section 1951

Citation: section 1951
Parent Document: 250 LLC v. Photopoint Corp.(usa), 32 Cal. Rptr. 3d 296 (2005)
Jurisdiction: California (state)
Effective Date: 2005-07-28
Original Source: https://www.courtlistener.com/opinion/2281319/250-llc-v-photopoint-corpusa/ ↗

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sought financing from a bank, and arranged for a letter of credit in the bank’s favor to cover the loan commitment fee. The bank approved the loan, but the debtor was unable to consummate the loan agreement. The bank drew on the letter of credit to pay the commitment fee, and the debtor filed for bankruptcy. The bankruptcy trustee sued the bank to recover the proceeds of the letter of credit on the theory that the commitment fee was an impermissible penalty under applicable state contract law. The bankruptcy and district courts held that the trustee had no right to recover the fee because the fee had been paid through a letter of credit and recovery was barred by the independence principle. The circuit court disagreed;

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