Central States Resources Corp. v. First Nat. Bank in Morrill, Neb.

• Decision Date: 04 June 1993
• Docket Number: No. S-90-1124,S-90-1124
• Citation: 243 Neb. 538,501 N.W.2d 271
• Parties: CENTRAL STATES RESOURCES, CORP., An Iowa Corporation, Appellant, v. FIRST NATIONAL BANK IN MORRILL, NEBRASKA, Appellee.
• Court: Nebraska Supreme Court

Page 271

501 N.W.2d 271

243 Neb. 538

CENTRAL STATES RESOURCES, CORP., An Iowa Corporation, Appellant, v. FIRST NATIONAL BANK IN MORRILL, NEBRASKA, Appellee.

No. S-90-1124.

Supreme Court of Nebraska.

June 4, 1993.

Syllabus by the Court

1. Limitations of Actions: Time: Appeal and Error. The point at which a statute of limitations begins to run must be determined from the facts of each case, and the decision of the district court on the issue of statute of limitations normally will not be set aside by an appellate court unless clearly wrong. However, when reviewing a question of law, an appellate court is obliged to reach a conclusion independent of the trial court's rulings.

2. Loans: Sales: Banks and Banking: Agents: Title. A participated loan results in the sale of a designated percentage of the loan to the participating bank with the lead bank acting as the participant's agent to collect and forward the appropriate repayments and to service the loan, but the participant does not acquire full legal title to the loan and attendant documents; such title rests in the lead bank.

3. Trusts: Property: Title. A constructive trust is imposed upon one who has acquired legal title to property under such circumstances that one may not in good conscience retain the beneficial interest in the property; in that situation, equity converts the legal titleholder into a trustee holding the title for the benefit of those entitled to the ownership thereof.

4. Loans: Banks and Banking: Assignments. Under a participation agreement, a "downstream" bank is akin to an assignee of a promissory note who stands in the shoes of the assignor and obtains the right, title, and interest that the assignor had at the time of the assignment.

5. Limitations of Actions: Principal and Agent: Time. When an agent is specifically appointed to collect money and remit it to the principal after deducting his or her charges, no time having been stated when the remittance is to be made, the statute of limitations begins to run in favor of the agent from the time such agent receives the money. Mere silence or concealment by the agent without affirmative misrepresentation will not toll the statute.

6. Loans: Time. The duty to pay loan participants arises when proceeds are derived from the participating loan.

7. Limitations of Actions: Principal and Agent: Agency: Time: Accounting. Where there is a general or continuing agency, a statute of limitations does not commence to run until the agency is terminated, so that unless the death of one of the parties occurs, the termination of a continuing agency cannot be effective so as to set the statute in motion until an accounting is had or a demand for an accounting made and refused, or there is an express repudiation of agency communicated to the principal.

8. Actions. A cause of action accrues when the aggrieved party has the right to institute and maintain suit.

9. Limitations of Actions: Assignments. An assignee of the Federal Deposit Insurance Corporation stands in the shoes of that agency and thus receives the benefit of the 6-year statute of limitations provided by 12 U.S.C. § 1821(d)(14) (Supp. I 1989).

10. Pleadings: Appeal and Error. An issue not presented to or passed upon by the trial court generally is not appropriate for consideration on appeal. However, an appellate court is obliged to dispose of cases on the basis of the theory presented by the pleadings on which the case was tried.

11. Limitations of Actions: Appeal and Error. Which statute of limitations applies is a question of law that an appellate court must decide independently of the conclusion reached by the trial court.

Paul A. Zoss, of Adams, Howe & Zoss, P.C., Des Moines, IA, for appellant.

Richard A. Douglas, of Nichols, Douglas and Kelly, P.C., Scottsbluff, for appellee.

HASTINGS, C.J., and BOSLAUGH, WHITE, CAPORALE, SHANAHAN, FAHRNBRUCH, and LANPHIER, JJ.

HASTINGS, Chief Justice.

Central States Resources, Corp. (Central States), appeals the judgment dismissing its cause of action as to count VII entered by the district court following a bifurcated trial on the applicability of the statute of limitations.

On January 5, 1983, the Bank of Gering (Gering) purchased from Minatare State Bank (Minatare) a $227,000 participation in loans of $327,300 which were made by Minatare to Harlan Deines on January 4, 1983. A participation agreement involves a lead bank which makes a loan and sells a portion of it to another bank. First National Bank in Morrill ( FNBM ) is the successor in interest of Minatare, which held Deines' loan.

This participation agreement involved two notes, the first in the principal amount of $88,000, evidenced by note No. 17067, dated May 27, 1982, and the second evidenced by note No. 17441, dated December 4, 1982, which was made in the amount of $239,300. The terms of the participation agreement provide that all advantages derived from the loans or any security therefor shall be shared ratably in the proportion which its unpaid respective participations bear to the entire face amount. The participation certificate executed by Minatare certified to Gering as follows:

Undersigned warrants the validity of all said notes and guarantees all signatures thereon and the validity of the Truth-In-Lending Disclosure Statement; and knows of no defect therein or defense thereto. Undersigned elects the same as a note or notes under any guaranties applicable thereto and confirms that all payments of interest, all advantages derived from the above or any security pledged therefor, including the exercise of any banker's lien or right of setoff, shall be shared in such manner that each bank shall share such payments and advantages ratably in the proportion which its unpaid respective participations in this loan shall bear to the entire unpaid amount of the loan. All payments of principal and expenses of collection shall be shared in the same manner.

Gering State Company was the holding company, owned and operated by H.L. McKibbin and his wife and son, which held more than 80 percent of the outstanding stock of Gering, as well as over 80 percent of Minatare.

Gering was closed and placed into a Federal Deposit Insurance Corporation (FDIC) receivership on July 31, 1986. On April 20, 1988, Central States purchased the loan participation certificate at issue from FDIC. The petition, filed by Central States against FNBM on June 5, 1989, followed by a later-filed amended petition, prayed for an accounting and an order requiring FNBM to pay Central States a share of the payments received by Minatare on the loan.

FNBM's answer alleged as an affirmative defense that Central States' claim was barred by the applicable statute of limitations, which Central States denied in its reply. The trial court heard only the issue of the statute of limitations as provided by Neb.Rev.Stat. § 25-221 (Reissue 1989). That section provides that any party may move that the issue of the bar of the statute of limitations be tried separately. The court held that the cause of action listed in count VII was barred by the applicable statute of limitations. Neb.Rev.Stat. § 25-205 (Reissue 1989) provides for a bar of 5 years on an agreement in writing. The action was ordered dismissed. Following a denied application for new trial, Central States appeals. The primary question before this court is whether Central States' cause of action had accrued prior to June 5, 1984, and whether it is barred.

Central States assigns as error the ruling of the district court (1) that the cause of action accrued when the sale proceeds were received by Minatare, rather than when the proceeds were applied to the note, and by inference, the court's failure to apply the appropriate statute of limitations, and (2) that the claim for a share of a "beet check," a money order purchased by Deines and payable to Minatare, had accrued prior to June 5, 1984.

Deines filed for bankruptcy on June 10, 1983. Following the November 15, 1983, discharge from bankruptcy, the Deines farm was sold for $67,536.50 by means of an auction on February 18, 1984. The proceeds were placed in a separate account in Minatare entitled "Harlan Deines Farm Sale," and a separate ledger was used to record the payment of sale expenses. The sale resulted in net proceeds of $45,683.04 after deducting the value of another person's property also included in the sale, as well as various sale expenses. The net proceeds eventually were applied to the note of Deines held by Minatare.

McKibbin, former president and board member of both Gering and Minatare, testified that upon receipt of the funds, the normal procedure in the payment of participation funds consisted of the loan officer's dividing the proceeds according to the participation agreement. When asked whether he had made demand upon Minatare to receive any of these sale proceeds, he stated that he "didn't personally make any demand, I really wasn't up on the account. The loan officers were handling it and it didn't come to my attention."

Gary Kelley, vice president of Gering during the incidents at issue here, also served both on the board of directors and as administrative vice president at Minatare for the final 6 or 7 months of 1985, then as president of Minatare from January 1986 until January 1989, when Minatare merged with FNBM. Kelley testified that as an officer of Gering, he assisted Minatare's employee who officially acted as clerk for the Deines auction and was aware of the fact that money was received by Minatare on the sale. He admitted that he made no demand for proceeds of that particular sale.

It is the contention of FNBM that the net proceeds of $45,083.04 remaining in the "Harlan Deines Farm Sale" account as of April 24, 1984, were on that date applied to the note. This claim is supported by exhibit 119, which is on letterhead of Minatare, is dated April 24, 1984, and contains a breakdown of the various items in the Deines...