First Nat. Bank of Omaha v. State

• Decision Date: 21 August 1992
• Docket Number: No. S-89-844,S-89-844
• Citation: 488 N.W.2d 343,241 Neb. 267
• Parties: FIRST NATIONAL BANK OF OMAHA, a National Banking Corporation, Appellant, v. STATE of Nebraska, Appellee.
• Court: Nebraska Supreme Court

Page 343

488 N.W.2d 343

241 Neb. 267

FIRST NATIONAL BANK OF OMAHA, a National Banking Corporation, Appellant, v. STATE of Nebraska, Appellee.

No. S-89-844.

Supreme Court of Nebraska.

Aug. 21, 1992.

Syllabus by the Court

1. Demurrer: Pleadings. When ruling on a demurrer, a court must assume that the pleaded facts, as distinguished from legal conclusions, are true as alleged and must give the pleading the benefit of any reasonable inference from the facts alleged, but cannot assume the existence of a fact not alleged, make factual findings to aid the pleading, or consider evidence which might be adduced at trial.

2. Pleadings. A petition will be sufficient if, under the facts alleged, the law entitles a plaintiff to recover.

3. Pleadings. Facts are sufficient to constitute a cause of action when they are a narrative of the events, acts, and things done or omitted which show a legal liability of the defendant to the plaintiff.

4. Appeal and Error. The law of the case doctrine teaches that the holdings of an appellate court on questions presented to it in reviewing the proceedings of the trial court become the law of the case; those holdings conclusively settle, for the purpose of that litigation, all matters ruled upon, either expressly or by necessary implication.

5. Tort Claims Act. The applicability of the discretionary function exception in the State Tort Claims Act, Neb.Rev.Stat. § 81-8,209 et seq. (Reissue 1987), depends on the conduct in question, not on the identity of the actor.

6. Tort Claims Act: Negligence: Liability. The discretionary function exception of the State Tort Claims Act, Neb.Rev.Stat. § 81-8,209 et seq. (Reissue 1987), includes a governmental regulatory agency and its action, conduct, and decisions. Judgment or choice is essential and indispensable for discretionary conduct excepted from negligence liability under the State Tort Claims Act.

7. Tort Claims Act: Public Policy. The discretionary function exception of the State Tort Claims Act, Neb.Rev.Stat. § 81-8,209 et seq. (Reissue 1987), protects or excepts only governmental decision, action, or conduct based on a permissible exercise of a public policy judgment.

8. Tort Claims Act. The discretionary function exception is inapplicable to a claim under the State Tort Claims Act, Neb.Rev.Stat. § 81-8,209 et seq. (Reissue 1987), if a statute, regulation, or policy specifically prescribes a course of governmental action or conduct.

9. Tort Claims Act. When established governmental policy, as expressed or implied by statute, regulation, or agency guidelines, allows a government agent to exercise discretion, it must be presumed that the agent's acts are grounded in policy when exercising that discretion.

10. Tort Claims Act. Discretionary conduct is not confined to the policy or planning level.

James B. Cavanagh of Lieben, Dahlk, Whitted, Houghton & Jahn, P.C., and, on brief, Thomas J. Culhane of Erickson & Sederstrom, P.C., Omaha, for appellant.

Robert M. Spire, Atty. Gen., and Charles E. Lowe, Lincoln, for appellee.

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

CAPORALE, Justice.

The district court sustained the demurrer of the defendant-appellee, State of Nebraska, to the third amended petition filed by the plaintiff-appellant, First National Bank of Omaha, and dismissed the suit. First National has appealed, asserting, in summary, that the district court erred in concluding that it failed to state a cause of action. We affirm.

First National instituted its suit under the provisions of the State Tort Claims Act, Neb.Rev.Stat. § 81-8,209 et seq. (Reissue 1987). In First Nat. Bank of Omaha v. State, 230 Neb. 259, 430 N.W.2d 893 (1988) (First Nat. Bank of Omaha I ), this court affirmed the sustainment of the State's demurrer, but reversed the order of dismissal, writing that "it is reasonably possible that [First National] may be able to state a cause of action in support of its theory of recovery." Id. at 268, 430 N.W.2d at 900. First National thereafter filed an amended petition, and the State again successfully demurred. First National responded by filing the petition which is the subject of this appeal.

The subject petition alleges that in April 1980, First National entered into several loan agreements with James and Nancy Gillette and two corporations the Gillettes controlled, Beatrice State Company and Olympic Investment Company. The proceeds from the loans were used to purchase the stock of First Security Bank and Trust Company of Beatrice, a state-chartered bank, and First Security Savings of Beatrice a state-chartered industrial loan and investment company. First National took possession of the stock as collateral for the loans.

Because the loans became delinquent and both Security Bank and Security Savings were on the verge of insolvency, First National notified the Nebraska Department of Banking and Finance that it intended to dispose of the stock it held as collateral at a public sale. The financial problems of Security Bank and Security Savings "were primarily due to a number of non-performing loans" the two institutions had made to "Newt Copple of Lincoln, Nebraska, or his associates or related entities." As of April 8, 1983, Newt Copple was indebted to Security Bank in the amount of $1,181,661 and to Security Savings in the amount of $1,537,308.08.

The department attempted to dissuade First National from selling the stock and encouraged it instead to take over both Security Bank and Security Savings. First National rejected that proposal and, on March 25, 1983, sent potential buyers notice that the stock would be sold.

In the meantime, on or about March 10, 1983, the department had received written notice from the Federal Bureau of Investigation in regard to "what appeared to be criminal conduct in the form of fraudulent loan transactions involving [Security Bank]." The bureau also advised that it "had information indicating that there had been similar fraudulent loan transactions involving Commonwealth Savings Company, a state chartered industrial loan and investment company, and S.E. Copple." At no time did the department make First National aware of this letter or of its contents.

On April 1, 1983, the department's director held a meeting with S.E. Copple, representatives of First National, the Gillettes, and the Nebraska Depository Institution Guarantee Corporation, among others. The director proposed that First National acquire Security Bank and Security Savings and accept the stock of those corporations in satisfaction of the loans. It was also proposed that Security Bank and Security Savings lend S.E. Copple "sufficient funds to permit him to purchase the Newt Copple loans from their respective institutions...." The guarantee corporation "would make a capital contribution of $200,000.00 to [Security Savings] and provide a guarantee in the amount of $680,000.00 against further losses...."

On April 8, 1983, First National entered into an agreement with its borrowers which incorporated the elements proposed at the April 1 meeting. However, the agreement was contingent upon S.E. Copple's purchase of Newt Copple's loans "on terms and conditions acceptable to the Banking Department"; the guarantee corporation's agreeing to the proposed advances and guarantees; the department's assuring First National of "the capital adequacy of, quality of assets in, and absence of violations of law by both [Security Bank] and [Security Savings]"; and the department's approval of the agreement. These conditions were met, and First National thereafter acquired Security Bank and Security Savings. Immediately after acquiring the two institutions, First National announced that it would stand behind their obligations. However, had First National been properly informed of the condition of Security Bank or Security Savings, it would not have acquired them.

S.E. Copple, as "a direct and proximate result of a long standing course of fraudulent and illegal lending practices engaged in between he [sic] and other members of his family and Commonwealth Savings Company," later defaulted "on the promissory notes he had given [Security Bank] and [Security Savings] to purchase the Newt Copple loans."

The subject petition concludes that the department was negligent in (1) failing to investigate the allegations of misconduct by S.E. Copple; (2) failing to conduct periodic examinations of Security Bank, Security Savings, and Commonwealth Savings; (3) approving the S.E. Copple loans when it knew or should have known it lacked adequate information; (4) approving the agreement of merger when it lacked adequate information; (5) providing assurances that Security Bank and Security Savings were stable; (6) failing to conduct periodic examinations of Security Bank as permitted by Neb.Rev.Stat. § 8-108 (Reissue 1991); (7) failing to conduct periodic examinations of Security Savings and Commonwealth Savings as required by Neb.Rev.Stat. § 8-401 (Reissue 1991); and (8) failing to advise First National of the alleged fraudulent conduct involving S.E. Copple and Commonwealth Savings.

We begin our analysis by recalling that when ruling on a demurrer, a court must assume that the pleaded facts, as distinguished from legal conclusions, are true as alleged and must give the pleading the benefit of any reasonable inference from the facts alleged, but cannot assume the existence of a fact not alleged, make factual findings to aid the pleading, or consider evidence which might be adduced at trial. Crow v. Giebelhaus, 241 Neb. 4, 486 N.W.2d 207 (1992); Whorley v. First Westside Bank, 240 Neb. 975, 485 N.W.2d 578 (1992); Pappas v. Sommer, 240 Neb. 609, 483 N.W.2d 146 (1992). A petition will be sufficient if, under the facts alleged, the law entitles a plaintiff to recover. See Matheson v. Stork, 239 Neb. 547, 477 N.W.2d 156 (1991). That is to say, facts are sufficient to constitute a cause of action when they...