Article

Note: To build a hospital in Moore, Oklahoma, the organizers of Moore Medical Center, L.L.C. (Medical Center) arranged mortgage insurance for a hospital from the United States Department of Housing and Urban Development (HUD) on the condition that the organizers post a standby letter of credit in the amount of US$4.6 million to cover operating expenses without exposing the hospital to any liability. The organizers approached James E. Williams (Applicant) to arrange for the standby with the understanding that the hospital's income from collection of accounts receivable would be used to repay drawings on it. Applicant obtained a standby from Gold Bank naming Medical Center as the Beneficiary.

Beneficiary did not execute a writing by which it agreed to pay or reimburse Applicant, or otherwise assume liability for payment of any drawings on the standby. When the entire sum of the letter of credit was drawn and paid, Issuer was reimbursed by Applicant; however, Applicant was not repaid by Beneficiary/Medical Center, which later filed for bankruptcy under Chapter 11 (reorganization) of the U.S. Bankruptcy Code. This filing was later converted to Chapter 7 (liquidation).

When Applicant's claim in the Bankruptcy Estate for repayment of $4.6 million was denied by the Bankruptcy Trustee, Applicant sued the Trustee for reinstatement of his claim. The United States Bankruptcy Court for the Western District of Oklahoma, Weaver, J., denied the claim. On appeal, the United States District Court for the Western District of Oklahoma, Miles-LaGrange, J., affirmed.

Applicant argued that the bankruptcy court erred in concluding that he did not have an enforceable claim against Beneficiary/Medical Center to repay the funds used to reimburse Issuer for the standby. The intermediate appellate court ruled that the bankruptcy court's findings were not clearly erroneous since the supposed terms of repayment were so vague and illusive that, at best, the promise was to repay Applicant if and when there was sufficient cash flow. The intermediate appellate court also noted that there were no provisions regarding payment terms, such as timing of payments, interests, or the payee.

Applicant also argued that, even if the court found no binding agreement between himself and Beneficiary, he was entitled to recovery under the alternative bases of promissory estoppel and unjust enrichment. The court disallowed the claim of promissory estoppel on the ground that no unambiguous promise existed, which precludes any claim for promissory estoppel. On the claim of unjust enrichment, the court ruled that there was insufficient evidence to prove that the Beneficiary's creditors were unjustly enriched at Applicant's expense. The intermediate appellate court also ruled that the finding of the bankruptcy court that there were no equitable grounds for inferring a promise was not clearly erroneous.

[JEB/mwl]

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