Harvey Estes Const. Co. v. DRY DOCK SAVINGS BANK OF NY
Decision Date | 28 August 1974 |
Docket Number | No. 74-601-D.,74-601-D. |
Citation | 381 F. Supp. 271 |
Parties | HARVEY ESTES CONSTRUCTION CO., an Oklahoma corporation, Plaintiff, v. DRY DOCK SAVINGS BANK OF NEW YORK, Defendant. |
Court | U.S. District Court — Western District of Oklahoma |
Larry E. Myers, Oklahoma City, Okl., for plaintiff.
Tom L. Armstrong, Oklahoma City, Okl., for defendant.
This case was removed to this Court from the Oklahoma State District Court of Pottawatomie County, Oklahoma on the basis of diversity of citizenship and the amount in controversy being in excess of $10,000.00. There is before the Court a motion by Dry Dock Savings Bank of New York (Dry Dock) for an order to release funds which the District Court of Pottawatomie County ordered paid into court and which are now held by this Court in view of the removal.
The controversy in this case arises out of a loan commitment contract between Harvey Estes Construction Co. (Harvey Estes) and Dry Dock. Dry Dock agreed to provide the permanent financing for a Harvey Estes construction project. In return for the commitment Harvey Estes agree to pay a commitment fee of $85,500. One half of the fee was paid in cash and one half of the fee was to be put in escrow covered by irrevocable letter of credit. The half covered by the letter of credit was to be retained by Dry Dock if the loan failed to close, but if the loan did close, the half was to be returned to Harvey Estes.
It is stipulated by the parties that the loan failed to close and cannot close because Harvey Estes was unable to complete the project due to insolvency. The letter of credit on its face requires that it be negotiated on or before June 30, 1974. It appears from the amended commitment letter (paragraph 19) that the commitment is terminable at the option of Dry Dock if the loan has not closed on or before December 31, 1973.
On April 2, 1974 Harvey Estes filed a petition in the District Court of Pottawatomie County, Oklahoma. He sought therein a judgment for $42,750 and an injunction prohibiting the issuing bank from honoring the above-mentioned letter of credit to Dry Dock. The bases for this suit are: that Dry Dock is not entitled to the funds covered by the letter of credit because of a failure and lack of consideration as the Defendant would not and has not suffered any damages; that the commitment letter is no longer binding since the property is now in foreclosure; that the Defendant is benefited as the obligation to lend money was at a lower interest than the current market; that Paragraph 17 of the commitment letter is void as a penalty or forfeiture.
On April 2, 1974, the Pottawatomie County District Court issued an Order enjoining the issuing bank from disbursing on the letter of credit held by Dry Dock and setting the matter for hearing on a temporary injunction on April 16, 1974. On April 16, 1974 there was a hearing on Plaintiff's motion for temporary injunction. All parties were present and represented by their attorneys. The motion was denied. On April 23, 1974 Plaintiff filed a Motion to Pay Funds Into Court. The basis for this motion was 12 Oklahoma Statutes § 1556. Notice of the motion was mailed to Defendant's attorneys. On May 1, 1974 Dry Dock presented the letter of credit and it was paid. Also, on the same day, the Motion to Pay Funds Into Court was heard and the Court ordered Dry Dock to pay the funds into Court pending further Order of the Court. The Order was directed to Dry Dock and not to the bank which had issued the letter of credit. On July 3, 1974 the bank which had issued the letter of credit was dismissed by the Court as a party Defendant. On July 12, 1974 Dry Dock filed a Petition for Removal. On July 19, 1974 the Court Clerk of the Pottawatomie County District Court was ordered to pay the $42,750 to the Court Clerk for the Western District of Oklahoma.
The only authority for the Order to Pay Funds Into Court is 12 Oklahoma Statutes § 1556. Plaintiff admits that it does not meet the requirements for an equitable order to pay funds into Court. 12 Oklahoma Statutes § 1556 provides:
"When it is admitted, by the pleading or oral examination of a party, that he has in his possession or under his control any money or other thing capable of delivery, which, being the subject of litigation, is held by him as trustee for another party, or which belongs or is due to another party, the court may order the same to be deposited in court or delivered to such party, with or without security, subject to the further direction of the court."
Pursuant to 12A Oklahoma Statutes § 5-114 the issuing bank was obliged to honor its letter of credit when Dry Dock presented it for payment. This Statute provides:
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