The appellant appealed the dismissal of its motion under Rule 45.02 for an order preserving a sum of money held as cash collateral.
The appellant argued that its obligations under a Letter of Credit Agreement were discharged because the respondent entered into a forbearance agreement with the principal borrower, materially altering the guaranteed loan.
The Divisional Court dismissed the appeal, finding that the agreement was for a standby letter of credit, not a guarantee, and thus the law of guarantees did not apply.
Furthermore, the cash collateral was not a specific fund to which the appellant had a proprietary claim, and the appellant had implicitly ratified the forbearance agreement by participating in the borrower's insolvency proceedings without objection.
