Siderius, Inc. v. Wallace Co., Inc.

Siderius, Inc. (plaintiff) sold steel pipe to Wallace Company, Inc. (defendant). Some of the pipe was to be manufactured in Israel and some in Italy. Texas Commerce Bank (bank) issued an irrevocable documentary letter of credit for Siderius’s benefit. Per the letter of credit, Siderius was required to submit, among other things, onboard bills of lading showing that the pipe was loaded on the transport ships no later than November 30, 1974, in order to be paid. The parties subsequently extended Siderius’s shipping deadline to January 15, 1975. Siderius timely shipped the Israeli-manufactured pipe and received payment for these shipments. Siderius shipped the Italian-manufactured pipe on January 29. Nevertheless, on February 20, Siderius submitted to the bank an onboard bill of lading indicating that the pipe was shipped from Italy on the M/V Slavonija on January 15. However, the Slavonija did not arrive at the Italian departure port until January 24. On its face, the bill of lading conformed to the letter of credit’s requirements. However, Wallace, which suspected that the bill of lading was fraudulent, notified the bank of its concern. Wallace also informed the bank that it was unwilling to waive any defects with the letter of credit. On February 24, the bank dishonored Siderius’s payment request. Wallace also advised Siderius that it was rejecting the Italian pipe because Siderius shipped it late. Siderius made a second payment request on March 7, which Siderius again accompanied with an onboard bill of lading dated January 15. The bank dishonored Siderius’s second request. Wallace then obtained a temporary injunction prohibiting the bank from honoring any subsequent Siderius payment requests because Siderius’s requests were supported by fraudulent documents. Siderius appealed.