## Facts

- Lodwrick M. Cook, a senior executive at Global Crossing, Ltd. (GX), borrowed $7.5 million from JPMorgan Chase Bank’s private banking division (Private Bank) and signed a promissory note.
- GX’s board had approved an executive loan guarantee plan intended to let executives borrow against their GX holdings without selling stock; the plan used standby letters of credit backed by GX’s revolving credit facility.
- JPM issued a standby letter of credit in favor of the Private Bank to support repayment if Cook failed to pay.
- The letter of credit was supported by GX’s revolving credit facility, a syndicated facility funded by multiple lender banks; JPM was both a participating lender and the administrative agent for the syndicate.
- Cook defaulted on the promissory note; the parties did not dispute that Cook borrowed the money and failed to repay it.
- After default, the Private Bank drew $7.5 million on the letter of credit and was paid in full.
- GX later filed for bankruptcy, and the automatic stay prevented collection efforts against GX on the facility.
- With the Private Bank paid but the facility bearing the economic loss, JPM sued Cook directly, claiming equitable subrogation to the Private Bank’s rights under Cook’s promissory note.
- Cook moved to dismiss under Rule 12(b)(6), arguing that payment to the Private Bank meant any further recovery would be an improper double recovery; JPM cross-moved for summary judgment.

## Issues

1. Whether JPM, after the Private Bank was paid through a standby letter of credit supported by GX’s revolving credit facility, could be equitably subrogated to the Private Bank’s rights and enforce Cook’s promissory note.
2. Whether Cook’s “double recovery” argument barred JPM’s claim where the Private Bank had been made whole but the loss had shifted to the facility and its lenders.
3. Whether, on the undisputed record, JPM was entitled to summary judgment on its subrogation-based claim against Cook.

## Decision

- Cook’s Rule 12(b)(6) motion to dismiss was denied.
- JPM’s cross-motion for summary judgment was granted.
- The court held that equitable subrogation could place JPM in the Private Bank’s position to enforce Cook’s promissory note, even though the Private Bank had already been paid via the letter of credit.
- The court rejected the double-recovery defense because the suit sought a single satisfaction of the debt by shifting the loss back to the party who failed to repay, not a second payment to the original lender.
- The court found no genuine dispute of material fact as to Cook’s borrowing, default, the letter-of-credit payment to the Private Bank, and the resulting loss borne through the facility; nothing in the transaction documents clearly foreclosed equitable subrogation.

## Legal Principles

- Equitable subrogation allows a party that pays another’s debt (and is not a mere volunteer) to succeed to the creditor’s rights against the debtor to prevent unjust enrichment.
- Subrogation turns on the substance of who ultimately bore the loss, not on formal labels or internal divisions within a financial institution.
- Payment that satisfies the creditor does not bar subrogation when the payer (or parties the payer represents) bears the economic burden and seeks reimbursement from the defaulting obligor; the doctrine aims at one satisfaction of the debt, not multiple recoveries.
- A defendant’s “double recovery” objection fails when the plaintiff’s claim would not pay the creditor twice but would instead transfer the claim from the satisfied creditor to the party that funded the satisfaction.
- Summary judgment is proper when the material facts are undisputed and the moving party is entitled to judgment as a matter of law; a Rule 12(b)(6) motion is denied when the complaint plausibly states a claim for relief.

## Conclusion

The court held that, although JPM’s Private Bank had been paid in full after drawing on a standby letter of credit, equity permitted JPM (given its payment role tied to the revolving credit facility) to stand in the Private Bank’s shoes and enforce Cook’s promissory note; it therefore denied Cook’s motion to dismiss and entered summary judgment for JPM.


JPMorgan Chase Bank v. Cook, 318 F. Supp. 2d 159 (2004)