Delzer v. United Bank of Bismarck

Decision Date24 April 1992
Docket NumberNo. 910304,910304
PartiesRay DELZER and Betty Jean Delzer, Plaintiffs and Appellants, v. UNITED BANK OF BISMARCK, Defendant and Appellee. Civ.
CourtNorth Dakota Supreme Court

Ray H. Walton (argued), and Anderson & Anderson, Bismarck, for plaintiffs and appellants; argued by Sonna M. Anderson.

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

MESCHKE, Justice.

For the second time, Ray and Betty Jean Delzer appeal a summary judgment dismissing their action against United Bank of Bismarck for breach of a claimed oral agreement to extend additional credit to them. We again reverse and remand for trial.

The Delzers owned and operated a 2,050 acre ranch northeast of Bismarck. Over the years, they borrowed operating funds from local banks. During the summer of 1979, the Delzers borrowed $60,000 from United. In September, they spoke to United officers about additional operating loans.

At first the Delzers requested a $150,000 operating loan from United, they say. They submitted a farm plan that projected income and expenses for several years, with current hay inventory and future hay sales to secure that loan. According to the Delzers, United would not increase their loan without all of their ranch assets as security. The Delzers claim that they refused to pledge all of their assets as security unless United assured them of additional credit of $122,500 to purchase cattle.

The Delzers then proposed a $300,000 loan that United accepted, they say. The Delzers claim that United officers orally agreed to a $300,000 line of credit, as confirmed by written comments of United officer Ron P. Keeley on October 15, 1979, in the Delzers' loan file at the bank:

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 credit agreement with United and signed a promissory note for $150,000. As collateral, United obtained security agreements on all of the Delzers' machinery and equipment, a second mortgage on their real estate, and a guaranty from their son, all consistent with the comments in United's loan file on October 15, 1979.

The credit agreement specifically incorporated a cash flow projection (PCA Form 316) that the Delzers argue was the projection for a $300,000 loan, but that the Bank says was the projection for a $150,000 loan. This agreement said that the loan balance would not exceed $150,000 at any time during the loan period. The credit agreement also stated that the Delzers agreed to apply all the proceeds from livestock to reduce any outstanding indebtedness, and that failure to do so would be a default.

Because cattle were a planned part of the operation to service this debt, the Delzers say, they later asked United for the funds to purchase the cattle that they expected to add through the credit agreement. United refused to advance any amount beyond the $150,000 loan.

As a result of United's alleged breach of the claimed agreement to loan them up to $300,000, the Delzers argue that they were unable to pay their debts. The Delzers' ranch failed and they lost their property. The Delzers then sued United for breach of the alleged agreement to extend additional credit to them.

United responds that the only agreement with the Delzers was for the $150,000 loan, and that the documents signed on November 1, 1979, reflect United's total commitment to the Delzers. United emphasizes one sentence in the agreement: "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 argues that this sentence made the loan documents fully integrated, and thus limited its obligation to the Delzers to a maximum loan of $150,000. Even if there was an oral agreement to loan the Delzers $300,000, United argues that the parol evidence rule excludes evidence of it, and that the statute of frauds bars enforcement of it.

United moved for summary judgment. After some hesitation, the trial court granted summary judgment to United, reasoning that "the claimed agreement here, even if one existed, is not enforceable." We reversed. Delzer v. United Bank of Bismarck, 459 N.W.2d 752 (N.D.1990) [Delzer I]. We concluded that the statute of frauds, NDCC 9-06-04(1), did not bar the suit because the asserted oral agreement was capable of being completed within one year. Id. We also concluded that the credit agreement was ambiguous and not clearly integrated, leaving a genuine issue of material fact about whether United agreed to supply the Delzers with additional credit up to $300,000 for purchasing cattle. Id. In addition, we concluded that there was sufficient evidence in the record, particularly the cash flow projections submitted by the Delzers to United, for reasonable inferences about terms of the alleged oral agreement. Id. We remanded for trial.

After remand, Ray Delzer, acting as his own attorney, began another action against United in federal court. This qui tam action alleged that United defrauded Farmers Home Administration by encouraging FHA to make a subordinated loan to the Delzers in 1981, and by improperly manipulating application of repayments on the several loans. 1 During discovery in the qui tam action, United deposed Ray Delzer. Although another lawyer was present to consider representing Delzer, Delzer was unrepresented by counsel at the deposition, and has since proceeded as his own counsel in that qui tam action.

During this deposition, counsel for United questioned Ray Delzer about a recently discovered letter, dated October 30, 1979, from Delzer to Northwestern National Life Insurance Company, the first mortgagee of the Delzers' ranch land. The letter said that the Delzers had decided to operate a small grain farm without cattle, and with a $150,000 line of operating credit from United. The letter confirmed that United's security for this credit would be a first mortgage on their hay and equipment, and a second mortgage on the Delzer's real estate, almost the same security executed two days later on November 1, 1979. The letter stated that a cattle operation would require more capital investment, and would place the Delzers in no better position, than a small grain operation. The letter said, "We have tore up our alfalfa lands, deep toolbar[r]ed them twice and irrigated the plowed land to recharge the soil profile. We are all set to do a good and timely job of farming next year."

Arguing that this letter "clearly shows all Delzers' claims are baseless," United again moved for summary judgment. The motion was based "upon subsequently discovered information," including the letter and Ray Delzer's testimony in the qui tam deposition. The Delzers resisted, including an additional affidavit by Ray Delzer that asserted:

On November 1, 1979, when we met with Bank officials, I was advised that any loan commitment was conditioned upon receipt of the collateral outlined in the Bank's October 15, 1979. We then proceeded to close the loan on the basis of the previously agreed to cattle plan.

The trial court wrestled with this motion.

The trial court first disagreed, "as a matter of law," with this court's conclusion in Delzer I that including livestock and "proceeds of livestock" as security made the credit agreement ambiguous. The trial court understood that, "[w]hile this court may disagree with the opinion, the finding of ambiguity made by the Supreme Court is the 'law of the case' and the trial court is bound by the appellate finding of ambiguity." Still, the court decided that the letter was "newly discovered" evidence that changed the position of the case enough to permit reevaluation of the evidence for interpreting the ambiguity in the credit agreement.

Reasoning that extrinsic evidence may affect the meaning of ambiguous language in a contract, the trial court held that the effect of the October 30 letter was "undisputed and conclusive" except for conflicting testimony from Ray Delzer himself. The court accepted that the credibility of a witness cannot be weighed for summary judgment, ordinarily. But yet the court ruled that a party resisting summary judgment need not be believed if that person's testimony late in the discovery process contradicted that person's earlier testimony.

Citing precedent "[o]n the strength of this rule," the trial court characterized Delzer's testimony in the qui tam deposition as an "attempt to reshuffle the sequence of events with testimony or evidence that the claimed oral agreement with the bank was made or even continued sometime between October 30 and November 1...." The court refused to consider Ray Delzer's testimony, reasoning:

The letter is decisive. Mr. Delzer obviously knew two days before execution of the contract what the agreement was with [United]. While there is a fact dispute as to whether the bank made an oral offer for a cattle operation between October 30 and November 1, which was agreed to by the [Delzers], that evidence is excluded because of its contradictory nature.

* * * * * *

Mr. Delzer's letter removes any ambiguity of the meaning of the words of the contract.

The trial court again entered summary judgment dismissing the Delzers' action against United.

Because United had pending counterclaims against the Delzers for fraud, misrepresentation, and abuse of process,...

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