Case Title: SCHULER v. COMMUNITY FIRST NAT'L BANK

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 2000-03-22T00:00:00Z

Document:
SCHULER v. COMMUNITY FIRST NAT'L BANK2000 WY 51999 P.2d 1303Case Number: 98-349Decided: 03/22/2000Supreme Court of Wyoming
 
CLINT P. SCHULER, 
individually, and SCHULER CONSTRUCTION, INC., a Wyoming corporation, Appellants 
(Plaintiffs), v.COMMUNITY FIRST NATIONAL BANK, 
and Scott Weaver, individually, Appellees (Defendants).

* This case was originally 
assigned to Justice Thomas on May 26, 1999, for the rendering of a proffered 
majority opinion. The case was reassigned to Chief Justice Lehman on December 
16, 1999. Chief Justice Lehman distributed a proffered opinion to the Court on 
January 19, 2000.

Appeal from the District 
Court of Campbell County, Honorable Dan R. Price II, 
Judge.

E. Courtney 
Gruber of Central Wyoming Law Associates, P.C., Riverton, representing 
appellants.Barry G. Williams and Kevin D. Huber of Williams Porter Day 
& Neville, Casper, representing appellees.

Before 
LEHMAN, C.J., and THOMAS, MACY, GOLDEN & HILL, JJ.

LEHMAN, Chief 
Justice.

[¶1] The issue 
in this appeal is whether the district court erred in granting summary judgment 
for the appellees, Community First National Bank (the bank) and Scott Weaver. 
The appellants, Clint Schuler (Schuler) and Schuler Construction, Inc. (Schuler 
Construction), contend unresolved issues of material fact existed which 
precluded summary judgment on their claims for bad faith, negligence, and breach 
of agreement to provide a line of credit. We hold that the district court 
correctly granted summary judgment on the appellants' claims, and we, therefore, 
affirm.

ISSUES

[¶2] This 
statement of the issues is found in the Opening Brief of 
Appellants:

I. Did the trial judge 
err in finding that no material issue of fact existed with regard to the 
Appellant[s'] allegation of bad faith and breach of fiduciary 
duties?

II. Did the trial judge 
err in finding that no material issue of fact existed with regard to the 
Appellant[s'] allegation of negligence?

III. Did the trial judge 
err in finding that no material issue of fact existed with regard to the 
Appellant[s'] allegation of breach of agreement to provide line of 
credit?

[¶3] This 
statement of issues is found in the Brief of Appellees:

1. Did the Trial Court 
properly find that no bad faith or breach of fiduciary duty existed in this 
matter?

2. Did the Trial Court 
properly find that no duty existed except the one imposed by the contractual 
relationship of the parties?

3. Did the Trial Court 
properly find that there was no breach of the agreements by the Appellees in 
this matter?

[¶4] In the 
Reply Brief of Appellants, this additional issue is set 
forth:

Did the trial court 
properly find that no duty existed except the one imposed by the contract 
between the parties?

FACTS

[¶5] Schuler 
Construction applied for a loan to fund a construction project. The bank 
approved the loan of $180,004.75, and, on June 24, 1996, the parties signed loan 
documents including a Variable Rate Commercial Revolving or Draw Note, 
Commercial Mortgage, Assignment of Rents and Leases, and Commercial Construction 
Loan Agreement. The parties agreed orally to a disbursement procedure by which 
Schuler Construction would present a draw request to the bank twice monthly 
along with checks payable to those subcontractors and material men that were 
entitled to the money requested. If, after reviewing the request and inspecting 
the project, the bank approved the request, it would deposit eighty-five percent 
of the draw request into Schuler Construction's checking account and notify the 
subcontractors to pick up their checks. Schuler Construction had to have the 
remaining fifteen percent on deposit.

[¶6] Pursuant to 
the oral agreement, Schuler Construction submitted two draw requests on July 31, 
1996, which totaled $25,498.07. The bank inspected the project, confirmed that 
Schuler Construction's fifteen percent was on deposit, and approved the request. 
On August 6, 1996, the bank deposited $21,673.36 into Schuler Construction's 
account. The next day, the bank discovered Schuler Construction's account no 
longer contained sufficient funds to cover the entire draw because checks 
unrelated to the construction project had cleared the account after the bank 
verified the amount on deposit. Furthermore, a cashier's check payable to 
Schuler's wife for $9,506 was issued from the account on August 8, 1996. In 
response, the bank placed a hold on the account and notified Schuler 
Construction of the problem. Schuler Construction did not cure the shortage in 
its account, and the account was subsequently closed.

[¶7] Schuler and 
Schuler Construction filed a complaint in the district court on November 17, 
1997. They included claims for: (1) interference with contract, (2) bad faith 
and breach of fiduciary duty, (3) negligence, (4) breach of agreement to provide 
a line of credit, and (5) interference with future business property. They later 
withdrew the fifth claim. On November 18, 1998, the district court granted the 
bank's motion for summary judgment on the remaining claims. The appellants 
appeal from the grant of summary judgment.

STANDARD OF 
REVIEW

[¶8] Summary 
judgment is appropriate only when no genuine issues of material fact exist and 
the moving party is entitled to judgment as a matter of law. W.R.C.P. 56(c); 
Century Ready-Mix Co. v. Campbell County Sch. Dist., 816 P.2d 795, 798 (Wyo. 
1991). A material fact is a fact that, if proved, would establish or refute an 
essential element of a claim or defense asserted by a party. Century Ready-Mix 
Co., 816 P.2d  at 799. When reviewing a grant of summary judgment, this Court 
will consider the record in the light most favorable to the party opposing the 
motion and give that party the benefit of all the favorable inferences we may 
fairly draw from the record. Id. We will uphold summary judgment if we can do so 
under any proper legal theory on the record presented. Id.

DISCUSSION

[¶9] In their 
first issue, the appellants contend the district court erred in granting summary 
judgment on their claim for bad faith and breach of fiduciary duty. The district 
court wrote:

The court finds no bad 
faith or breach of a fiduciary duty. The loan agreement, promissory note, and 
mortgage created only a creditor/debtor relationship. The evidence presented did 
not present a special relationship and the court could find no evidence that the 
bank acted in bad faith when it required the 15% equity by the borrower or when 
it froze the account. When the advances were made to the account and the funds 
needed to be released, there was not enough funds to cover the 
checks.

[¶10] In their 
brief to this Court, the appellants concede "the facts of the case do not give 
rise to a finding that any higher duty was owed by the lender under the 
circumstances." That concession extinguishes their fiduciary duty claim, and 
only the bad faith portion of this issue remains.

[¶11] The 
appellants claim the bank acted in bad faith when it required Schuler 
Construction to deposit fifteen percent of the amounts it wanted to draw and 
when the bank froze its line of credit without giving reasonable notice or time 
to cure the default. We disagree. Although the loan documents do not call for 
Schuler Construction to maintain fifteen percent of the loan request, the 
parties amended their written agreement by the practices they followed in the 
loan administration.1 Evidence of that practice is 
unchallenged in the record and supported by the appellants' complaint, which 
described that procedure. The testimony of both Schuler and a loan officer 
reflect that procedure, and the draw requests made and signed by Schuler 
Construction computed the fifteen percent equity requirement before they were 
submitted to the bank. Therefore, when the account contained insufficient funds 
to cover the checks uttered, the bank was within its rights to freeze Schuler 
Construction's line of credit. Price v. Wells Fargo Bank, 261 Cal. Rptr. 735, 742 
(Cal. Ct. App. 1989) (The implied covenant of good faith and fair dealing "does 
not impose any affirmative duty of moderation in the enforcement of legal 
rights."). We affirm summary judgment in favor of the bank on this cause of 
action.

[¶12] Next, the 
appellants argue that the district court erred in granting summary judgment on 
their negligence claim. The district court said:

Although it is unusual to 
grant summary judgment on a negligence claim, the issue that determines this 
claim is the nonexistence of a duty which would subject the defendants to a 
negligence claim. The view of the court is that there was no duty of the 
defendants except one imposed by the contractual relationship of the 
parties.

[¶13] The 
appellants do not contend the bank owed them any duty independent of the loan 
agreement. Instead, they argue, without citing to the record or supporting 
authority, that the bank owed them the duty of "a reasonably competent banker." 
They specifically assert that duty "arose in the contractual 
relationship."

[¶14] We have 
held that a contract may create a relationship from which a duty arises. 
Brubaker v. Glenrock Lodge Int'l Order of Odd Fellows, 526 P.2d 52, 59 (Wyo. 
1974). That is not to say, however, that every contract creates such a 
relationship. The circumstances in Brubaker were so exceptional as to warrant a 
deviation from the general rule that a breach of contract does not lead to tort 
liability. We declined to extend the reasoning of Brubaker in JBC of Wyoming 
Corp. v. City of Cheyenne, 843 P.2d 1190 (Wyo. 1992). There, we clearly 
articulated the proposition that "tort liability can only be premised on a duty 
independent of contractual duties." 843 P.2d  at 1197; see also Andrea Bloom, 
Lender Liability: Practice and Prevention § 2.2 (1989 & Supp. 
1997).

[¶15] This Court 
has said: "The existence of duty is a question of law, making an absence of duty 
the surest route to summary judgment in negligence actions." Daily v. Bone, 906 P.2d 1039, 1043 (Wyo. 1995). Because the appellants do not allege, and we cannot 
find, a duty independent of the contractual relationship, we affirm the grant of 
summary judgment on the negligence claim.

[¶16] In their 
final assignment of error, the appellants contend the district court erred when 
it found the bank had not breached the parties' agreement. In response to the 
appellants' claim for breach of agreement to provide a line of credit, the court 
ruled:

The court finds no breach 
of the agreement. At argument, the plaintiffs seem to indicate that there could 
be no breach of agreement on plaintiffs' alleged failure to have 15% equity 
because no such requirement exists in the loan documents. However, the actions 
of the parties indicate[] at least an oral agreement and activity consistent 
with that oral agreement. Even in the plaintiffs' complaint it is indicated that 
this was the arrangement. See paragraph 6 of the complaint. Insufficient funds 
by the plaintiffs in the account to cover the invoices and use of the funds for 
other purposes were defaults.

[¶17] The 
appellants argue the fifteen percent equity requirement was never part of the 
loan agreement and, therefore, Schuler Construction's failure to abide by it was 
not a breach of the agreement and, thus, did not justify the bank freezing its 
line of credit. We have already determined that Schuler Construction breached 
its obligation and the bank acted within its rights in response. That 
determination resolves this issue as well.

[¶18] The bank 
owed Schuler Construction no duty other than that imposed by their contractual 
relationship, and Schuler Construction breached its duty under that 
relationship. Therefore, the district court properly granted summary judgment. 
Affirmed.
Footnotes
Footnotes

1 As a 
general rule, if the parties mutually adopt a mode of performing their contract 
differing from its strict terms or if they mutually relax the contract's terms 
by adopting a loose mode of executing them, neither party can go back upon the 
past and insist upon a breach because the contract was not fulfilled according 
to its letter. Quin Blair Enterprises, Inc. v. Julien Constr. Co., 597 P.2d 945, 
951 n.6 (Wyo. 1979).