Cmty. First Bank v. First Cent. Bank McCook
| Decision Date | 04 February 2022 |
| Docket Number | No. S-21-143.,S-21-143. |
| Parties | COMMUNITY FIRST BANK, appellant, v. FIRST CENTRAL BANK MCCOOK, appellee. |
| Court | Nebraska Supreme Court |
Michael D. Samuelson and Robert B. Reynolds, of Reynolds, Korth & Samuelson, P.C., L.L.O., Ogallala, for appellant.
David W. Pederson, of Pederson Law Office, for appellee.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, Papik, and Freudenberg, JJ.
Community First Bank (Community First) appeals the order of the district court for Red Willow County which overruled Community First's motion for summary judgment, sustained the motion for summary judgment of First Central Bank McCook (First Central), and dismissed Community First's complaint in which it set forth "causes of action" all based on a claim for breach of contract. Community First generally argues that the district court erred when it determined that the contract between the two banks was a participation agreement that did not create a debtor-creditor relationship between the two banks. We conclude that the contract between the parties is ambiguous, and we further determine that a genuine issue of material fact exists regarding the provisions of the contract between the parties as to whether their contract is a participation agreement or a loan and that neither party has shown that it is entitled to judgment as a matter of law. We therefore reverse the order granting summary judgment in favor of First Central, and we remand the cause to the district court for further proceedings.
On April 15, 2020, Community First filed a complaint against First Central in which it set forth causes of action for breach of contract, breach of implied covenant of good faith and fair dealing, conversion, unjust enrichment, and declaratory judgment. Community First generally alleged that in 2017, First Central had approached Community First "about providing [$300,000] in financing." Community First alleged that it accepted First Central's offer and that the parties entered into a contract dated June 1, 2017, pursuant to which Community First's interest under the June 2017 contract "matured on August 1, 2017." Community First alleged that on four subsequent occasions, First Central sought extensions of the maturity date and Community First agreed to the extensions, the last of which extended the maturity date to December 15, 2018. Community First alleged that it did not agree to any further extensions and that following the final maturity date, it requested payment in full from First Central. Community First alleged that First Central refused to pay what was owed under the contract and its extensions. As more fully described below, the contract between the parties consisted of a document entitled "Participation Agreement," sometimes referred to herein as "agreement," into which a June 1, 2017, letter between the parties is incorporated.
In support of the cause of action for breach of contract, Community First alleged that First Central had breached the contract when it refused to provide the funds to which Community First was "entitled upon maturity" under the contract. In setting forth causes of action for breach of implied covenant of good faith and fair dealing, conversion, and unjust enrichment, Community First similarly alleged that First Central had committed the claimed torts when it refused to pay what Community First alleged it was owed under the contract.
Community First sought a judicial declaration of its rights under the 2017 contract and its extensions, including a determination of when and from whom Community First was entitled to be repaid its $300,000 plus interest. Community First also sought a judgment of damages against First Central for what it allegedly was owed under the 2017 contract and extensions.
First Central filed an answer in which it admitted that it and Community First had entered into a contract that it characterized as a "Participation Agreement" on June 1, 2017, and that the parties had entered into a "subsequent Participation Agreement" on November 1, 2017, that replaced the June contract. First Central further admitted that Community First had requested payment in full from First Central and that First Central had declined the request. However, First Central denied that it had breached the contract with Community First or committed any of the torts claimed by Community First. First Central denied every other allegation in Community First's complaint and asserted that "such allegations incorrectly or inaccurately describe subsequent interactions between" the parties. First Central asserted that Community First's claims were without legal basis under the terms of the contract between the parties.
Both parties moved for summary judgment, asserting that there was no genuine issue of material fact and that the respective party was entitled to judgment as a matter of law. The district court held an evidentiary hearing on the competing motions for summary judgment on November 23, 2020. At the hearing, the court received evidence offered by Community First that included the parties’ filings in this case and the affidavit of a Community First officer, which affidavit included various attachments. The court also received evidence offered by First Central that included affidavits of First Central officers.
Community First offered, and the court received, the affidavit of Jon Hidy, a branch president and member of the board of directors of Community First. Hidy attached several documents to his affidavit and stated that each of the attachments was a true and correct copy that had been retained by Community First or had been produced by First Central as part of discovery in this case.
Among the attachments to Hidy's affidavit was a document titled "Participation Agreement" and executed between First Central and Community First on June 1, 2017. In the agreement, First Central was designated as "Originating Financial Institution" and Community First was designated as "Participant." Recitals at the beginning of the agreement stated that First Central "has made or will make one or more advances" and "may, from time to time, make additional advances" to Donald and Norma Klein, designated as "Borrower," and that Community First "has contributed or will contribute toward advances made by" First Central to the Kleins. The terms of the agreement provided, inter alia, as follows: First Central would sell to Community First "an ownership interest in certain indebtedness owed by" the Kleins and that Community First would purchase such interest "without recourse to" First Central. Such transaction "shall not be construed as creating a debtor-creditor relationship between" First Central and Community First. Community First would purchase an undivided interest in the "Shared Obligation," which was defined as "[t]he Loan(s) and corresponding security outlined in a Commitment Letter dated June 1, 2017 ." As part of the agreement, Community First represented to First Central, inter alia, that "[t]he decision to purchase a participation interest in the Shared Obligation is based solely on [Community First's] independent evaluation of [the Kleins, the Kleins’] creditworthiness and existing information relating to the lien status of any collateral given to secure the obligation." The agreement included signature pages for each of the parties. The signature page for Community First was signed by an officer on June 1, 2017, and stated, inter alia, that its "Funding Commitment" was $300,000 and "Maturity Date" was August 1, 2017. The signature page for First Central was signed by an officer and stated, inter alia, that its "Funding Commitment" was $561,006.04 and, instead of August 1, 2017, the "Maturity Date" was December 15, 2030. The June 1, 2017, letter from First Central to Community First incorporated into the agreement stated that it was written "to confirm [Community First's] interest in participating in the credit facility to [First Central's] borrower, [the Kleins]." The letter then set forth "the terms under which [First Central was] prepared to offer this participation to [Community First]." Among the terms listed were a loan amount of $861,006.04 and a participation amount of $300,000. The "Purpose" was listed as "Refinance Existing Debt." Referring to the length of time, the "Term" listed in the June 1, 2017, letter was described as "[y]our commitment shall be until August 1, 2017," and "Payments" were described as "[a]ll principal and accrued interest is due on August 1, 2017." Provisions regarding the interest rate, servicing fee, and security were also set forth. The letter concluded, "If the terms and conditions of this letter meet with your approval, please indicate your acceptance of this commitment by signing and returning the enclosed copy." The letter was signed as being acknowledged and accepted on June 1, 2017, by an officer of Community First.
Documents which indicated extensions of the June 2017 contract were also attached to Hidy's affidavit. As stated above, the letter dated June 1, 2017, and the signature page for Community First that was part of the agreement indicated a "Maturity Date" of August 1, 2017. Additional documents attached to Hidy's affidavit purported to extend the "Maturity Date" from August 1, 2017, to, respectively, November 1, 2017; February 1, 2018; July 15, 2018; and finally, December 15, 2018.
The document indicating an extension to November 1, 2017, was a letter from First Central to Community First, which was virtually identical to the June 1, 2017, letter except that the "Term" was described as "[y]our commitment shall be until November 1, 2017," and "Payments" were described as "[a]ll principal and accrued interest is due on November 1, 2017." Included with the letter was a signature page similar to the signature page for Community First that was part of the June 2017 agreement except that it listed "Maturity...
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