Article

Note: A standby LC for US$ 170,000 was issued for the account of Peddler's Square, Inc., a condominium developer, to fund a required statutory warranty for Washington, DC condominium units. Beneficiary. was a trustee for purchasers of units. After beneficiary drew on the LC and placed the proceeds in a trust fund for repairs, applicant sued the beneficiary and the condominium association to recover the proceeds of the LC which it claimed was fraudulently drawn. In bringing the action, the applicant alleged that the trustee fraudulently induced the issuer to honor and failed to inform the applicant of the disposition of the funds. The applicant and the condominium association subsequently reached a settlement agreement and filed a consent motion to dismiss the case. The trustee opposed dismissal, and moved for sanctions against applicant. Noting that the documents required by the LC were presented, that they were supported by an engineer's report, and that these facts could have been determined by inquiring before filing the action, on petition by the beneficiary, the Superior Court for the District of Columbia, Weisberg, J., dismissed the case, granting sanctions against the applicant since the allegations "had no basis in fact or law." On appeal, the District of Columbia Court of Appeals, Terry, Steadman, and Pryor, JJ., affirmed, noting the "total lack of substance" in the claims and "aggravating ... persistence" in raising them.

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