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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
1998 LC CASE SUMMARIES Case Nos. 97-00933, 97-02710, 1998 Fla. App. LEXIS 3769 (Fla. App. April 15, 1998)
Topics:
Equitable Subrogation.
Type of Lawsuit:
Applicants sued beneficiary and company which defaulted on the underlying loans.
Parties:
Plaintiffs/Applicants- L.D. Stewart and Michael J. Maricle (Counsel for Plaintiffs: Zala L. Forizs, Blasingame, Forizs P.A., St. Petersburg, FL.
Defendant/Borrower- Tasnet, Inc. (Dennis G. Ruppel as Trustee)
Defendant/Beneficiary- Marine Bank (Counsel for Defendants: Michael C. Markham, Johnson, Blakely, P.A., Clearwater, FL.
Underlying Transaction:
Security for loans.
LC:
Standbys, amount paid US$ 250,000. Silent as to governing rules.
Decision:
The Court of Appeal of Florida, Second District, Altenbernd, J., upheld the trial court's award of summary judgment to the beneficiary and borrower.
Rationale:
As the applicants had received consideration for providing the standbys without reserving a right to subrogation and as they were not in privity with the beneficiary, they were not entitled to equitable subrogation.
Article
Factual Summary: Two investors agreed to become applicants on standby letters of credit issued on behalf of a company in exchange for some of the company's stock. The investors did not reserve any subrogation (assignment) rights in the agreement. When the company failed to make payment on the loans that the standbys were backing up, the beneficiary made presentation to the confirming bank and received payment, thus making the investors responsible for reimbursement.
After reimbursing the issuer, the investors brought suit against the beneficiary and the company on the ground of equitable subrogation. The trial court awarded summary judgment and attorney's fees to the beneficiary and company.
Legal Analysis:
The court found that the investors had failed to establish a right to subrogation because they had not expressly reserved one, were speculative investors in the company, had received consideration for providing the standbys, had no privity with the beneficiary, and the confirming bank had not received any rights that were assignable to them. Accordingly the court affirmed the summary judgment.
©1999 INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE
COPYRIGHT OF THE INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE
The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.