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Note: To issue a standby letter of credit, Talmer Bank and Trust (Issuer) required United States Indemnity and Casualty Co. Ltd. (Applicant), to deposit cash collateral of USD 400, 000.00. Apparently, the application for the standby required the return of the original operative standby before the collateral would be released.

Prior to the expiry date, Beneficiary went into receivership in Delaware, and the Delaware court seized all of its assets including the standby, causing them to be delivered to a receiver (Receiver). Beneficiary did not surrender the standby to the Applicant or Issuer, alleging that Receiver refused to release it until all potential claims are resolved. It is unclear whether there were any drawings under the standby, and whether the standby had expired.

Applicant sued Issuer, demanding the release of the collateral. Issuer moved for summary disposition. The Circuit Court of Michigan, Sixth Judicial Circuit, Oakland County, Potts, J., denied the motion for summary disposition.

Issuer argued that factual and evidentiary record presented no issue of disputed material fact as a matter of law. Issuer contended that it was honoring the agreement with Applicant, which provides that Issuer is entitled to retain collateral until the standby is surrendered and all drawings on it are settled.

Applicant argued that the standby had already expired, and no claims were outstanding. Furthermore, Applicant presented a copy of a letter from the executive managing director and chief legal officer of Issuer, sent to the Beneficiary, evidencing that it was Issuer’s understanding that Beneficiary did not have any claims to be made under the letter of credit.

The Judge stated that: “Each party presents disputed facts regarding the existence of outstanding claims on the letter of credit. A genuine issue of material fact exists when reasonable minds could differ on a material issue.” Factual development necessary to resolve differences in parties’ arguments and evidence. Motion for summary disposition denied because factual and evidentiary record indicate issue of material fact as a matter of law.

[KCM]

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