Court of Appeals for the First District of California
2004 WL 1664864 (2004)
Todd Meagher (defendant) sold his ownership interest in Credit.com to Adam Levin (plaintiff). Levin paid part of the price with a $331,000 promissory note, secured by a letter of credit. The letter of credit required Meagher to present a draft to Wachovia Bank with a sworn certificate that Levin had defaulted on the note. One of Levin’s obligations was to either pay off and terminate a line of credit guaranteed by Meagher or obtain a release of Meagher no later than April 21, 2003. The line of credit, issued by Wells Fargo, was paid off on April 17th. However, Wells Fargo did not update its computer systems to reflect the payment for several days. A Wells Fargo employee told Meagher that the line of credit was still showing a balance on April 22, 2003. Meagher sent a notice of default to Levin. Levin responded that day with a written statement from the Wells Fargo employee who had received the payment. Meagher presented the letter of credit to Wachovia Bank and sought to draw upon it based on Levin’s default on April 23, 2003. Meagher spoke with a different Wells Fargo employee, who stated the line of credit was still showing a balance and Meagher remained a guarantor until the payment posted to the account. Meagher refused to withdraw his request to draw on the letter of credit, and Levin sued Meagher, seeking an injunction to prevent Meagher from drawing on the letter of credit. The trial court entered a preliminary injunction against Meagher, and Meagher appealed to the Court of Appeals for the First District of California.
Rule of Law
Holding and Reasoning (Margulies, J.)
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