City of Tulsa v. Bank of Oklahoma, N.A.

The City Council of Tulsa decided to encourage the initiation of new direct nonstop airline service to business centers on the East and West coasts, and voted to approve a Memorandum between the Tulsa Industrial Authority (TIA) and the City which would convey certain real property (Property) for that purpose. The transfer would allow TIA to mortgage the Property to the Bank of Oklahoma (BOK) in support of a non-recourse loan so that TIA could, in turn, make an aggregate loan (Great Plains Loan) to Great Plains Airlines, Inc. (Great Plains). This transfer would allow the Tulsa Airports Improvement Trust (TAIT) to enter into a Support Agreement, pursuant to which TIA, in the event of a default would have the option of selling the Property to TAIT under the direction of the BOK. Upon exercise of such option, the TIA would sell, transfer and convey the property to TAIT to satisfy the outstanding loan balance. Great Plains subsequently defaulted under the terms of the Great Plains Loan, and left a balance owed to the Bank. Ultimately TAIT did not purchase the Property. TIA and the Bank sued TAIT. TAIT alleged the Support Agreement was unlawful and an unenforceable contract because TAIT could not purchase the Great Plains Loan and Property by reason that all of TAIT's funds were airport revenues and such purchases would violate the FAA Revenue Use Policy. To resolve the matter, the parties executed a Settlement Agreement which provided the City would pay BOK. The City and its Mayor asked the trial court to determine that the settlement agreement was a lawful contract executed by the City, and the settlement payment made pursuant to the settlement agreement was a lawful expenditure of public funds. Taxpayers intervened, and asked the trial court to determine that the payment of money to the Bank of Oklahoma pursuant to the settlement agreement was an illegal transfer of public funds made pursuant to an unlawful settlement agreement. In granting the City's motion for summary judgment, the trial court found the settlement agreement was a lawful and the settlement payment was a lawful expenditure of funds. Upon its review, the Supreme Court concluded the settlement was not based on a contract, but rather under the equitable theory of unjust enrichment to the City of Tulsa, and as such, the City had authority to enter into the Settlement Agreement. However, the Court found that the unjust enrichment claim was unviable and the Statute of Limitations would have barred the unjust enrichment claim against the City. The Court remanded the matter back to the District Court to direct the repayment of the settlement funds from BOK back to the City of Tulsa. View "City of Tulsa v. Bank of Oklahoma, N.A." on Justia Law