## Facts

- Superintendencia de Administracion Tributaria (Superintendencia), Guatemala’s tax authority, contracted with Intrinsic Values Corporation (Intrinsic) to purchase automobile license plates and related items.
- At Superintendencia’s request, Banco de Guatemala issued irrevocable letters of credit for Intrinsic’s benefit.
- First Union National Bank and Barclays Bank, PLC served as the confirming banks on the letters of credit.
- Superintendencia canceled the contract, asserting that Intrinsic failed to supply the contracted goods.
- Superintendencia sued Intrinsic in Guatemala concerning the contract dispute.
- The Guatemalan court issued a temporary injunction barring Banco de Guatemala (the issuing bank) from paying on the letters of credit while the Guatemalan case remained pending.
- Superintendencia then filed an action in Florida seeking to prevent First Union and Barclays (the confirming banks) from honoring any presentment under the letters of credit, alleging that payment would facilitate a “material fraud.”
- Intrinsic was not named as a party in the Florida complaint and was not served with notice before the Florida trial court entered a temporary injunction restraining the confirming banks from honoring the letters of credit.
- After the Florida injunction was entered, Intrinsic sought payment under the letters of credit, intervened in the Florida action, and moved to dissolve the temporary injunction.
- The trial court denied Intrinsic’s motion to dissolve, and Intrinsic appealed.

## Issues

1. Whether Superintendencia made a sufficient showing of “material fraud” to justify continuing a Florida temporary injunction preventing confirming banks from honoring irrevocable letters of credit.
2. Whether the Florida court could continue injunctive relief affecting the letters of credit where a Guatemalan court had already issued temporary injunctive relief involving payment on the same credits and the beneficiary was not originally named or given notice in the Florida case.

## Decision

- The Third District Court of Appeal reversed the order denying Intrinsic’s motion to dissolve the temporary injunction.
- The court held that the Florida injunction restraining the confirming banks could not be maintained on the record presented and remanded for further proceedings consistent with its opinion.

## Legal Principles

- A letter of credit is generally independent from the underlying sales contract; disputes about contract performance ordinarily do not justify stopping honor of a complying presentment.
- A court may restrain honor only in the narrow “fraud in the transaction” situation, requiring a showing of material fraud—fraud so serious that allowing the beneficiary to obtain payment would be plainly unjust.
- Allegations that the seller failed to perform the underlying contract, without more, typically amount to a contract dispute and do not meet the material-fraud standard needed to enjoin honor of a letter of credit.
- Florida temporary injunction practice requires a proper evidentiary basis and procedures consistent with due process, including notice and an opportunity to be heard for parties whose rights are directly affected.
- A Florida court may consider comity and related foreign proceedings, including foreign temporary injunctions, but the existence of foreign litigation does not by itself supply the showing required to block payment on letters of credit under Florida law.
- Appellate review of an order refusing to dissolve a temporary injunction is for abuse of discretion, but an injunction cannot stand when the legal standard for relief is not met.

## Conclusion

The Third District reversed the denial of Intrinsic’s motion to dissolve because the record did not establish the kind of material fraud required to justify judicial interference with the confirming banks’ obligation to honor the letters of credit, and it remanded for proceedings consistent with those limits on injunctive relief in letter-of-credit disputes.


Intrinsic Values Corp. v. Superintendencia de Administracion Tributaria, 806 So. 2d 616 (2002)