First Bank of Wakeeney v. Moden, 55718

• Citation: 235 Kan. 260,681 P.2d 11
• Decision Date: 24 March 1984
• Docket Number: No. 55718,55718
• Parties: FIRST BANK OF WAKEENEY, Kansas, A Corporation, Plaintiff-Appellee, v. Ernest C. MODEN and Henrietta L. Moden, Husband and Wife, and Eric Moden, Defendants-Appellants, and Federal Land Bank of Wichita, Wichita, Kansas, Defendant-Appellee.
• Court: United States State Supreme Court of Kansas

Page 11

681 P.2d 11

235 Kan. 260

FIRST BANK OF WAKEENEY, Kansas, A Corporation, Plaintiff-Appellee, v. Ernest C. MODEN and Henrietta L. Moden, Husband and Wife, and Eric Moden, Defendants-Appellants, and Federal Land Bank of Wichita, Wichita, Kansas, Defendant-Appellee.

No. 55718.

Supreme Court of Kansas.

March 24, 1984.

Ross Wichman of Kent, Wichman & Anderson, Hays, argued the cause and was on the brief for defendants-appellants.

David J. Harding, WaKeeney, argued the cause and was on the brief for plaintiff-appellee.

Basil C. Marhofer, Ness City, was on the brief for defendant-appellee.

MEMORANDUM OPINION

PER CURIAM:

This is an appeal by two of the defendants, Ernest C. Moden and his wife, Henrietta L. Moden, from the judgment of the Trego District Court in this mortgage foreclosure action. The main issues raised are whether the plaintiff, First Bank of WaKeeney, Kansas, owed Mr. and Mrs. Moden a fiduciary duty, and if so, whether it breached that duty; whether the WaKeeney bank failed to comply with a loan agreement; and whether the WaKeeney bank is estopped from bringing this action.

The Federal Land Bank of Wichita, Wichita, Kansas, is a defendant. It held a first and prior mortgage on the bulk of the Moden land. It filed a counterclaim and sought judgment against Mr. and Mrs. Moden on its note and foreclosure of its mortgage. After trial, the district court granted the Federal Land Bank judgment against Mr. and Mrs. Moden in the sum of $592,612.01, plus interest accruing after date of judgment at the rate of $197.18 per day until paid; and the court ordered the Federal Land Bank's mortgage foreclosed as a first and prior lien against the land described in that mortgage. No complaint is made in this appeal as to that judgment and order of foreclosure. It is affirmed. We need not discuss it further. When reference is made later in this opinion to "the Bank," we speak of the plaintiff, First Bank of WaKeeney.

Eric Moden, son of Mr. and Mrs. Ernest Moden, filed a motion and was granted leave to intervene. He then filed a third-party petition stating various theories by which he sought to escape liability upon an unsecured $24,099.45 promissory note which he executed and delivered to the Bank on or about May 10, 1982, and which note had since been renewed several times. The trial court found against Eric Moden and denied him relief. While Eric joined in the notice of appeal, no error in the court's order denying him relief was claimed in the briefs or oral argument. That portion of the trial court's judgment is affirmed, and we need not discuss it further. When reference is made later in this opinion to the Modens, we shall be speaking of Ernest C. and Henrietta L. Moden.

The trial judge prepared and filed a lengthy and detailed memorandum in this case. He determined the facts, some upon disputed evidence, and he then discussed and decided the applicability of each of the defenses raised by the Modens. Since this opinion is unpublished and the parties to this action are already aware of the judge's decision, we need not repeat it here. The judge carefully considered each point raised, and upon review we affirm.

We briefly summarize the evidence. The Modens, farmers and ranchers in Trego County, borrowed money from the Bank at least as far back as 1972. Every six months, Mr. Moden would prepare a plan for the operation of his ranch for the next six months and present it to the Bank along with a request that his note be renewed in a larger amount. The notes were secured by perfected security agreements covering livestock, grain, feed and machinery. By January 21, 1982, the indebtedness had grown to $892,389.76. That amount exceeded the Bank's lending limits, and other banks had participated in the loan. The National Bank of America (NBA), in Salina, announced that before it could participate in an extension or renewal, it required that the Bank secure (1) a second mortgage on the Moden land which was subject to the Federal Land Bank's first mortgage, and (2) a first mortgage on an undivided and unencumbered one-half interest in a half section owned by Henrietta Moden. Reluctantly, the Modens executed these mortgages, which now form the basis for plaintiff's foreclosure action.

Mr. Moden presented the Bank with a farm plan at the time of the January 1982 note renewal. It was his plan to reduce the indebtedness by selling cattle, wheat, excess equipment, and some real estate. Over the next few months the Modens did sell cattle, grain and some equipment, and paid $478,591.03 to the Bank on their note.

Also at the time the note was renewed, the Modens, the Bank and NBA entered into a Loan Agreement, which provided for the execution of the mortgages and for the sale of cattle and other collateral. It required the Modens to make application for an FHA loan of $200,000 and an FHA emergency low-interest-rate loan of $40,000. The Loan Agreement also provided that "[i]t is the intention of all parties hereto that the NBA participation be paid in full as soon as possible ...."

We turn to the first issue: Was there a fiduciary duty on the part of the Bank? The rules applicable when making that determination are set forth fully in Olson v. Harshman, 233 Kan. 1055, 1057-1059, 668 P.2d 147 (1983). There are two types of fiduciary relationships, those specifically created by contract, and those implied in law due to the factual situation surrounding the transaction and the relationship of the parties. There is no contract here between the parties creating such a relationship; any...