Note: In related previous litigation1, Fifth Third Bank (Beneficiary/Lender) sued Community Bank & Trust (Issuer) for wrongful dishonor of a standby LC assuring repayment of Cleveland Motor Cars Inc.'s loan repayment obligations. Subsequently, Issuer was closed by regulators and under U.S. law the Federal Deposit Insurance Corp. (FDIC) was appointed Receiver. Beneficiary/Lender made a claim in the bank insolvency proceedings and the FDIC issued a Receiver Certification to Beneficiary/Lender in the amount of US$423,172.78. Subsequently, Beneficiary/Lender sued Borrower and Guarantors to recover the amount due on the loan.

The State of Ohio, Court of Common Pleas, Hamilton County, Myers, J., gave judgment for Beneficiary/Lender in the instant action.

The Judge rejected Borrower and Guarantors' claim that Beneficiary/Lender was fully paid by the Receiver's Certificate for the debt it sought to collect. The Judge noted that under the U.S. Financial Institutions Reform Recovery and Enforcement Act (FIRREA)2, the Receiver of a failed financial institution may use a Certificate of Award to pay creditors. Consequently, the Judge concluded that as to the Issuer, payment by Certificate "operates as payment". However, without explaining her rationale, the Judge ruled that the Certificate did not discharge the obligation of Guarantors of the loan and did not relieve Guarantors of their liability.


1. Fifth Third Bank v. Kohl's Indiana, 918 N.E.2d 371 (Ind. Ct. App. Dec. 18, 2009) [USA], noted in 2010 ANNUAL REVIEW OF INTERNATIONAL BANKING LAW & PRACTICE 488.

2. Pub.L. 10173; 103 Stat. 183.


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.