Kerr-McGee Chemical Corp. v. Federal Deposit Insurance Corporation

Kerr-McGee Chemical Corporation (Kerr-McGee) (plaintiff) agreed to sell certain chemicals to Sabar Chemical Corporation (Sabar). As part of the sale, Sabar obtained a letter of credit from Park Bank (the bank) (defendant) in the amount of $1,002,000. The letter listed Kerr-McGee as the beneficiary. The letter required specific documentation for a draw on the letter, including an invoice listing the price at $167 per metric ton free on board (F.O.B.) vessel. The letter provided that it was to be governed by the Uniform Customs and Practice for Documentary Credits (UCP). Subsequently, Sabar requested a 30-day extension to pay Kerr-McGee in exchange for a 1 percent increase in purchase price. Kerr-McGee agreed, and the letter of credit was amended to require an invoice at $168.87 per metric ton F.O.B. vessel. The total amount of the letter of credit, however, remained unchanged at $1,002,000. After Sabar failed to pay, Kerr-McGee presented a sight draft and an invoice to the bank, both with a total $1,014,590.53 to account for the 1 percent increase. The bank dishonored the draft on the ground that the sight draft exceeded the amount of credit. Kerr-McGee submitted an amended sight draft for $1,002,000, but the total price on the invoice submitted remained $1,014,590.53. The bank again dishonored the draft, this time on the grounds that the amount of the invoice exceeded the amount of credit and the amounts on the draft and invoice were inconsistent. Kerr-McGee filed suit in federal court. Soon after the suit was filed, the Federal Deposit Insurance Corporation (FDIC) (defendant) assumed control of the bank. The district court granted FDIC summary judgment. Kerr-McGee appealed.