Amerus Bank v. Pinnacle Bank

• Decision Date: 09 June 1999
• Docket Number: No. 4-98-CV-90314.,4-98-CV-90314.
• Citation: 51 F.Supp.2d 994
• Parties: AMERUS BANK, Plaintiff, v. PINNACLE BANK, as Successor of Indiana Federal Bank for Savings, Defendant. Pinnacle Bank, Counterclaim-Plaintiff, v. Amerus Bank, Counterclaim-Defendant.
• Court: U.S. District Court — Southern District of Iowa

51 F.Supp.2d 994

AMERUS BANK, Plaintiff, v. PINNACLE BANK, as Successor of Indiana Federal Bank for Savings, Defendant.

Pinnacle Bank, Counterclaim-Plaintiff, v. Amerus Bank, Counterclaim-Defendant.

No. 4-98-CV-90314.

United States District Court, S.D. Iowa, Central Division.

June 9, 1999.

COPYRIGHT MATERIAL OMITTED

J. Michael Vaughan, Kansas City, MO, W. Don Brittin, Jr., John F. Lorentzen, Des Moines, IA, for Plaintiff/Counterclaim Defendant.

Bret A. Dublinske, Jon P. Sullivan, Des Moines IA, for Defendant/counterclaim Plaintiff.

ORDER ON MOTION FOR SUMMARY JUDGMENT

PRATT, District Judge.

This matter comes before the Court on Defendant Pinnacle Bank's [hereinafter Defendant or Pinnacle] Motion for Summary Judgment, filed on December 9, 1998. Defendant seeks summary judgment on all of Plaintiff's claims. On April 12, 1999, Plaintiff AmerUs Bank [hereinafter Plaintiff or AmerUs] filed its Resistance to Defendant's Motion for Summary Judgment and on April 22, 1999 Defendant filed its Reply. No hearing on this matter is deemed necessary and the matter is now considered fully submitted.

I. Background Facts and Proceedings

The following facts are either undisputed or viewed in the light most favorable to the nonmoving party for the motion being considered. See United States v. City of Columbia, 914 F.2d 151, 153 (8th Cir. 1990); Woodsmith Publ'g Co. v. Meredith Corp., 904 F.2d 1244, 1247 (8th Cir.1990). In June 1996, AmerUs and Indiana Federal Bank For Savings [hereinafter Indiana Federal] negotiated for the sale of a portfolio of second mortgage loans (i.e. home equity loans) then held by AmerUs. It is undisputed that at the time of negotiations both AmerUs and Indiana Federal were sophisticated business enterprises, experienced in the buying and selling of loans. There was no disparity of bargaining power and both were represented by counsel. At the close of negotiations, Elizabeth Swanson, (counsel for AmerUs) provided a form Purchase and Sale Agreement and a form Loan Servicing Agreement, both of which had been previously developed by AmerUs, to Jim Jorgensen (counsel for Indiana Federal bank) for his review. (See Swanson Affidavit, ¶ 4). Jorgenson made some initial changes to the forms in order to tailor them to the Indiana Federal transaction. The Purchase and Sale Agreement and the Loan Servicing Agreement were both entered into as of June 12, 1996. The Court finds several clauses are particularly pertinent to its analysis.

Article I of the Loan Servicing Agreement provides definitions for words or phrases used within the contract. In this section "Excess Servicing Fee" is defined as "the difference between interest accrued on the Mortgage Loans at the Loan Rate and interest computed at the Remittance Rate."

Article VI of the Loan Servicing Agreement provides the general servicing procedure guidelines. Section 6. 1, which is entitled "Servicing Compensation" provides in pertinent part that "[a]s compensation for its services hereunder, Servicer shall be entitled to retain the Excess Servicing Fee and the Supplemental Fees." Article X, Section 10.10, entitled "Servicer's Fee" further provides that "Servicer shall not receive a separate servicing fee under this Agreement. The pricing mechanism in the Purchase Agreement in part includes the consideration which Servicer receives."

Article IX of the Servicing Agreement provides for various ways in which the servicing contract may be terminated. Paragraph 9.1,¹ which is the only paragraph contained in this article states as follows:

This Agreement shall continue in existence and effect until terminated as herein provided. If not earlier terminated pursuant to Section 8.1 above, the respective obligations and responsibilities of Servicer shall terminate with respect to each Mortgage Loan upon the earlier of: (a) the final payment or other liquidation of such Mortgage Loan and the remittance of all funds relating to such Mortgage Loan hereunder, (b) the mutual consent of Servicer and the Owner in writing to terminate this Agreement with respect to such Mortgage Loan; or (c) the later of the date on which servicing is transferred or sixty (60) days after receipt by Servicer of written notice from Owner of Owner's intent to transfer servicing to a third party without cause. Written notice pursuant to the preceding clause (c) of this Section shall be received by the Servicer not less than sixty (60) days from the proposed transfer date. (emphasis added).

The Court also finds it worthy to note the explicit lack of a penalty provision in either agreement for early cancellation.

On or about July 30, 1997, Indiana Federal merged with Pinnacle, with Pinnacle emerging as the surviving entity. As successor, Pinnacle assumed Indiana Federal's rights and obligations under the Loan Servicing Agreement at issue in this case. On or about March 30, 1998, nearly two years after the Agreements were signed, Pinnacle gave AmerUs notice that it intended to terminate the Servicing Agreement in no less than sixty days, and that it "intend[ed] to transfer the servicing of the Mortgage Loans ... to Guaranty Federal Bank." (See Def.'s Ex. M). At that time, Guaranty Federal Bank [hereinafter Guaranty] was also a potential buyer for the loan portfolio and wanted to be able to choose a different servicer or service the loans itself.

On April 3, 1998, AmerUs wrote a letter to Pinnacle stating in part as follows: "AmerUs Bank disputes your contention concerning the right of Pinnacle Bank to pull servicing from AmerUs Bank." (See Def.'s Ex. N.) On May 4, 1998, AmerUs filed this action. Thereafter, on May 20, 1998, counsel for AmerUs wrote a letter to counsel for Pinnacle stating in part as follows:

Section 9.1(c) permits termination "sixty (60) days after receipt by Servicer of written notice from Owner of Owner's intent to transfer servicing to a third party without cause." (Emphasis added.). Pinnacle's termination of the Agreement under section 9.1(c) is ineffective unless servicing is transferred to a bona fide third party. Unless the transfer of servicing is to a bona fide third party, AmerUs will not recognize Pinnacle's attempt to terminate the agreement under section 9.1(c), and AmerUs will continue to exercise its rights to provide servicing for the mortgage loans under the terms of the Agreement. AmerUs would agree to terminate the Agreement, under the provisions of section 9.1(b) provided Pinnacle will continue to pay AmerUs the Excess Servicing Fee, as defined by the Agreement, for the life of the mortgage loans notwithstanding termination. Alternatively, AmerUs would agree to terminate the Agreement in consideration of the immediate payment of the present value of the Excess Servicing Fee for the life of the mortgage loans.

(See Def.'s Ex. O). In the present action AmerUs Bank makes two claims against Pinnacle. First, AmerUs claims that pursuant to the Sale and Purchase Agreement, it was entitled, as consideration for the sale of the mortgage loans, to receive an Excess Servicing Fee from Pinnacle, and that Pinnacle breached the Purchase and Sale Agreement as well as the corresponding Loan Servicing Agreement by refusing to pay such fee after the effective termination date. Second, AmerUs claims that, as a result of a mutual mistake, or a unilateral mistake by AmerUs and inequitable conduct by Indiana Federal, a provision was included in the Servicing Agreement by which a successor servicer, on termination of the Servicing Agreement, would succeed to all rights of AmerUs. In support of this second claim, AmerUs contends that the intent of AmerUs and Indiana Federal in entering the Servicing Agreement was that AmerUs' right to receive the Excess Servicing Fee could not be terminated as a result of the termination of the Servicing Agreement.

Pinnacle claims, on the other hand, the contracts at issue are clear and unambiguous, and that it properly and effectively terminated the Loan Servicing Agreement pursuant to Article IX.

II. Legal Standard

The purpose of summary judgment is to "pierce the boilerplate of the pleading and assay the parties' proof in order to determine whether trial is actually required." 11 Matthew Bender, Moore's Federal Practice, § 56.02, at 56-207 (3d ed.1997), (citing Wynne v. Tufts Univ. Sch. of Med., 976 F.2d 791, 794 (1st Cir.1992), cert. denied, 507 U.S. 1030, 113 S.Ct. 1845, 123 L.Ed.2d 470 (1993)). Summary judgment "allows courts and litigants to avoid full-blown trials in unwinnable cases, thus conserving the parties' time and money and permitting courts to [conserve] scarce judicial resources." Id. § 56.02

The plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. See Handeen v. Lemaire, 112 F.3d 1339, 1345 (8th Cir. 1997) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). The precise standard for granting summary judgment is well-established and oft-repeated: summary judgment is properly granted when the record, viewed in the light most favorable to the nonmoving party and giving that party the benefit of all reasonable inferences, shows that there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. See Fed. R.Civ.P. 56(c); Harlston v. McDonnell Douglas Corp., 37 F.3d 379, 382 (8th Cir. 1994); Walsh v. United States, 31 F.3d 696, 698 (8th Cir.1994); City of Columbia, 914 F.2d at 153; Woodsmith Publ'g, 904 F.2d at 1247. The court does not weigh the evidence nor make credibility determinations, rather the court only determines whether there are any disputed issues and, if so, whether those issues are both genuine and material. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106...