Price v. Wells Fargo Bank
| Decision Date | 24 August 1989 |
| Docket Number | No. A040678,A040678 |
| Citation | 213 Cal.App.3d 465,261 Cal.Rptr. 735 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Ernest L. PRICE et al., Plaintiffs and Appellants, v. WELLS FARGO BANK et al., Defendants and Respondents. |
Silveira, Mattos & Lewis, Weldon J. Mattos, Jr., Merced, for plaintiffs and appellants.
David J. Brown, Kent M. Roger, Brobeck, Phleger & Harrison, San Francisco, for defendants and respondents.
Ernest L. Price and Maxine Price (hereafter appellants) appeal from a summary judgment in favor of Wells Fargo Bank and Pamela G. Bogle (hereafter respondents). The action was filed on July 12, 1985 in the Superior Court for Merced County and later transferred to the Superior Court for the City and County of San Francisco. The amended complaint chiefly concerned three related loan transactions and stated five causes of action: fraud, tortious breach of covenant of good faith, contractual breach of covenant of good faith, negligent infliction of emotional distress, and intentional infliction of emotional distress. An additional cause of action alleged fraud in connection with a separate mobile home loan.
On July 1, 1987, respondents filed a motion for summary judgment or, alternatively, summary adjudication of issues. The trial court granted summary judgment for both defendants on all causes of action and, somewhat inconsistently, summarily adjudicated various issues. Appellants attacked the summary judgment through motions for reconsideration, new trial, and relief under Code of Civil Procedure section 473, and upon denial of these motions, filed a timely notice of appeal.
For 20 years, appellants owned and operated the Creekview Angus Ranch near Merced, California. In 1982, the ranch comprised 1872 acres of grazing land and 698 head of cattle. In addition, appellants leased another 1,228 acres of adjoining land from in-laws at a modest price. They concentrated their operations on raising purebred angus cattle and hoped to establish a registered herd over a period of years. As sidelines, they maintained a small almond orchard and a substantial apiary business with 3,000 hives. The ranch was subject to deeds of trust securing loans of Crocker Bank and Travelers Insurance Company which had balances, respectively, of $225,000 and $137,378.
In 1982, Crocker Bank informed appellants that it would not extend them any further credit. Seeking a means of paying off the Crocker loan, they approached Wayne Hadsel, the Merced branch manager for Wells Fargo, with a request for a five-year loan. Their loan application was processed by Clifford Wictorin, a loan officer at the Merced branch. On February 14, 1983, Wictorin recommended in a report to Edward Farnam, the agribusiness district manager of Wells Fargo, that the bank extend credit to appellants. The report contained projections of the appellants' gross income but was lacking in any precise estimates of their expenses. For example, it projected an income of $385,000 from their apiary operation but neglected to mention estimated expenses of $343,000. Farnam approved the loans but later attributed his approval to a mistaken understanding of appellants' expenses.
On February 28, 1983, Wells Fargo extended to appellants three loans, secured by substantially all the ranch property, in the amounts of $63,000, $97,000, and $210,000. The promissory notes for the $63,000 and $97,000 loans provided that "[p]rincipal shall be payable in full on October 31, 1983." The $210,000 promissory note was less clear. The relevant portion stated: The testimony of Wictorin and Farnam on deposition and certain documents secured from the bank in discovery indicated that the parties actually contemplated that the loan would be repaid over five years, with annual principal payments of $42,000.
Both Ernest and Maxine Price testified that they were surprised to read the October 31, 1983, maturity date on the promissory notes and protested to Wictorin that they couldn't possibly pay the loans off by that date. According to Maxine Price, he reassured them that the loans "would be redid on the five-year program that we were going to be on." On August 19, 1983, Wells Fargo extended another $15,000 loan to appellants for purchase of a mobile home.
Nearly the full amount of the loans was to be applied to repayment of the Crocker Bank and Travelers Insurance Company loans; a balance of only about $12,000 was available to cover operating expenses of the ranch. Later in the year, appellants invested the proceeds of cattle sales in a major capital improvement--the construction of a sales pavilion, including a barn and corrals, to conduct public cattle auctions. There is some evidence that bank officials were aware of appellants' plans to construct this facility; Wictorin's credit report refers to Ernest Price's marketing plan "to increase exposure through cattle shows and publications and conduct annual sales at his home ranch;" and Ernest Price asserted that he showed Wictorin the planned locations of the facility. Nevertheless, Wells Fargo officials expressed surprise when they learned that appellants had made this large capital investment and charged that it represented an unauthorized diversion of ranch income.
From May through November 1983, appellants made a number of interest payments on the three loans. As the maturity dates approached, Ernest Price sought some kind of accommodation in several conversations with Wictorin in late September and October. According to Price's deposition testimony, Wictorin assured him that he would "redo" the notes. Appellants let the October 31, 1983, maturity date pass without making any payments of principal.
On November 21, 1983, appellants received a letter from Wictorin announcing that their loans were past due, followed by a similar letter on December 13, 1983. They concede that they made no further payments on the loans that year and never disputed that the amounts were due. Instead, they attempted to initiate discussions to restructure the loans. The matter was referred to the Wells Fargo loan adjustment department which handled delinquent accounts. On February 3, 1984, appellants received a letter from Pamela Bogle, an assistant vice-president of Wells Fargo, announcing that all sums were due and payable on the loans and threatening foreclosure.
Without contesting that the loan payments were due, appellants arranged a meeting with Bogle at their ranch on March 8, 1984, to discuss a revised payment schedule. The parties reached an apparent agreement. A letter of Bogle dated March 19, 1984, stated their agreement as follows: "(1) Delinquent interest will be paid current on or before April 15, 1984 and will be kept current according to the terms of the original promissory notes. (2) You will commence to make principal reductions on April 15, 1984 in the amount of $15,000 and future payments will continue in the following manner:
May 1984 $15,000
July 1984 20,000
August 1984 25,000
September 1984 70,000
October 1984 12,500
November 1984 24,500
December 1984 10,000
January 1985 10,000
February 1985 10,000
March 1985 22,500 "
Appellants fell badly behind this repayment schedule, paying only $15,000 in principal on April 18, 1984, $24,323.71 in delinquent interest on June 5, 1984 and $10,000 in principal on June 20, 1984. In December 1984, Wells Fargo attached an Agriculture Commodity Credit Corporation check in the amount of $22,738 payable to their apiary business. Bogle wrote to appellants on May 17, September 4, November 21, and December 6, 1984, informing them of their continued default and advising them to liquidate assets to pay for the loans. In their correspondence with the bank, appellants never questioned their obligations but rather promised to make additional payments.
In September 1984, Wells Fargo initiated foreclosure proceedings by filing a notice of default. Appellants subsequently retained an attorney, Weldon J. Mattos, Jr., who arranged a meeting on December 12, 1984, with Bogle, Wictorin, and Farnam at the branch office of the bank. Following the meeting, Mattos proposed a revised repayment schedule which Bogle quickly rejected. The next month, however, Bogle agreed to postpone a trustee's sale in consideration of a small payment of $6,000. After further negotiations, Bogle issued a modified ultimatum in a letter dated February 19, 1985. The bank agreed to forbear publishing notice of trustee's sale on condition that appellants (1) make a payment of $50,000 on February 20, 1985, (2) assign to the bank the proceeds of a pending escrow for the sale of the almond orchard, (3) assign to the bank the proceeds of any loan from the Farmers Home Loan Administration, if they should succeed in securing such a loan, and (4) pay all amounts outstanding by June 10, 1985.
On behalf of appellants, Mattos accepted the terms of Bogle's ultimatum but stated that appellants could not make the first payment until March 1, 1985. On that date, appellants in fact paid Wells Fargo $50,000. They borrowed from a friend to make a further payment of $90,000 on June 10, 1985. Not satisfied with this partial payment, the bank published a notice of trustee's sale to be held by July 9, 1985. Securing a loan from another individual, appellants presented Wells Fargo on June 24, 1985, with a check in the amount of $146,211.09 in full payment of the outstanding loan balances. As the private loan was drawn on an out-of-state bank, the appellants' check unfortunately did not clear. O...
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