The opinion of the court was delivered by: COHILL, JR.
MAURICE B. COHILL, JR. CHIEF UNITED STATES DISTRICT JUDGE
Plaintiff, Mellon Bank, N.A. ("Mellon"), sues to recover for defendant's allegedly improper draw on a standby letter of credit. The parties have filed cross motions for summary judgment with several briefs and a considerable amount of evidentiary material. The pertinent agreements are before us, and as to most of the issues raised by the parties there are no apparent disputed issues of material fact. Partial summary judgment on these matters is appropriate. However, the parties have failed to address defendant, General Electric Credit Corp.'s ("GECC") defense of anticipatory repudiation, and therefore the cross motions for summary judgment must be denied.
The entity at the eye of this storm is not a party to this litigation. Woodings Consolidated Industries, Inc. ("Woodings") manufactured oil drilling equipment, and over the years Mellon had been Woodings' primary source for financing. By 1986, Woodings owed Mellon more than $ 5 million.
On April 23, 1985, Woodings entered into a leaseback arrangement with GECC. Under the terms of this agreement Woodings sold GECC a valuable machine (known as a sucker rod machine for reasons we do not care to fathom), and GECC then leased the machine back to Woodings for a specified monthly payment. This contract will be referred to here as the "Lease Agreement."
In conjunction with the Lease Agreement, and to better secure GECC's interest, Woodings and GECC executed a Letter of Credit Agreement. In accord with its terms, Woodings arranged a standby Letter of Credit with Mellon Bank in the amount of $ 600,000 with GECC as beneficiary. The Letter of Credit issued by Mellon permitted GECC to draw up to $ 600,000 upon submission of a sight draft by GECC and a typewritten statement that the sum demanded was due and owing.
From 1984 to 1986 Woodings experienced increasing financial losses as a result of a severe downturn in the oil industry. On January 23, 1987 Woodings failed to make its scheduled lease payment to GECC. Defendant also alleges that Woodings failed to present proof of liability insurance for 1987 as required by the Lease Agreement.
Based on these alleged defaults, GECC presented Mellon with a sight draft on the Letter of Credit in the amount of $ 600,000, and a typewritten statement asserting that Woodings was in default and that the full amount of the draft was due and owing. Mellon paid the full amount to GECC.
Mellon has now sued GECC to recover the $ 600,000 drawn on the Line of Credit, asserting that Woodings was not in default at the time of the draft, that the $ 600,000 was not due and owing, and therefore GECC could not properly draw on the Line of Credit. Both sides seek summary judgment, raising a host of intertwined issues which we now attempt to unravel.
The Letter of Credit Agreement between Woodings and GECC provides in pertinent part:
Under the terms hereof, upon the occurrence of any default under the Lease, or upon the filing of a petition by or against Lessee under Title XI of the United States Code or any successor or similar law, GECC shall have the right to present sight draft(s) and a properly-executed statement to the issuer for any amount not exceeding, in total, the sum of U.S. $ 600,000.00 and to receive said monies therefrom, at GECC's sole discretion, in lump sum, or in several sums from time to time.
The Letter of Credit issued by Mellon provides in pertinent part:
On February 11, 1987, GECC presented Mellon with a sight draft for $ 600,000 and the following typewritten statement:
This is to advise you that Woodings Consolidated Industries, Inc.: ("Customer") is in breach of certain agreements with General Electric Credit Corporation ("GECC") and that, accordingly, the amount of SIX HUNDRED THOUSAND AND 00/100 U.S. ($ 600,000) DOLLARS drawn by GECC under Draft No. 0001 dated February 11, 1987 against Mellon Bank Letter of Credit No. 56540 is due and owing by Customer to GECC.
Mellon honored the draft on the following day.
Mellon describes its claim as a breach of warranty action. Under § 5-111 of the Uniform Commercial Code, a party drawing on a line of credit "warrants to all interested parties that the necessary conditions of the credit have been complied with." 13 Pa. C.S.A. § 5111. Thus a beneficiary warrants to the issuing bank the truth of the statements necessary to a draw on the credit. Pubali Bank v. City National Bank, 676 F.2d ...