Del E. Webb McQueen Development Corp. v. Resolution Trust Corp.

In this case we hold that a standby letter of credit in favor of Del E. Webb McQueen Development Corporation (Del Webb) was not an accrued and unconditionally fixed liability of the former Sun State Savings and Loan Association (Sun State) at the time Sun State was placed in receivership by the Office of Thrift Supervision (OTS). Sun State’s obligation to pay Del Webb on the letter of credit was contingent upon default under a promissory note, and on the date Sun State was placed in receivership the note was not in default. Because Sun State’s obligation to pay the letter of credit was contingent, the Resolution Trust Corporation (RTC) properly classified Del Webb’s claim under the letter of credit as a priority 7 and not a priority 6 claim, pursuant to 12 C.F.R. § 360.2 .

I

FACTS

On December 31, 1986, Sun/Kawa Joint Venture (Sun/Kawa), an Arizona general partnership comprised of Sun State and Robert J. Kawa, bought a real estate option from Del Webb for $1 million. No money changed hands. Instead, Sun/Kawa gave Del Webb its promissory note dated December 31, 1986 (the note). The note required Sun/Kawa, the maker, to pay Del Webb, the payee, annual installments of…