Factual Summary: At the request of applicant, a business operating in West Virginia and subject to state wage bonding requirements under W.Va. Code § 21- 5-14 (1999), bank issued a standby as a wage bond for security of applicant's employees' wages payable to the State Division of Labor. The credit expired on 30 June 1992. When applicant's business subsequently ceased operations in the summer of 1992, the beneficiary/State Labor Department drew on the LC for an outstanding wage claim in the amount of US$7,338.94 on 29 June and the issuer paid. Subsequently, other claims were made by former employees of the applicant and the State found that the applicant owed wages and fringe benefits to its former employees in an amount exceeding the LC. The beneficiary requested that the issuer remit payment of the balance of the face amount of the LC. The issuer refused, claiming that the beneficiary "had failed to properly investigate the claims for the unpaid wages and benefits and that the LC had expired" and the beneficiary then brought this action for wrongful dishonor. The trial court granted summary judgment for the issuer, ruling that the State's investigation of wage claims was "fatally flawed" and failed to comply with the applicable statutes, and beneficiary appealed. On appeal, reversed with orders to enter judgment for the beneficiary.

Legal Analysis:


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