McCormack v. First Westroads Bank, 89-002

• Citation: 238 Neb. 881,473 N.W.2d 102
• Decision Date: 16 August 1991
• Docket Number: No. 89-002,89-002
• Parties: Michael McCORMACK, Appellant, v. FIRST WESTROADS BANK, a Corporation, Appellee.
• Court: Nebraska Supreme Court

Page 102

473 N.W.2d 102

238 Neb. 881

Michael McCORMACK, Appellant, v. FIRST WESTROADS BANK, a Corporation, Appellee.

No. 89-002.

Supreme Court of Nebraska.

Aug. 16, 1991.

Syllabus by the Court

1. Summary Judgment. A summary judgment is proper when the pleadings, depositions, admissions, stipulations, and affidavits in the record disclose that there is no genuine issue as to any material fact or as to the ultimate inferences to be drawn therefrom and that the moving party is entitled to judgment as a matter of law.

2. Summary Judgment. In a court's consideration of a motion for summary judgment, the evidence is to be viewed most favorably to the party against whom the motion is directed, giving to that party the benefit of all favorable inferences which may reasonably be drawn from the evidence.

3. Summary Judgment: Proof. Since the party moving for summary judgment has the burden of showing that no genuine issue as to any material fact exists, that party must produce enough evidence to demonstrate his entitlement to a judgment if the evidence were to remain uncontroverted at a trial, after which the burden of producing contrary evidence shifts to the party opposing the motion.

4. Promissory Notes: Debtors and Creditors. The taking of a new note for an existing note is a renewal of the old indebtedness, and not a payment of the debt, unless there is a specific agreement between the parties that the new note shall extinguish the original debt.

5. Contracts: Principal and Surety: Debtors and Creditors. Where the surety makes no inquiry on the subject, the duty of disclosure as to facts increasing the risks of the undertaking depends upon the circumstances of the case. Generally, the creditor may assume that the surety has obtained information from other sources or has chosen to assume whatever risks may be involved. A duty of disclosure may arise when the creditor knows or has good grounds for believing (1) the surety is being deceived or misled or (2) the surety has been induced to enter the contract in ignorance of facts materially increasing his risks, of which the creditor has knowledge and which the creditor has the opportunity to disclose prior to the surety's acceptance of the undertaking.

6. Contracts: Debtors and Creditors. Collateral proceeds are to be applied in the manner provided in the agreement between the parties or in the absence of such agreement in such order as the creditor determines.

7. Contracts: Parol Evidence. The parol evidence rule renders ineffective proof of a prior or contemporaneous oral agreement which alters, varies, or contradicts the terms of a written agreement.

James P. Fitzgerald, of McGrath, North, Mullin & Kratz, P.C., Omaha, for appellant.

Thomas F. Flaherty, of Fraser, Stryker, Vaughn, Meusey, Olson, Boyer & Bloch, P.C., Omaha, for appellee.

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

PER CURIAM.

Plaintiff-appellant, Michael McCormack, signed a pledge agreement guaranteeing a debt of Acoustical Engineering, Inc., and pledging certain shares of stock as collateral. After Acoustical defaulted on its promissory note to defendant-appellee, First Westroads Bank (hereinafter Bank), the Bank sold the stock and applied the proceeds to the debt. In his second amended petition, McCormack set out four "causes of action," alleging generally that the Bank converted the pledged shares of stock, as shown by certain alleged conduct of the Bank. The district court for Douglas County granted summary judgment in favor of the Bank and dismissed McCormack's petition.

McCormack appeals from that order, assigning as error the actions of the trial court "in entering summary judgment for the [Bank] because there were genuine issues of material fact and the evidence was susceptible of different interpretations." McCormack then assigns as error the actions of the court in seven specific instances: (1) in determining that the evidence was not sufficient to show that a later promissory note between Acoustical and the Bank did not discharge Acoustical's prior indebtedness secured by McCormack's pledge of collateral, or that there was not a material fact issue as to a conversion; (2) in determining that the refinancing of the earlier note was an extension of the underlying debt that McCormack had agreed to; (3) in determining that the Bank acted in good faith; (4) in finding that the Bank's promise to set up a "lock box" agreement to collect Acoustical's receivables was not enforceable by McCormack; (5) in failing to find that "the Bank's disclaimer of its duty to protect and preserve the collateral was unenforceable"; (6) in failing to resolve the issue "whether the Bank's disposition of Acoustical's assets was commercially reasonable"; and (7) in dismissing the case without ruling on McCormack's contention that the Bank had improperly applied Acoustical's collateral to debts other than the debt guaranteed by McCormack. We affirm.

A summary judgment is proper when the pleadings, depositions, admissions, stipulations, and affidavits in the record disclose that there is no genuine issue as to any material fact or as to the ultimate inferences to be drawn therefrom and that the moving party is entitled to judgment as a matter of law. Neb.Rev.Stat. § 25-1332 (Reissue 1989); Millard v. Hyplains Dressed Beef, 237 Neb. 907, 468 N.W.2d 124 (1991). In a court's consideration of a motion for summary judgment, the evidence is to be viewed most favorably to the party against whom the motion is directed, giving to that party the benefit of all favorable inferences which may reasonably be drawn from the evidence. J.J. Schaefer Livestock Hauling v. Gretna St. Bank, 229 Neb. 580, 428 N.W.2d 185 (1988). Since the party moving for summary judgment has the burden of showing that no genuine issue as to any material fact exists, that party must produce enough evidence to demonstrate his entitlement to a judgment if the evidence were to remain uncontroverted at a trial, after which the burden of producing contrary evidence shifts to the party opposing the motion. Deutsche Credit Corp. v. Hi-Bo Farms, Inc., 224 Neb. 463, 398 N.W.2d 693 (1987).

In this appeal, we must view the evidence in a light most favorable to McCormack and give him the benefit of all reasonable inferences deducible from the evidence. See Millard v. Hyplains Dressed Beef, supra.

The record presents the following facts in the form of affidavits, depositions, and exhibits: Acoustical was incorporated in 1963 by McCormack, acting as its attorney. Gerald Carlson and Darlene Carlson, husband and wife, were the sole stockholders of Acoustical and were two of the three directors of the company. McCormack was the other director. McCormack continued to serve as Acoustical's primary attorney until sometime after Acoustical ceased active business operations on December 31, 1986.

Acoustical and the Bank had a banking relationship which predated 1981. In 1981, Acoustical was involved in a construction contract in Saudi Arabia. Under that contract, Acoustical was obligated to provide a performance bank guaranty in the sum of 545,287.50 Saudi riyals (approximately $168,000). Acoustical requested the assistance of the Bank in the issuance of this performance guaranty. The Bank required as a condition to the issuance of the performance guaranty that Acoustical provide negotiable collateral of a value of $180,000. Acoustical was not financially able to provide the collateral.

McCormack, as trustee for himself; his father, John McCormack; and Michael Hagge, agreed with Acoustical to provide the $180,000 of collateral to support the performance guaranty in exchange for a fee of $150,000. McCormack, his father, and Hagge pledged various municipal bonds owned by McCormack's father and a $65,000 Bank of Millard certificate of deposit owned by Hagge to the Bank to collateralize the Acoustical performance guaranty. None of the pledged collateral was owned by McCormack.

The date for Acoustical's payment of the $150,000 fee to McCormack under the Acoustical-McCormack agreement came and went, and Acoustical was unable to pay it. In the meantime, under the Saudi Arabian contract, Acoustical was obligated to replace the previously issued performance guaranty with a maintenance guaranty in approximately the same dollar amount. On or about March 21, 1983, the maintenance guaranty was issued by the Bank. The Bank at that time was still in possession of the collateral provided to it by McCormack in connection with the previously issued performance guaranty.

In early July 1983, McCormack met with Gerald Carlson, Acoustical's president, to discuss how Acoustical could collateralize the new maintenance guaranty in order that McCormack's group's collateral could be released and at the same time pay McCormack his $150,000 fee. They agreed that Acoustical should pay the $150,000 fee to McCormack and that McCormack would buy a $150,000 certificate of deposit and pledge it as collateral for the maintenance guaranty. The collateral owned by the others would be released.

This agreement was carried out. McCormack bought a $150,000 certificate of deposit with the $150,000 paid to him by Acoustical and pledged it to the Bank to collateralize the maintenance guaranty. The collateral owned by McCormack's father and Hagge was released and returned to them.

Peter Zandbergen, a vice president of the Bank, prepared an assignment of money market certificate and sent it to McCormack. McCormack did not like the form, and he redrafted it and signed it. Under this agreement, McCormack pledged the $150,000 certificate of deposit purchased with the $150,000 paid to him by Acoustical to the Bank as collateral for the guaranty.

In January 1984, the existing $150,000 certificate of deposit matured, and McCormack purchased three certificates of deposit of the Bank totaling $150,000 and pledged them to the Bank as the collateral for the...