New York Law Review

Tag: Affidavit Sufficiency

  • Fair Pavilions, Inc. v. First Nat. City Bank, 19 N.Y.2d 518 (1967): Sufficiency of Affidavit to Terminate Letter of Credit

    Fair Pavilions, Inc. v. First Nat. City Bank, 19 N.Y.2d 518 (1967)

    An affidavit submitted to a bank to terminate a letter of credit must specify the grounds for termination with sufficient detail to allow the beneficiary to understand and remedy the alleged default.

    Summary

    Fair Pavilions, Inc. contracted to construct a building for Exhibitions de France, Inc., with payments guaranteed by a letter of credit from First National City Bank, based on an application from Willard International Financial Co. The letter of credit allowed termination if the bank received an affidavit from Willard stating that certain events under the construction contract (clause XV) had occurred. Willard submitted a conclusory affidavit stating that such events occurred, without specifying which ones. The bank then terminated the letter of credit. The New York Court of Appeals held that the affidavit was insufficient because it failed to specify which event under clause XV had occurred, thus preventing Fair Pavilions from remedying the alleged default. The court reversed the lower court’s denial of summary judgment for Fair Pavilions.

    Facts

    Fair Pavilions, Inc. (plaintiff) contracted with Exhibitions de France, Inc. (“Exhibitions”) to build a structure at the New York World’s Fair.
    The contract (clause XV) outlined conditions for termination of plaintiff’s performance.
    Exhibitions was obligated to provide an irrevocable letter of credit guaranteeing installment payments.
    Exhibitions arranged for Willard International Financial Co., Ltd. (“Willard”) to issue the letter of credit.
    Willard applied to First National City Bank (defendant) for the letter of credit in favor of plaintiff for $2,030,000.
    Paragraph 6 of the letter of credit allowed termination if the bank received an affidavit from a Willard officer stating that events in clause XV of the construction contract occurred.
    The bank received an affidavit from Willard stating, in conclusory form, that “One or more of the events described in clause XV * * * have occurred,” without specifying the event.
    The bank notified plaintiff that the $400,000 final payment was terminated.

    Procedural History

    Plaintiff sued the bank to recover the $400,000 via a motion for summary judgment in lieu of complaint.
    Special Term denied the motion, citing factual issues regarding the bank’s duty to verify defaults and the truth of the affidavit.
    On reargument, both plaintiff’s and defendant’s motions for summary judgment were denied because of factual issues over whether events described in clause XV had occurred justifying Willard’s affidavit. The court directed that proper pleadings be served.
    The Appellate Division held the bank was not obliged to determine the accuracy of Willard’s representation.
    The Court of Appeals reviewed the Appellate Division’s decision.

    Issue(s)

    Whether an affidavit submitted to a bank pursuant to a letter of credit, which states that events allowing termination of the underlying contract have occurred, must specify which event has occurred to be sufficient to terminate the credit.

    Holding

    Yes, because the affidavit must identify the alleged default with enough specificity to allow the beneficiary of the letter of credit to understand and remedy it.

    Court’s Reasoning

    The Court of Appeals reasoned that the documents presented to the bank, including the affidavit, must be sufficient on their face to justify the bank’s action in refusing to pay on the letter of credit. The court emphasized that this is especially important given the drastic consequences of canceling the credit for the plaintiff. The court interpreted paragraph 6 of the letter of credit, read in conjunction with clause XV of the building contract, to mean that the affidavit must identify the alleged defect before the credit can be canceled, allowing the plaintiff an opportunity to remedy it. The court stated, “The meaning of paragraph 6 of the letter of credit was not that Willard could terminate the credit at will.” The court found the affidavit’s conclusory statement that “One or more of the events described in clause XV…have occurred” insufficient because it did not specify which event had occurred, making it impossible for Fair Pavilions to remedy the unspecified default. The court contrasted paragraph 6 with paragraph 7 of the letter of credit, which expressly allowed Willard to cancel the credit at will during a specific period, but only on payment of a substantial sum to Fair Pavilions. The court concluded that interpreting paragraph 6 to allow cancellation based on an unspecific affidavit would place one party at the mercy of another, which is against the general policy of the law. The court found that “It is not reasonable to interpret paragraph 6 of the letter of credit in a manner which permits cancellation by means of an affidavit so unspecific that the alleged default is kept secret and the beneficiary rendered powerless to cure it.”

  • People v. McCall, 17 N.Y.2d 152 (1966): Sufficiency of Eavesdropping Warrant Affidavits

    People v. McCall, 17 N.Y.2d 152 (1966)

    An affidavit supporting an eavesdropping warrant must contain specific facts, not just conclusory statements, to establish reasonable grounds to believe that evidence of a crime will be obtained.

    Summary

    The New York Court of Appeals reversed the defendants’ convictions for conspiracy and narcotics possession, holding that the affidavits supporting the eavesdropping warrants were insufficient because they contained only conclusory statements and lacked specific facts to justify the warrants’ issuance. The court emphasized the need for judicial safeguards to protect privacy rights and held that a trial court must assess the factual basis for an eavesdropping order, even if issued by another judge, when the order’s validity is challenged and the evidence obtained is central to the prosecution’s case.

    Facts

    The People obtained judicial orders permitting eavesdropping on telephones based on affidavits. The defendants were subsequently convicted of conspiracy to violate narcotics laws. A substantial part of the overt acts supporting the conspiracy charge consisted of telephone conversations intercepted via the eavesdropping orders. Two of the defendants were also convicted of narcotics possession, with the intercepted phone calls playing an important role in those convictions as well.

    Procedural History

    After the indictment, the defendants moved to inspect the eavesdropping orders and supporting affidavits. The County Court denied the motion, deeming the orders not public records. At trial, the People offered the orders into evidence. Defense counsel, examining the orders and affidavits for the first time, objected to their reception and the admission of evidence obtained through eavesdropping. The trial court declined to rule on the affidavits’ sufficiency, deferring to the issuing judge’s discretion. The Court of Appeals reversed the convictions.

    Issue(s)

    Whether the affidavits supporting the eavesdropping orders were sufficient to establish reasonable grounds to believe that evidence of a crime would be obtained through eavesdropping.

    Holding

    No, because the affidavits were barren of tangible facts upon which a judge could exercise discretion, containing only conclusory statements.

    Court’s Reasoning

    The Court of Appeals found the affidavits supporting the telephone interception orders insufficient. The affidavits stated only the District Attorney’s conclusion that “information received from persons of known reliability” revealed that the telephone was being used for illicit drug trafficking. The court noted that the affidavits failed to state what was “revealed” as a fact or even in substance. The court stated that even if the name of the informant is not disclosed, “some factual statement of the affiant’s experience with his reliability and some factual showing of what he ‘revealed’ are basic requirements.” The court emphasized that the District Attorney’s affidavits presented only indefinite assertions from an undisclosed person to another equally indefinite person, providing no factual basis for the judge to assess. Moreover, the District Attorney did not appear personally before the Justice in Westchester on either application, so the Justice had no opportunity to “examine on oath the applicant and any other witness he may produce” as authorized by Section 813-a of the Code of Criminal Procedure. The court drew an analogy to search warrants, stating that just as with search warrants, “there is a significant need for an adequate factual basis on which the Judge will be able to decide whether or not the order or warrant will issue.” The expressions “oath or affirmation” and “reasonable ground to believe” in the eavesdropping statute (Code Grim. Pro., § 813-a) could have no other meaning. The Court of Appeals emphasized the importance of protecting privacy rights and ensuring that judges have a sufficient factual basis before issuing eavesdropping warrants. A refusal to permit a defendant to examine the facts upon which his privacy has been broken into amounts to saying that any search warrant or order for interception is all right if a Judge has seen fit to sign it.