Opinion ID: 1142705
Heading Depth: 1
Heading Rank: 9

Heading: of value, consideration and quids pro quo

Text: In the USB-drafted findings of fact and conclusions of law, the Court first holds [BOM] is liable to make restitution even if ... [BOM] took USB's money without notice of Gray's breach of fiduciary duty, so long as ... [BOM] advance no consideration for Gray's substitution of notes. The Court finds no quid pro quo, or equity to support ... [BOM's] claim to the LR & K money. The holding denies any necessity of a finding BOM has participated in or had prior knowledge of any of Gray's wrongdoing. In the real world of banks that do business as banks and compete with one another, it is not uncommon that an individual or business entity may use one bank for a time and, for whatever reason, decide a more advantageous arrangement can be found elsewhere. In such circumstances, the customer may often obtain an extension of credit from his new bank and thereupon satisfy debts due his old bank. What bank officer has not had the experience of receiving a call from someone with another bank, stating, I need to get the payoff amount on your John Doe loan. At times no doubt this happens after the old bank has made the credit judgment that the John Doe loan has become a bit shaky and has decided to extend Doe no further credit. This may have been the reason Doe sought a new bank, and it is hardly an occurrence bankers would label bizarre that a new bank is willing to take on Doe as a borrower even though the old bank has had its fill of him. We think it fair to suggest there are even times when Doe's old bank has for some while been thinking, We don't know how in the world we are ever going to get our money out of Doe, when, out of the blue, a new bank Doe has seduced advises a payoff is on the way. Subsequent chapters in such scenarios sometimes find the new bank less than pleased with its new customer. There are times when the customer defaults, so that the new bank must resort to collateral or pursue collection. And when this happens, think how silly it would seem if the new bank should sue the old bank to recover the original payoff sum and hold the old bank liable because it had given no consideration for the payoff. The old bank in such a scenario had no doubt been enriched, but no sensible person would label that enrichment unjust. That circumstance is analogous in every legally relevant way to the point USB presses today. BOM gave value  consideration  for the June 26, 1984, LK & R note it held, some $400,000.00 worth of value. LK & R gave value to BOM on July 23 when Gray wired the funds to BOM's correspondent paying LK & R's note. BOM gave value for the $407,210.96 it received on July 23 when, in the Chancery Court's words, it treated the $400,000.00 note as satisfied. USB received value for its $450,000.00 in the way banks customarily receive value for monies disbursed when it received LK & R's three cross-guaranteed interest bearing notes dated July 27, 1984. This is the way the banking world works. That there may have been a substantial credit risk inherent in the promises the LK & R-to-USB notes reflected did not strip these of their power to vest in USB certain legally enforceable obligations of and from LK & R, obligations USB has pursued, albeit prudently and with but modest effect. We doubt USB would find offense had USB/Gray in July of 1984 taken the LK & R notes and handed LK & R a check for loan proceeds, which LK & R in turn deposited and then drew their check to BOM for principal and interest then due. We perceive no difference in legal effect that Gray transferred the funds by wire from USB's Memphis correspondent to BOM's Memphis correspondent. It is important to remember that a transfer of property ... in satisfaction of ... a pre-existing debt ... is a transfer for value. Restatement of Restitution, § 173(2) (1936). This is an accepted principle in many areas of the law. Cf. Miss. Code Ann. §§ 75-3-303(b) and -408 (1972). None would think a debtor's payment of his (past due) note recoverable for want of value. It is all the same when the antecedent debt is paid with proceeds of a loan from another lender. Besides, upon receipt of USB's wire, BOM gave up all rights against LK & R as conferred by their note, including fourteen percent per annum interest. [12] USB repeatedly insists we ignore all of this and isolate our thoughts to but a lone convergence in space-time on July 23, 1984, when Gray wired its money to BOM. The point escapes us. Assuming BOM and USB had bargained for the sale of the LK & R note, the form of value given by BOM would surely have been sale of the LK & R note to USB. To be sure, a prudent negotiator for USB would have bought the note only at a substantial discount, but this does not change the form or adequacy of the value BOM would give. That BOM may have received more than fair market value does not leave the bargain legally suspect. USB seems to be saying BOM should have offered to pay USB for taking the note. In point of fact, USB took the three cross-guaranteed interest bearing notes from LK & R, which in substance is the only form of value we can imagine it might have received from BOM. It was value received adequate in law, notwithstanding it may have been inadequate in fact. BOM has been enriched but not unjustly so.
Nor was BOM unjustly enriched in the Bigelow matter. The evidence is simpler. USB does not contend BOM did anything that induced Gray to make the USB-Bigelow loans or issue to Heller the new letter of credit in January of 1985. The Court below found there was no proof that [BOM] ... knew that Gray would substitute the letters of credit. USB makes no claim it may impute to BOM Gray's breach of duties owed USB in the Fall of 1984 and early winter days that followed. As with LK & R, USB argues BOM must be held because it received no consideration for its January, 1985, release from its letter of credit held by Heller. USB misconceives the Bigelow matter as it did the LK & R matter. BOM had given Heller the $100,000.00 letter of credit for Bigelow's benefit on January 23, 1984. The letter by its terms was good for one year. Heller never presented the letter and demanded BOM honor it. Gray feared Heller might and so made Bigelow the several USB loans and issued the new USB letter of credit on January 11, 1985. BOM knew nothing of this. USB's consideration was Bigelow's obligation to indemnify USB if USB had to honor the letter of credit and pay Heller. That USB via the neglect of Gray extended a credit that took BOM off the hook imposes no duty upon BOM to indemnify USB because Bigelow ultimately defaulted. Bigelow may have been shaky when all of this was done, but this is of no consequence, nor is the fact he ultimately took bankruptcy. USB's loss on this record emanates from Gray's breach of his duty of care and Bigelow's insolvency, but nothing in these renders in any way unjust BOM's undeniable enrichment.