Article

Note: Global Manufacture Group, LLC (Broker/Applicant) agreed to pay for the purchase of automobile wheel manufacturing equipment from Automotive Wheels, Inc. and Titan International, Inc. (Seller/Beneficiary) for the purpose of reselling it to a Chinese manufacturer, GMG International Tendering Co. Ltd. (Buyer), as a middleman. The contract required the purchase to be made "by an irrevocable documentary letter of credit in a form satisfactory to [Seller/Beneficiary] naming [Seller/Beneficiary] as beneficiary thereof and expiring six (6) months from the [c]losing [d]ate".

Broker/Applicant tendered an LC issued by Deutsche Bank which Seller/Beneficiary alleged that LaSalle Bank (Seller's Bank), not a party to the transaction, rejected. Seller stated that unless an LC conforming to Seller's Bank's requirements was provided by 3 September, a deadline later extended to 7 September, "the agreement would be 'null and void'". Broker/Applicant rejected this deadline and advised Seller of its intent to provide the LC "as soon as practicable." Broker/Applicant tendered an LC in November which Seller rejected, having repudiated the contract on 7 September.

Eventually Seller sold the equipment to Buyer without the use of Broker/Applicant. Broker/Applicant contended that Seller accepted the same LC that Broker/Applicant had tendered, with only a change in beneficiary.

Broker/Applicant sued Seller for fraud by concealment, intentional interference with contract relations, interference with prospective economic relations, unjust enrichment, and various violations of the California Business and Professions Code section 17200. The trial court sustained Seller's demurrer. On appeal, the Court of Appeal of California, Fourth Appellate District, Division Three, in an opinion by O'Leary, J., affirmed.

Broker/Applicant argued that Seller was only aware of the identity of Buyer due to a breach of confidentiality by one of Broker/Applicant's employees, who had once been an employee of Seller. Broker/Applicant contended that, after being made aware of Buyer's identity, Seller refused Broker/Applicant's LC in bad faith in order to sell directly to Buyer and circumvent Broker/Applicant.

The trial court had stated that even though "[Broker/Applicant] has pled general language that it 'was ready, willing and able' to tender payment for the equipment and tendered 'letters of credit to [Seller]' [Broker/Applicant] still does not allege that it tendered an irrevocable documentary letter of credit as required by the sales agreement." The appellate court agreed that Broker/Applicant's failure to submit an appropriate LC terminated Seller's obligations, stating that "[Broker/Applicant] lost a potential customer and sale profits because it did not timely submit an acceptable irrevocable letter of credit as required by the Sales Agreement with [Seller]", therefore preventing Broker/Applicant from establishing damages.

[JEB/mlm]

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