CCF, Inc. v. First National Bank (In re Slamans)
United States Court of Appeals for the Tenth Circuit
69 F.3d 468 (10th Cir. 1995)
Gas-station operator Slamans obtained a standby letter of credit from First National Bank (defendant) guaranteeing payment to Sun Company if Slamans defaulted on his oil-product distribution obligations; when Slamans filed for bankruptcy, Sun drew on the letter of credit, FNB paid the full amount, and then demanded that Sun turn over sale proceeds Sun otherwise owed Slamans under their distribution agreement. Sun refused and filed an interpleader action in Slamans's bankruptcy proceeding; the bankruptcy court found for FNB, subrogating it to Slamans's rights under Section 509 of the Bankruptcy Code, and creditor CCF (plaintiff) appealed.
Whether an issuer of a standby letter of credit, upon paying the beneficiary, may be subrogated to the beneficiary's rights against the debtor under Bankruptcy Code Section 509, in the same manner traditionally available to a secondarily liable party like a guarantor.