SAVA Gumarska In Kemijska Industria d.d. v. Advanced Polymer Sciences, Inc.

SAVA Gumarska In Kemijska Industria d.d. (SAVA) (plaintiff) agreed to buy certain filament-winding and curing equipment from Advanced Polymer Sciences, Inc. (APS) (defendant). The parties’ agreement required SAVA to pay APS a $550,000 deposit, which would be secured by a standby letter of credit that APS procured from Bank One Texas (bank) (defendant). Per the letter of credit, SAVA would receive payment by submitting a signed statement that the equipment’s delivery date had passed and by refusing delivery for a qualifying reason. Additionally, the letter of credit required a statement that APS had to deliver all equipment by September 9, 1999. However, the agreement obliged APS to deliver only the curing equipment by that date; the filament-winding equipment was not due until 2001. The bank drafted the letter of contract based on the agreement, which APS provided to the bank. In October 2000, SAVA advised APS that it was canceling the agreement and would be drawing down on the letter of credit. In November, SAVA submitted documents to the bank in support of its payment request. APS sued the bank to stop it from paying SAVA. Per APS, SAVA was not entitled to payment because SAVA (1) committed material fraud by falsely asserting that the delivery deadline for the filament-winding equipment had passed and by not disclosing that the letter of credit included the wrong deadline for that equipment and (2) breached the agreement by repudiating it. However, the trial court did not rule that SAVA had a disclosure duty to APS or the bank. The court granted a temporary restraining order preventing payment. SAVA then intervened, and the bank was excused from participating at trial. The trial court ruled that the standby letter of credit was void (which was equivalent to enjoining payment) because SAVA committed material fraud and that SAVA breached the agreement. SAVA appealed, requesting judgment against the bank for the $550,000 and against APS for its attorney’s fees. APS also requested attorney’s fees.