State Bank of Kenmare v. Lindberg

• Decision Date: 03 June 1991
• Docket Number: No. 900411,900411
• Citation: 471 N.W.2d 470
• Parties: STATE BANK OF KENMARE, a North Dakota Corporation, Plaintiff and Appellee, v. Layne A. LINDBERG and Barbara J. Lindberg, Defendants and Appellants. Civ.
• Court: North Dakota Supreme Court

Page 470

471 N.W.2d 470

STATE BANK OF KENMARE, a North Dakota Corporation, Plaintiff and Appellee, v. Layne A. LINDBERG and Barbara J. Lindberg, Defendants and Appellants.

Civ. No. 900411.

Supreme Court of North Dakota.

June 3, 1991.

Barbara J. Lindberg, pro se.

Albert A. Wolf of Wheeler Wolf, Bismarck, for plaintiff and appellee; appearance by Gerry Gunderson.

VANDE WALLE, Justice.

Layne Lindberg and Barbara Lindberg appealed from an order and judgment entered in the district court for Burke County granting the State Bank of Kenmare summary judgment on a counterclaim filed by the Lindbergs. We affirm.

The original action and counterclaim stem from a loan of $204,448.73 made by the Bank to the Lindbergs in April 1985. To secure the loan, the Lindbergs gave the Bank a mortgage on farm land they were purchasing and a mortgage on an oil well known as Kok 1-13, as well as an assignment of production payments from the well. The Lindbergs executed a note promising to make monthly payments of $4,000 to the Bank until the loan was paid in full. The Lindbergs made payments pursuant to the note through March 1986, after which no further payments were made.

In November 1986, the Bank initiated a foreclosure action. The Lindbergs responded by answering the complaint and by filing a counterclaim which was subsequently amended. The amended counterclaim included allegations of fraudulent misrepresentation, breach of an obligation of good faith, and interference with contractual rights. The foreclosure action, which has previously been before this Court, ¹ and the counterclaim were bifurcated. In November 1990, the trial court, after having previously denied the Bank's motion to dismiss the counterclaim and its motion for summary judgment on the counterclaim, granted the Bank's renewed motion for summary judgment on the counterclaim. The Lindbergs moved the trial court to reconsider its order for summary judgment but the motion was denied.

The Lindbergs contend on appeal that there was sufficient evidence presented to the trial court to preclude summary judgment. In particular, the Lindbergs contend that there was sufficient evidence regarding: failed promises to loan additional money or to renegotiate the terms of the original loan, the Bank's misappropriation of funds, and the Bank's interference with the contractual relationship between the Lindbergs and the oil well lessors, Robert and Nita Kok.

Throughout their appellate brief, the Lindbergs make vague allegations of lack of good faith and "breachment of a fiduciary." The allegation that the Bank breached an obligation to act in good faith was not raised specifically as an issue on appeal, nor was it developed sufficiently enough for this Court to determine its merit. ² The allegation that the Bank's actions amounted to a "breachment of a fiduciary" was raised as an issue but is without merit. The relationship between a bank and its customers does not ordinarily impose a fiduciary duty upon a bank. Union State Bank v. Woell, 434 N.W.2d 712 (N.D.1989). The record reveals that the Lindbergs were experienced business people and sought to deal with the Bank at arms-length. No factual basis exists to raise an inference that the exercise of domination, control or influence required to establish a fiduciary relationship were present in this case.

On appeal from a summary judgment we must determine whether or not the information available to the trial court, when viewed in a light most favorable to the opposing party, precludes the existence of a genuine issue of material fact and entitles the moving party to summary judgment as a matter of law. Delzer v. United Bank of Bismarck, 459 N.W.2d 752 (N.D.1990). Summary judgment is appropriate where the law is such that resolution of the factual disputes will not change the result. Production Credit Ass'n of Fargo v. Ista, 451 N.W.2d 118 (N.D.1990).

The Lindbergs' main contentions on appeal arise from their allegations that the Bank promised to restructure the April 1985 loan in the event they experienced financial difficulty, and their allegation that the Bank promised to loan additional funds at a future date for drilling of a second well. The Lindbergs assert that the Bank made at least three separate oral promises to provide future financial assistance. The first alleged promise, made just prior to the signing of the promissory note for the April 1985 loan, was that the Bank would "adjust" the loan accordingly to accommodate the Lindbergs should they encounter financial difficulty. The second alleged promise, made at the same time, was that the Bank would at a later date advance funds necessary to drill a second well. The third alleged promise, made in March 1987 by an attorney for the Bank, was that the Bank had decided "to release the funds in which to drill the [second] well." These allegations require that we consider whether the Lindbergs can establish that the Bank's alleged oral promises were enforceable.

We have examined the issue of enforceability of alleged oral promises made by a lender to provide future financial assistance in two recent cases. In Union State Bank v. Woell, 434 N.W.2d 712 (N.D.1989), we affirmed a judgment dismissing a counterclaim for damages allegedly resulting from a bank's failure to honor an oral agreement " 'to continue loaning money to Woell up to the extent of the Bank's lending limit and then to put Woell into contact with other lending sources beyond the Bank's lending limits.' " Supra at 717. We noted that "[e]ssential terms of an oral contract to continue lending money in the future include the amount and duration of the loans, interest rates, and, where appropriate, the methods of repayment and collateral for the loans, if any. [Citations omitted.] Taken alone, the absence of any one of these terms may not be of great significance; however, viewed collectively, their absence is fatal to the existence of a binding contract." Id. We determined in Woell that there existed no reasonable inference that the parties agreed on any specific terms to continue financing and thus concluded that the alleged oral agreements failed for lack of certainty of the contract's terms.

In Delzer v. United Bank of Bismarck, 459 N.W.2d 752 (N.D.1990), we reached a different conclusion as we reversed a trial court's decision to grant a summary judgment to the lender on Ray and Betty Delzer's suit for damages arising out of an alleged oral agreement to provide additional financing. The Delzers alleged that the lender had orally agreed to provide a $300,000 line of credit to finance their farming operation but had provided them with only a $150,000 farm line. The lender's refusal to loan any more money under the alleged line-of-credit agreement rendered the Delzers unable to service their debt load.

We determined in Delzer that the terms of the alleged line-of-credit agreement were sufficiently certain to meet the Woell requirements. Significantly, the lender's comments, which were in the record, indicated that the lender contemplated the $300,000 line of credit. The $150,000 line-of-credit agreement specifically referred to proceeds from the sale of livestock which both parties agreed could not be purchased without additional moneys from the alleged oral agreements. While it was impossible to prove a specific amount of money to be loaned in the future, there was a reasonable inference, which could be gleaned from evidence of the alleged $300,000 credit agreement and a cash flow projection submitted by the Delzers to the lender, that an additional $150,000 line of credit may have been agreed upon to purchase livestock. Comments made by the lender created a reasonable inference that the additional line of credit was intended to be over a five-year period and there was some evidence of a proposed repayment schedule. Finally, a specific interest rate could have been reasonably inferred from the lender's prevailing rate in the farm and ranch sector.

Here, viewing the evidence in a light most favorable to the Lindbergs, there is no reasonable inference of an enforceable agreement to provide future financial assistance. The Lindbergs have produced no evidence of the amount or duration of these alleged loans, nor of the method of repayment. While, as in Delzer, we might infer an interest rate from the prevailing rate for like operations if such a rate exists, we have no evidence from which to infer the other essential terms. While the lack of one term may not be of great significance, the collective absence of essential terms "is fatal to the existence of a binding contract." Woell, supra at 717.

Nevertheless, the Lindbergs assert that the Bank's promise to loan money at a future date or to restructure the current loan amounted to "deceit through fraudulent representations." The Lindbergs appellate brief does not make clear whether this action was brought in tort or in contract. In Olson v. Fraase, 421 N.W.2d 820 (N.D.1988), this Court noted that a contract action for fraud brought under section 9-03-08, NDCC, applied only to misrepresentations between parties to a contract, while a tort action for deceit applied where there was no contract between the parties. See also Hellman v. Thiele, 413 N.W.2d 321 (N.D.1987). In this case, however, the Lindbergs apparently are not seeking damages under the contract, but rather are seeking damages for injuries allegedly caused by extra-contractual statements made by the lender, which induced the Lindbergs to alter their position to their detriment. Such an action sounds in tort and is appropriately analyzed under our deceit statutes found in Chapter 9-10, NDCC.

Section 9-10-03, NDCC, provides that one who...