Keybank Nat'l Ass'n v. Sys. West Computer Res., Inc.

• Decision Date: 22 December 2011
• Docket Number: No. 20100101–CA.,20100101–CA.
• Citation: 265 P.3d 107,691 Utah Adv. Rep. 14,698 Utah Adv. Rep. 19,2011 UT App 441
• Parties: KEYBANK NATIONAL ASSOCIATION, Plaintiff and Appellee, v. SYSTEMS WEST COMPUTER RESOURCES, INC.; and Nancy H. Halverson, Defendants and Appellants.
• Court: Utah Court of Appeals

2011 UT App 441

265 P.3d 107

691 Utah Adv. Rep. 14

698 Utah Adv. Rep. 19

KEYBANK NATIONAL ASSOCIATION, Plaintiff and Appellee,

v.SYSTEMS WEST COMPUTER RESOURCES, INC.; and Nancy H. Halverson, Defendants and Appellants.

No. 20100101–CA.

Court of Appeals of Utah.

Sept. 22, 2011.As Amended on Denial of Rehearing Dec. 22, 2011.

David K. Isom and Matthew M. Boley, Salt Lake City, for Appellants.

Gerald H. Suniville, Stephen K. Christiansen, and Seth M. Mott, Salt Lake City, for Appellee.

Before Judges VOROS, ROTH, and CHRISTIANSEN.

AMENDED OPINION ¹

CHRISTIANSEN, Judge:

¶ 1 Defendants Systems West Computer Resources, Inc. and Nancy Halverson (collectively, Systems West) ² appeal the district court's grant of summary judgment to plaintiff KeyBank National Association (KeyBank) on KeyBank's breach of contract and related claims and on Systems West's counterclaims. We affirm.

BACKGROUND ³

¶ 2 This controversy stems from KeyBank's one-million-dollar loan to Systems West. On January 9, 2001, KeyBank wrote Systems West a letter (the January 2001 letter) confirming its approval of the one-million-dollar line of credit. The letter explained that the maturity date would be “7/31/01, then annually from that point forward.” The repayment provided for “[m]onthly interest, principal and interest at maturity.” On January 10, 2001, the parties executed several loan documents, including a Business Loan Agreement, a Promissory Note (the Note), and a Commercial Security Agreement. Halverson, President and CEO of Systems West, personally guaranteed the Note in a Commercial Guaranty. The maturity date of the Note was extended numerous times, and the loan finally came due July 15, 2008. Systems West failed to fully repay the balance of the loan.

¶ 3 The Business Loan Agreement's provisions at issue in this matter (the Term Provisions) provided,

TERM. This Agreement shall be effective as of January 10, 2001, and shall continue in full force and effect until such time as all of [Systems West's] Loans in favor of [KeyBank] have been paid in full, including principal, interest, costs, expenses, attorneys' fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement.

LINE OF CREDIT. [KeyBank] agrees to make Advances to [Systems West] from time to time from the date of this Agreement to the Expiration Date, provided the aggregate amount of such Advances outstanding at any time does not exceed the Borrowing Base. Within the foregoing limits, [Systems West] may borrow partially or wholly prepay, and reborrow under this Agreement as follows: .... There shall not exist at any time of any Advance a condition which would constitute an Event of Default under this Agreement.

Expiration Date. The words “Expiration Date” mean the date of termination of [KeyBank's] commitment to lend under this Agreement.

¶ 4 The Business Loan Agreement contained several other pertinent provisions, including provisions for default, acceleration, and cure of default. For example, it provided that default would occur if Systems West “fails to make any payment when due under the Loan” or “fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents.” The Business Loan Agreement also addressed KeyBank's right to accelerate the loan upon default, stating,

If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at [KeyBank's] option, all indebtedness immediately will become due and payable, all without notice of any kind to [Systems West]....

Additionally, “a default, other than a default on indebtedness, is curable ... if Systems West ... has not been given a notice of a similar default within the preceding twelve ... months....” The Business Loan Agreement defined “indebtedness” as “the indebtedness evidenced by the Note or Related Documents, including all principal and interest.”

¶ 5 Aside from the agreements extending the maturity date of the Note, the Business Loan Agreement was modified twice: once on November 30, 2001, and again on October 2, 2006. The Modification of Business Loan Agreement and Promissory Note, executed on October 2, 2006, provided for the following:

Extension of Loan Term. The Parties agree that the term of the Loan, and the maturity date of the Note, is hereby extended to July 31, 2007. During such extended term, [Systems West] will continue to make payments as provided in the Agreement and Note, as modified by the Prior Modifications. Any reference in the Agreement, the Note, or the other Related Documents to the “Expiration Date,” the “Maturity Date,” or to any other term with reference to the date the Loan matures, the date [KeyBank's] obligations to make additional advances under the Agreement terminates, or the date the Note becomes due and payable shall henceforth mean July 31, 2007.

¶ 6 The Note originally matured on July 31, 2001. The Note provided,

Systems West ... promises to pay to KeyBank ... the principal amount of One Million ... or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance.... [Systems West] will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on July 31, 2001.

The parties extended the maturity date of the Note for successive terms seventeen times—first by agreements entitled Modification and/or Extension Agreements and then by Change in Terms Agreements. They executed the final extension by a Change in Terms Agreement dated June 27, 2008. The Note finally matured on July 15, 2008.

¶ 7 The Modification and/or Extension Agreements each contained a provision that stated, “Except as modified above, all other provisions of the Promissory Note and any other documents securing or relating to the Loan ... remain in full force and effect.” Each Change in Terms Agreement contained a similar provision:

Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreements evidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender's right to strict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms.

¶ 8 The parties agree that they executed several written instruments that constituted an integrated agreement. Most of the written instruments executed in January 2001 contained an integration clause. Each of the various Modification and/or Extension Agreements and Change in Terms Agreements, in which the maturity date of the original Note was extended, also contained an integration clause. Additionally, the two Business Loan Agreement modifications each contained an integration clause. Accordingly, we refer to the complete and final expression of the parties' bargain as the Integrated Agreement.

¶ 9 After Systems West failed to fully pay the loan's balance by July 15, 2008, KeyBank filed a complaint against Systems West, alleging breach of contract, breach of guarantee, and failure to turn over collateral. These allegations stem from Systems West's default in failing to pay the loan in full by July 15, 2008. Systems West filed counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, negligent misrepresentation, breach of fiduciary duty, promissory estoppel, and defamation.

¶ 10 About a year after filing the complaint, KeyBank moved for summary judgment, alleging, inter alia, that based on the undisputed and unambiguous facts in the terms of the Integrated Agreement, Systems West breached its contractual obligations to KeyBank by failing to pay off the loan on the maturity date.⁴ The district court entered summary judgment in KeyBank's favor on all of its causes of action and dismissed Systems West's counterclaims. The court determined that the Integrated Agreement's terms were unambiguous and that Systems West defaulted in its payment obligation to KeyBank. Accordingly, the district court entered judgment against Systems West for $978,372, not including $77,855 for accrued interest, $176 for continuing per diem interest, $100,061 for attorney fees, and $4622 for costs. The district court also ruled that Systems West's “counterclaims are barred because they seek to impose duties and obligations that are inconsistent with the express terms of the Loan Documents.” Systems West appeals.

ISSUES AND STANDARDS OF REVIEW

¶ 11 Systems West agrees with the district court's ruling that its agreement with KeyBank was integrated. However, contrary to the district court's ruling, Systems West argues that the Integrated Agreement unambiguously provides that so long as Systems West made timely interest payments, KeyBank had to continue to extend the loan's maturity date until either Systems West paid off the loan or both parties agreed in writing to terminate the agreement. Alternatively, Systems West argues that the Integrated Agreement was ambiguous, and therefore, the district court erred by excluding parol evidence regarding the parties' intent.

¶ 12 Systems West also contends that the district court erred when it failed to consider parol evidence, which would have created a factual dispute that would have precluded summary judgment, regarding Systems West's counterclaims for breach of the implied covenant of good faith and fair dealing, negligent misrepresentation, and breach of fiduciary duty.⁵ Finally, in a related argument, Systems West contends that the district court erred when it dismissed Systems West's counterclaim for breach of the implied covenant of good faith and fair dealing...