Mid-America Tire, Inc. v. PTZ Trading Limited

Mid-America Tire (Mid-America) (plaintiff) entered negotiations with PTZ Trading (PTZ) (defendant) to purchase overstock Michelin tires. Negotiations were for winter tires, as PTZ led Mid-America to believe that summer tires would be available at a later time and that PTZ was the sole authorized seller of overstocked Michelin tires. PTZ was, in fact, not an authorized seller and could not sell summer tires in the future. The winter tires to be sold to Mid-America were designated as “DA/2C.” PTZ told Mid-America that 2C meant the tires were stored in two different warehouses, but 2C really meant that the tires could not be sold in the United States. Mid-America agreed to purchase the winter tires as a sign of goodwill in order to purchase summer tires at a later time. A letter of credit was established naming an agent of PTZ as beneficiary, with payment to be made only upon Mid-America authorizing the tires for shipment. Mid-America discovered the truth about the tires, did not authorize shipment, and sued to enjoin the issuer of the letter of credit from making payment on the basis of fraud. The trial court issued a permanent injunction. The appellate court reversed, holding that Article 5 of the Uniform Commercial Code (UCC) only allows enjoining payment under a letter of credit if the documents presented for payment are forged. Mid-America appealed to the Ohio Supreme Court, arguing that the UCC allowed an injunction for fraud in the underlying transaction.