OPINION OF THE COURT

COWEN, Circuit Judge.

At issue in this case is which party is entitled to a fund of $594,000 paid into the district court. To settle this dispute we must determine whether a bank which has honored a letter of credit may be equitably subrogated to the rights of its customer vis-a-vis funds paid to the customer by a party unrelated to the original letter of credit. We conclude that because the issuing bank was satisfying its own primary liability rather than the liability of another when it made payment under the letter of credit, it may not avail itself of the common-law remedy of equitable subrogation. We will affirm the order of the district court granting summary judgment in favor of Green Hill Investors.

I.

The $594,000 fund which is the subject of this diversity dispute was paid into the district court by United States Fidelity and Guaranty Company ("USF G"). This lawsuit began when Green Hill Associates ("Associates") sued USF G for the proceeds of performance bonds issued by USF G. York Excavating Co. ("York"), Dauphin Deposit Bank and Trust Company ("Dauphin Deposit") and Green Hill Project Investors ("Investors") subsequently intervened in the action, claiming an interest in the bond proceeds. The action itself arises from the construction of a multi-family residential development in Susquehanna Township ("the Township"), Dauphin County, Pennsylvania. Dauphin Deposit appeals the district court's order granting summary judgment in favor of Investors.

Associates was the owner and developer of a subdivision construction project, known as the Green Hill Project ("the Project"). Susquehanna Construction Corporation ("SCC") was a general manager of the Project under a written agreement entered into with Associates and as such undertook to construct certain buildings and complete certain other improvements on the site. USF G issued two performance bonds guaranteeing the faithful and timely performance of all of SCC's duties under the contract with Associates ("the USF G bonds"). The aggregate amount of these bonds totalled $2,965,873.

Eastern Consolidated Utilities, Inc. ("ECU") also entered into a contract with Associates for certain work on the Project. Under that contract, ECU agreed to construct such improvements as internal roadways, parking areas and storm drainage systems. ECU's responsibilities under this contract were guaranteed by performance bonds issued by Employers Insurance of Wausau ("the Wausau bonds").

In order to begin work on the Project, Associates needed the approval of the Township. Therefore, Associates entered into an agreement with the Township ("the Subdivision Agreement") to complete various improvements on the site of the proposed subdivision. These improvements included the construction of grading, roads, driveways, and parking and recreation areas. The Subdivision Agreement required Associates to provide either a bond or a standby letter of credit guaranteeing the completion of the specified improvements.

Associates applied for an irrevocable standby letter of credit from Dauphin Deposit in order to satisfy the Subdivision Agreement. Dauphin Deposit accepted Associates' application and issued a letter of credit in favor of the Township for the account of Associates. The face amount of the letter was $1,088,646. The letter provided that it would be payable upon the Township's certification that the required site improvements had not been completed as required by the Subdivision Agreement. Dauphin Deposit received a fee of $75 plus 1.5% per annum of the face amount of the letter of credit. Associates also agreed to reimburse Dauphin Deposit if Dauphin honored the letter of credit ("the reimbursement agreement"). The reimbursement agreement did not include an assignment of Associates' rights in the USF G bonds in the event of honor.

As security in the event of honor, Dauphin Deposit received a collateral note executed by the Tudor Development Group ("Tudor"), Associates' general partner on the project, and an assignment of the proceeds of the Wausau performance bonds. As noted, Dauphin Deposit did not obtain an assignment of the USF G bonds nor did it file financing statements perfecting its security interest in any of the collateral it did obtain in connection with the issuance of the letter of credit.

Sometime in May, 1987, SCC defaulted under its contract with Associates. Subsequently, Associates was declared in default of its obligations to build the site improvements under the subdivision agreement with the Township. As a result, on April 6, 1988, the Township issued its draft in the amount of $800,202 against the Dauphin Deposit letter of credit. Dauphin Deposit paid on the Township's draft. To date, Dauphin Deposit has not been reimbursed by Associates for its payment under the letter of credit.

Following SCC's default, Associates submitted a claim to USF G for payment under the USF G performance bonds. On September 14, 1989, Associates' bond claims against USF G were settled, with USF G agreeing to make a payment totalling $609,000. In exchange for this payment, Associates executed a release and assignment under which USF G was freed from any and all claims arising from the Project. Of this settlement, $594,000 was paid into the district court to be held pending resolution of the various parties' claims to the fund.

Associates presently asserts a claim against the fund as obligee under the USF G bonds. As a part of its settlement with USF G, Associates assigned a portion of its rights in the bonds to Investors. Thus Investors now claims the proceeds of the fund based on Associates' partial assignment of the bond proceeds. Dauphin Deposit contends that it is equitably subrogated to Associates' interest in the fund by reason of its payment to the Township under the letter of credit, for which it has not been reimbursed. Furthermore, Dauphin Deposit claims that the partial assignment by Associates to Investors could not divest Dauphin Deposit of its rights to the fund because its right to be equitably subrogated attached at the time it honored the letter, which was prior to the time of Associates' partial assignment to Investors.

Dauphin Deposit obtained a judgment against Tudor under the collateral note which it obtained as security but has not executed that judgment. Dauphin Deposit has neither sought nor obtained a judgment against Associates.

The district court, on cross-motions for summary judgment by Investors and Dauphin Deposit, concluded that there were no disputed issues of material fact and granted summary judgment in favor of Investors. The district court concluded that a bank which issues a standby letter of credit cannot accede to the rights of its customer on a theory of equitable subrogation and that even if such relief were available, the undisputed facts did not support granting Dauphin Deposit an equitable interest in the USF G bond proceeds. This appeal followed.

Our review of the district court's determination of a question of law is plenary. Carter v. Rafferty, 826 F.2d 1299, 1304 (3d Cir. 1987), cert. denied, 484 U.S. 1011, 108 S.Ct. 711, 98 L.Ed.2d 661 (1988). The clearly erroneous standard of review is applied to findings of fact. Id. When an action is decided on motion for summary judgment, this court must apply the same test that the district court was required to apply pursuant to Federal Rule of Civil Procedure 56(c): summary judgment is properly granted only if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id.

II.

Before addressing the substantive legal questions raised by this appeal, we think it useful to provide a brief overview of letters of credit law and the relationships among the parties to letter of credit transactions. In short, a letter of credit is an engagement by an issuer, usually a bank, made at the request of a customer for a fee, to honor a beneficiary's drafts or other demands for payment upon satisfaction of the conditions set forth in the letter of credit. 13 Pa.Cons.Stat.Ann. § 5103(a) (1984).

There are two types of letters of credit: commercial and standby. A commercial letter of credit is used in a sales situation where the seller is unfamiliar with the creditworthiness of the buyer. American Ins. Ass'n v. Clarke, 865 F.2d 278, 282 (D.C.Cir. 1988). To assure the seller that he will receive the benefits of his performance, the buyer obtains a letter of credit naming the seller as beneficiary. Wood v. R.R. Donnelley Sons Co., 888 F.2d 313, 317 (3d Cir. 1989). Under the terms of the letter, the issuer undertakes to purchase documents presented by the beneficiary (the seller) that conform to the terms set forth in the letter. Id.

Standby letters of credit differ from commercial letters in some respects. The beneficiary of a commercial letter of credit may draw upon the letter simply by presenting the requisite documents showing that the beneficiary has performed and is entitled to the funds. A standby letter requires the production of documents showing that the customer has defaulted on its obligation to the beneficiary, which triggers the beneficiary's right to draw down on the letter. Id. Standby letters are usually used in non-sales contracts such as contracts for the construction of a building, the provision of services, or some other contract where the performance of one party is executory. See John F. Dolan, The Law of Letters of Credit: Commercial and Standby Credits ¶ 1.06 (2nd ed. 1991). No distinction is made in the UCC between commercial and standby letters of credit.

The most salient feature of a letter of credit and the principal reason for its use in commercial transactions is the "independence principle." This means that the letter of credit is a commercial instrument completely separate from the underlying contract between the customer and the beneficiary. Wood, 888 F.2d at 318. The independence principle obliges the issuer to honor the draft when the beneficiary presents conforming documents without reference to compliance with the terms of the underlying contract between the customer and the beneficiary. See, e.g., 13 Pa.Cons.Stat.Ann. § 5114(a). This "independence" means that should disagreement arise between customer and beneficiary, the dispute is resolved with the money already in the pocket of the beneficiary. It also means that when an issuer makes payment under a letter of credit, the issuer is satisfying its own primary obligation to the beneficiary, without reference to the rights of its customer under the underlying contract with the beneficiary.

In contrast, a guarantor is subject to liability only if the beneficiary has sought and has been unable to obtain payment from the party who is primarily liable on the debt. Therefore a guarantor is actually liable for the debt of another party which that party has failed to satisfy.

In this case, the customer in the letter of credit transaction was Associates. The contract underlying the letter of credit was the subdivision agreement entered into by Associates and the Township, and the Township was the beneficiary of the letter of credit. Dauphin Deposit, the issuer, was obligated under the terms of the letter to honor the Township's demand for payment when the Township certified that the agreed upon improvements had not been made by Associates. Id. at § 5114(a). Once Dauphin Deposit honored the letter, Associates, as its customer, had an immediate statutory obligation to reimburse Dauphin, the issuer, id. at § 5114(c), and was also obligated to do so under the terms of the reimbursement agreement.

While section 5114(c) states that the issuer shall be reimbursed, there are no comparable statutory provisions indicating the manner in which such reimbursement shall occur. The method of reimbursement is a matter left to negotiations between the parties. In this case, the reimbursement obligation was memorialized contractually in the reimbursement agreement entered into by Associates and Dauphin Deposit. In addition, Dauphin Deposit negotiated for assignment rights in certain collateral held by Associates, namely its rights under the Wausau performance bonds and also looked to the Tudor promissory note as collateral in its dealings with Associates.

III.

The classic explanation of the doctrine of equitable subrogation is as follows:

Where property of one person is used in discharging an obligation owed by another or a lien upon property of another, under such circumstances that the other would be unjustly enriched by the retention of the benefit thus conferred, the former is entitled to be subrogated to the position of the obligee or lienholder.

Gladowski v. Felczak, 346 Pa. 660, 31 A.2d 718, 720 (1943) (quoting Restatement of Restitution § 162 (1937)). Generally, the following five prerequisites must be satisfied before a claimant may avail itself of the remedy of equitable subrogation: (1) the claimant paid the creditor to protect his own interests; (2) the claimant did not act as a volunteer; (3) the claimant was not primarily liable for the debt; i.e., secondary liability; (4) the entire debt has been satisfied; and (5) allowing subrogation will not cause injustice to the rights of others. See, e.g., United States Fidelity and Guaranty Co. v. United Penn Bank, 362 Pa. Super. 440, 524 A.2d 958, 963-64, alloc. denied, 517 Pa. 609, 536 A.2d 1333 (1987).

Pennsylvania law offers little guidance, however, on the question of whether the doctrine is applicable in the context of letters of credit. This dearth of state case law is best explained by the simple fact that the question of subrogation usually arises in the bankruptcy setting. The issuer which has honored a demand for payment under a letter of credit has an immediate and unconditional statutory right to reimbursement from its customer and has usually secured adequate collateral to make itself whole in the event of honor. If the customer becomes bankrupt, however, the issuer's only practical recourse is asserting a claim in the bankruptcy proceeding. Therefore, most of the law related to the issue presented in this appeal comes from the bankruptcy courts rather than state courts. We look, then, to those cases for guidance.

Those courts which have considered the question presently before us have disagreed as to whether the remedy of equitable subrogation is available. The minority view advocates the availability of equitable subrogation, see In re Valley Vue Joint Venture, 123 B.R. 199 (Bankr.E.D.Va. 1991); In re National Service Lines, Inc., 80 B.R. 144 (Bankr.E.D.Mo. 1987); In re Sensor Systems, Inc., 79 B.R. 623 (Bankr.E.D.Pa. 1987); In re Minnesota Kicks, Inc., 48 B.R. 93 (Bankr.D.Minn. 1985), whereas the majority of courts to consider the issue, as well as the district court in this case, have refused to grant the issuing bank equitable subrogation rights following honor under a letter of credit. See In re Carley Capital Group, 119 B.R. 646 (W.D.Wis. 1990); In re Agrownautics, Inc., 125 B.R. 350 (Bankr.D.Conn. 1991); In re East Texas Steel Facilities, Inc., 117 B.R. 235 (Bankr.N.D.Tex. 1990); In re St. Clair Supply Co., Inc., 100 B.R. 263 (Bankr.W.D.Pa. 1989); In re Kaiser Steel Corp., 89 B.R. 150 (Bankr.D.Colo. 1988); In re Munzenrieder Corp., 58 B.R. 228 (Bankr.M.D.Fla. 1986); In re Economic Enterprises, Inc., 44 B.R. 230 (Bankr.D.Conn. 1984); cf. In re Glade Springs, Inc., 826 F.2d 440 (6th Cir. 1987) (confirming bank (Chemical) which in effect guaranteed that issuing bank's (UAB) letter of credit would be honored, may be equitably subrogated to the rights of the issuing bank which had received security from its customer). We agree with the majority view that a bank which issues a letter of credit may not accede to the rights of its customer on a theory of equitable subrogation.

Courts grappling with this issue have generally concluded that while there are some superficial similarities between guarantees and letters of credit, their "legal" characteristics remain quite distinct and thus the remedies available should remain distinct as well. See In re Carley Capital, 119 B.R. 646; In re Agrownautics, 125 B.P. 350; In re East Texas Steel, 117 B.R. 235. As noted by the district court, the key distinction between letters of credit and guarantees is that the issuer's obligation under a letter of credit is primary whereas a guarantor's obligation is secondary — the guarantor is only obligated to pay if the principal defaults on the debt the principal owes. In contrast, while the issuing bank in the letter of credit situation may be secondarily liable in a temporal sense, since its obligation to pay does not arise until after its customer fails to satisfy some obligation, it is satisfying its own absolute and primary obligation to make payment rather than satisfying an obligation of its customer. Having paid its own debt, as it has contractually undertaken to do, the issuer "cannot then step into the shoes of the creditor to seek subrogation, reimbursement or contribution from the [customer]. The only exception would be where the parties reach an agreement to the contrary." In re Kaiser Steel, 89 B.R. at 153.

The distinct nature of the obligations which arise with respect to letters of credit and guarantees is also reflected in a number of provisions of the UCC itself. See 13 Pa. Cons.Stat.Ann. § 5103 cmt. ("[t]he issuer is not a guarantor of the performance of these underlying transactions"); 13 Pa.Cons.Stat.Ann. § 5101 cmt. ("[t]he other source of law respecting letters of credit is the law of contracts with occasional unfortunate excursions into the law of guaranty"); 13 Pa.Cons.Stat.Ann. § 5109 cmt. ("issuer receives compensation for a payment service rather than for a guaranty of performance"). While we recognize that arguments may be made and have been made in support of allowing subrogation, we believe that Article 5 of the UCC, when viewed in its entirety, evinces an intent to keep the law of guarantee and the law of letters of credit separate. In our view, the Uniform Commercial Code Committee, rather than the federal courts, is best equipped to address this problem. See The Task Force on the Study of U.C.C. Article 5, An Examination of U.C.C. Article 5 (Letters of Credit), 45 Bus.Law. 1527 (1990) (Task Force, while reaching no conclusion as to whether subrogation is appropriate, suggests it would be useful to resolve issue by statute); Michael E. Avidon, U.C.C. Article 5 Symposium: Subrogation in the Letter of Credit Context, 56 Brook.L.Rev. 128, 138 (1990) ("[i]n addition to providing needed guidance as to rights and obligations in what has been a murky area of the law, well-crafted legislation will curb the excesses of courts . . . in their zeal to do equity in particular cases").

The UCC does contain one direct reference to the possibility of subrogation in the letter of credit context: "[t]he customer will normally have direct recourse against the beneficiary if performance fails, whereas the issuer will have such recourse only by assignment of or in a proper case subrogation to the rights of the customer." 13 Pa.Cons.Stat.Ann. § 5109 cmt. This comment, however, is clearly limited to the possibility of the issuer being subrogated to the customer's rights against the beneficiary. In the present case, rather than seeking subrogation rights against the beneficiary of the letter, Dauphin Deposit seeks subrogation rights against a stranger to the letter of credit issued in favor of the Township. In any event, this comment merely suggests rather than mandates the availability of subrogation in certain cases.

Finally, we note that some courts have determined that equitable subrogation is not available to a bank which has honored a letter of credit, but has not been reimbursed. These courts have rejected the remedy of equitable subrogation in the belief that allowing subrogation would abrogate the independence principle which is the cornerstone of letter of credit law. See In re Carley Capital, 119 B.R. at 651; In re East Texas Steel, 117 B.R. at 241; In re Economic Enterprises, 44 B.R. at 232. The district court in this case disagreed with that assessment and concluded that "the independence principle is technically not violated by allowing Dauphin Deposit to proceed against its customer." App. at 1144. We agree with the district court that the vitality of the independence principle is unlikely to be substantially diminished were we to allow subrogation in this situation. However, as noted, one of the principal requirements of equitable subrogation has not been satisfied here — that the party seeking subrogation have satisfied the debt of another — and therefore we conclude that the district court correctly determined that the remedy cannot be invoked in this case. Moreover, as will be discussed, the equities do not favor granting subrogation rights in this case.

IV.

Even if we were to ignore the fact that Dauphin Deposit has failed to meet the technical requirements to avail itself of the remedy of subrogation since it was satisfying its own primary obligation in paying under the letter of credit, we would nevertheless be compelled to reject its claimed right to the remedy of equitable subrogation on these facts. As the district court concluded, the equities do not favor subrogation in this case.

When Dauphin Deposit agreed to issue a letter of credit on behalf of its customer, Associates, it was in a position to bargain for whatever security it thought appropriate. It chose to contract for an assignment of rights in the Wausau bonds and received a promissory note from Tudor. In addition, Dauphin Deposit received a large annual fee for the service of issuing the credit based upon the face amount of the letter. It could have contracted for an assignment of rights in the USFG bonds but did not do so.

Presumably, at the time these arrangements were made Dauphin was satisfied with the collateral it received and the creditworthiness of its customer. However, now that Dauphin has discovered that it made a poor business decision in not contracting for an assignment of rights in the USF G bonds, it seeks our help in gaining additional rights. As the district court properly concluded, there is no apparent reason why the court should exercise its equitable powers to rewrite the contract between the parties to give Dauphin Deposit more security than it bargained to receive. See In re Carley Capital, 119 B.R. at 650 (no equitable reason to grant subrogation where "the plaintiffs had the ability by virtue of the contracts with the parties with whom they dealt to protect themselves in exactly the same way that they seek to protect themselves by subrogation"); In re Munzenrieder, 58 B.R. at 231 (fact that security received turned out to be useless "means nothing more or less than that the Bank entered into a transaction which . . . turned out to be a total loss, a fact legally meaningless and insufficient to invoke the doctrine of equitable subrogation").

In assessing the equities of the situation, we must also look to the other parties who could or would be affected by a decision to allow subrogation in this case. Those parties who engaged in business dealings with Associates subsequent to the issuance of the letter of credit, including Investors, to whom Associates assigned its rights in the USF G bonds, assumed they would be free from any future claims by Dauphin Deposit with respect to the letter of credit. We do not believe the equities favor treating Dauphin Deposit in a manner which would be detrimental to those parties who had subsequent dealings with Associates.

Finally, we note that as a general matter, equitable relief is not appropriate where a party has an adequate legal or statutory remedy. Clark v. Pennsylvania State Police, 496 Pa. 310, 436 A.2d 1383, 1385 (1981). Here, Dauphin Deposit appears to have two legal remedies and one statutory remedy: (1) seek judgment against Tudor on the promissory note; (2) sue Associates directly under the Reimbursement Agreement; and (3) seek reimbursement under 13 Pa.Cons.Stat.Ann. § 5114(c) which provides that an issuer is entitled to immediate reimbursement from its customer in the event of honor. In determining whether a remedy is "adequate," we must look to its availability and not to the likelihood of its success. Willing v. Mazzocone, 482 Pa. 377, 393 A.2d 1155, 1158 (1978); Chartiers Valley School Dist. v. Virginia Mansions Apts., Inc., 340 Pa. Super. 285, 489 A.2d 1381, 1386 (1985). Thus the fact that the remedies set forth above might not make Dauphin Deposit whole does not mandate a finding that such remedies are inadequate, thereby requiring this court to grant equitable relief.

V.

In sum, we conclude that equitable subrogation is not an appropriate remedy in this situation, both because an issuing bank which honors a letter of credit makes good its own primary obligation, rather than fulfilling the obligation of another, and because the equities of the case before us do not warrant it. We will affirm the judgment of the district court granting summary judgment in favor of Investors.