Yankton Production Credit Ass'n v. Larsen

• Decision Date: 05 April 1985
• Docket Number: No. 83-734,83-734
• Citation: 365 N.W.2d 430,219 Neb. 610
• Parties: YANKTON PRODUCTION CREDIT ASSOCIATION, a Corporation, Appellee, v. Chris LARSEN et al., Appellants.
• Court: Nebraska Supreme Court

Page 430

365 N.W.2d 430

219 Neb. 610

YANKTON PRODUCTION CREDIT ASSOCIATION, a Corporation, Appellee, v. Chris LARSEN et al., Appellants.

No. 83-734.

Supreme Court of Nebraska.

April 5, 1985.

Syllabus by the Court

1. Summary Judgment. A summary judgment shall be rendered if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact, that the ultimate inferences to be drawn from those facts are clear, and that the moving party is entitled to a judgment as a matter of law.

2. Summary Judgment: Appeal and Error. In reviewing a summary judgment the court must take the view of the evidence most favorable to the party against whom the motion is directed and give that party the benefit of all favorable inferences which may be drawn from the evidence.

3. Contracts: Breach of Contract: Forbearance: Estoppel. A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

4. Contracts: Promissory Notes: Consideration. In order for a detriment to the promisee to constitute a valid consideration for a note or contract, it must have been within the express or implied contemplation of the parties and known to and agreed to by them.

5. Uniform Commercial Code: Contracts. There is a good faith obligation in the performance or the enforcement of every contract or duty within the Nebraska Uniform Commercial Code. Neb. U.C.C. § 1-203 (Reissue 1980).

Patrick J. Birmingham of Birmingham & Scholer, Bloomfield, for appellants.

Robert E. Otte of Jewell, Otte, Gatz & Collins, Norfolk, and Steven M. Johnson of Brady, Kabeiseman, Reade, Abbott & Johnson, Yankton, S.D., for appellee.

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

WHITE, Justice.

The defendants, Chris and Ardith Larsen, husband and wife, appeal from the order of the trial court sustaining the motion of the plaintiff, Yankton Production Credit Association (PCA), for a summary judgment on the defendants' counterclaim for breach of contract.

The PCA initiated the litigation by filing a replevin action against the Larsens, claiming that the defendants had defaulted in payments due to the plaintiff and that the defendants owed the PCA the principal sum of $522,290.95, together with interest. The parties stipulated that judgment be entered in favor of the PCA and that the Larsens reserved their right to file counterclaims.

The amended counterclaim later filed by the defendants alleged that the plaintiff refused to advance them the balance of three separate loans agreed to by the parties and that the plaintiff breached its duty to deal in good faith. The counterclaim also alleged that the PCA expressly and impliedly represented to the Larsens that it would provide the Larsens a continuing line of credit to finance an expansion of their operation, livestock inventory, and operating expenses.

The plaintiff filed an answer expressly denying that there was an agreement to advance to the defendants any particular sum of money and alleging that any advancement was at the option of the plaintiff. The plaintiff moved for summary judgment and offered depositions of the defendants in support of the motion. The district court ruled in favor of the plaintiff and found that there was no contractual obligation on behalf of the PCA to loan any specific amount of money to the defendants and that any advances were at the sole discretion of the PCA.

In their appeal the defendants allege three assignments of error. The first two assignments may be combined in that they generally allege that the trial court erred in interpreting the note, security agreement, and loan application to mean that the PCA was entitled to advance to the Larsens unreimbursed commitments at its sole discretion. The third assignment of error alleges that the trial court erred in finding that there existed no genuine issue of material fact and that the PCA was entitled to a summary judgment. We reverse and remand for the reasons hereinafter set forth.

The Larsens own and operate a large farm in Knox County, Nebraska. To facilitate an expansion of their livestock breeding operation, they commenced borrowing money from the PCA on April 7, 1978, and proceeded to finance their entire farming and ranching operation through the PCA. At that time they requested $821,982.37 and executed a loan application, security agreement, and promissory note. The loan agreement in each of the loan applications that the Larsens signed contained the following provisions:

To accept advances of loan proceeds to be made at the option of the Association and to pay interest (which may be variable) on such advances at a rate(s) provided in promissory note(s) to be executed by the undersigned in a form requestd [sic] by the Association from the date of the advance(s) until paid.

That the Association may disburse from the proceeds of the loan the amount required to (1) purchase Class B stock; (2) pay the cost and expense incident to the making of the loan; (3) pay all prior liens on the property offered as a security; (4) pay such other obligations as are listed in schedule "Purpose of Loan" in this application; (5) and to disburse any and all other proceeds to the undersigned in the Bank of Verdigre ... Acct. # 227-088.

(Emphasis supplied.) The security agreements that the Larsens signed contained the following provision:

It is understood and agreed between the parties hereto that nothing herein contained shall be construed to obligate the Secured Party to make loans or advances to the Debtor and that the sole purpose of this instrument is to provide collateral security for presently existing indebtedness and loans and advances which in the absolute discretion of the Secured Party, may be made concurrently or hereafter to the Debtor.

(Emphasis supplied.) The promissory notes did not contain any language purporting to limit the obligation of the PCA to advance funds at its option.

The initial request for $821,982.37 was approved and the money was released by the PCA as the Larsens needed it. Initially, this arrangement was satisfactory to the Larsens. On January 10, 1980, the Larsens executed and delivered to the PCA a promissory note in the sum of $737,000, of which $570,000 was for the purpose of purchasing livestock and approximately $167,000 was for operating expenses. From January 10, 1980, until the end of April 1980, the PCA provided the Larsens with $251,382 of the $570,000 earmarked for purchasing livestock. The PCA thereafter refused to loan the Larsens the remainder of the previously committed $570,000 for livestock inventory. This amounted to approximately $318,618. Consequently, the defendants could not buy the livestock needed to fully utilize their expanded operation and generate the necessary profits to make the payments on their debt. On January 6, 1981, the PCA agreed to loan the Larsens $362,825. The Larsens executed a promissory note and received $154,975 of the total loan amount. The PCA refused to advance the remaining amount of $207,850 to the Larsens. Finally, on May 29, 1981, the PCA agreed to loan $10,000 to the Larsens. Later, they refused to advance the Larsens $5,527 of this agreed-upon amount. The Larsens claim that the failure of the PCA to loan them the remainder of the agreed-upon loan amounts cost them $650,000 in lost profits.

A summary judgment shall be rendered if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact, that the ultimate inferences to be drawn from those facts are clear, and that the moving party is entitled to a judgment as a matter of law. Neb.Rev.Stat. § 25-1332 (Reissue 1979); Witherspoon v. Sides Constr. Co., 219 Neb. 117, 362 N.W.2d 35 (1985); Cummings v. Curtiss, 219 Neb. 106, 361 N.W.2d 508 (1985); Gilbreath v. Ridgeway, 218 Neb. 822, 360 N.W.2d 474 (1984); Stromsburg Bank v. Nuttelman, 218 Neb. 687, 358 N.W.2d 746 (1984); Mutual Benefit Life Ins. Co. v. Chisholm, 213 Neb. 301, 329 N.W.2d 103 (1983).

Upon a motion for summary judgment the court examines the evidence to discover if any real issue of fact exists. We are required, as was the trial court, to take...