Delzer v. United Bank of Bismarck, 890239

CourtUnited States State Supreme Court of North Dakota
Citation459 N.W.2d 752
Docket NumberNo. 890239,890239
PartiesRay DELZER and Betty Jean Delzer, Plaintiffs and Appellants, v. UNITED BANK OF BISMARCK, Defendant and Appellee. Civ.
Decision Date31 July 1990

Ray H. Walton (argued), Bismarck, for plaintiffs and appellants.

Anderson & Anderson, Bismarck, for plaintiffs and appellants. Appearance by Harold L. Anderson.

Wheeler Wolf, Bismarck, for defendant and appellee; argued by David L. Peterson.

GIERKE, Justice.

Ray and Betty Delzer (Delzers) appeal from a district court order which granted summary judgment of dismissal in favor of United Bank of Bismarck (United). We reverse and remand.

The Delzers operated a 2,050 acre ranch located thirteen miles northeast of Bismarck, North Dakota. Over the years, the Delzers had sought financing from local banks for the purpose of obtaining funds to operate their ranch. Between June and October of 1979, the Delzers borrowed approximately $60,000 from United for operating needs. In September of 1979, the Delzers spoke with United officials regarding further ranch operating loans.

The Delzers contend that they initially requested an operating loan of $150,000 from United. They submitted a farm plan that provided projected income and expenses for the upcoming years. The $150,000 loan was to be collateralized by projected hay sales and by current hay inventory. Delzers maintain that United would not loan them the money without additional security. Essentially, the Delzers allege that United desired a security interest in all of the assets of the ranch. The Delzers argue that they told United officials that they would not pledge all of their ranch assets as security unless United agreed to assure them of an additional $122,500 to purchase cattle. The Delzers submitted a farm plan for a $300,000 loan of which they contend that United accepted as a formal loan application. The Delzers maintain that United officials conveyed their approval of the $300,000 line of credit orally and in comments to the loan file prepared by United officer Ron P. Keeley. Mr. Keeley's October 15, 1979, comments stated in part:

"Today discussed the application of Ray Delzer for a $300,000.00 revolving farm line. Directors present were Frank Bavendick and Bob Woodmansee together with Rick Hurdelbrink and Ron Keeley. Both directors felt we should go ahead based on machinery, equipment, and real estate collateral.

"We have obtained cash flow statements and various other projections. We expect this to be minimum five year project as the major purpose is to finance a herd of cows which he will dry lot....

* * * * * *

"We will require a Security Agreement on machinery, equipment and a 2nd real estate mortgage and a collateralized guaranty from his son to tie up all farm assets."

On November 1, 1979, the Delzers executed a line of credit agreement with United for $150,000 and signed a promissory note for that amount. As collateral, United held security agreements on all of the Delzers' unsecured machinery and equipment, a second mortgage on their real estate, and a collateralized guaranty from their son, David Ray Delzer, consistent with the Bank's security needs as expressed in the October 15, 1979, bank comments.

The line of credit agreement specifically stated that the Delzers agreed to apply all proceeds from the sale of livestock to reduce any outstanding indebtedness under the agreement and failure to do so would be considered a default under the agreement. Further, the line of credit agreement specifically incorporated a cash flow projection (PCA Form 316) which United maintains was the $150,000 cash flow projection while the Delzers argue that it was the $300,000 cash flow projection. Finally, the credit agreement stated that at no time during the loan period would the loan balance exceed $150,000.

Due to the fact that the purchase of cattle was an integral part of the ranch and was needed to provide cash flow to service their debt load, the Delzers assert that they subsequently approached United for a cattle purchase advance which they felt was part of the alleged $300,000 line of credit agreement. However, United refused to advance any money to the Delzers beyond the initial $150,000 loan. Essentially, the Delzers maintain that there was an agreement to provide a $300,000 farm line, of which $150,000 would be provided as an operating loan on or about the 1st of November and the balance would be available as the cattle were purchased. The Delzers argue that as a result of United's alleged breach of their $300,000 line of credit agreement, they were unable to service their debt load. Consequently, the Delzers' ranching operation failed causing them to lose their farm, ranch and all assets pledged as security for the United loan. Thereafter, the Delzers sued United for breach of their alleged agreement to extend additional credit to them.

United responds that the farm plan submitted by the Delzers calling for a $150,000 operating line was the plan upon which United based its operating loan. United contends that the $150,000 promissory note, line of credit agreement and security documents reflected its total commitment to the Delzers for $150,000. United argues that the following language from the line of credit agreement reflects both the Delzers' and its intent: "Borrower acknowledges that at no time during the loan period will the loan balance exceed One Hundred Fifty Thousand and no/100 ($150,000.00) Dollars." United maintains that the $150,000 loan documents are fully integrated documents which reflect the scope of its loan agreement with the Delzers.

Therefore, United moved for summary judgment arguing that by virtue of the loan documents, it was not obligated to extend additional credit to the Delzers. Further, United argued that even if an agreement to provide a $300,000 line of credit to the Delzers was made, the parol evidence rule would exclude evidence of any oral agreement and the statute of frauds would render any oral agreement unenforceable. The Delzers contended that the statute of frauds did not apply and if the statute did apply, that numerous exceptions to the statute were present. After initially denying United's motion for summary judgment, the district court granted United's motion stating that, "The Court agrees with Mr. Peterson [counsel for United] that the claimed agreement here, even if one existed, is not enforceable. The Court relies on the Woell case [Union State Bank v. Woell, 434 N.W.2d 712 (N.D.1989) ]. Also, whatever evidence of an agreement the plaintiffs may have, such evidence is not admissible at trial." This appeal followed.

There are two issues on appeal that need be resolved: (1) whether the Delzers are precluded from proving the oral contract due to the statute of frauds and the parol evidence rule; (2) whether the trial court erred in entering summary judgment against the Delzers based upon the holding in Union State Bank v. Woell, supra.

Initially, we must consider whether or not the alleged $300,000 oral agreement is unenforceable because of the statute of frauds. Section 9-06-04(1), N.D.C.C., states that "an agreement that by its terms is not to be performed within a year from the making thereof" is invalid unless some note or memorandum is in writing and subscribed by the party to be charged. In this case, United argues that it is uncontradicted by all the parties involved that the alleged agreement was to be a multiple year agreement. The Delzers maintain that while the parties had intended that the alleged oral agreement would encompass a several year loan and repayment period, it was possible for all of the loans and repayments to be made within one year. We agree with the Delzers.

In Bergquist-Walker Real Estate v. William Clairmont, 333 N.W.2d 414, 418 (N.D.1983), this court held that "[i]f there is any possibility that an oral contract is capable of being completed within one year, the contract is not within the statute of frauds even though it is clear that the parties may have intended and thought it probable that the contract would extend over a longer period, and even though the contract does so extend." (Emphasis added). Thus, the contract must be impossible to perform within one year if it is to be proscribed by the statute. Id. at 418.

Assuming the existence of the alleged $300,000 oral agreement, it would seem unlikely that the Delzers would obtain the money, purchase livestock, and then sell either assets or the cattle to repay the full amount of the loan within one year. However unlikely, there is a possibility that that could have occurred. See, Zimmerman v. First Federal Savings and Loan Association, 848 F.2d 1047 (10th Cir.1988) (oral agreement to loan 2.2 million dollars did not fall within the statute of frauds because nothing in the terms of the oral agreement made it impossible for the plaintiff to borrow the 2.2 million dollars and to sufficiently develop the intended project to allow them to sell the project and apply the proceeds to pay back the entire loan).

Thus, we conclude that since there was a possibility, however remote, that the asserted oral agreement was capable of being completed within one year, the agreement would not fall within the statute of frauds and consequently, would not be proscribed by the provisions of Section 9-06-04(1), N.D.C.C.

Secondly, the Delzers assert that the trial court erred in granting summary judgment and in concluding that "whatever evidence of an agreement the plaintiffs [Delzers] may have, such evidence is not admissible at trial." Thus, we must address whether the parol evidence rule precludes the Delzers' proof, at the summary judgment stage, of the existence of the alleged oral $300,000 line of credit commitment made to them by United.

Summary judgment under Rule 56, N.D.R.Civ.P. is appropriate when there is no dispute as to material facts, or when, although factual disputes exist between the parties, the law is...

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