Title: FORREST W. PROVENCE AND SHIRLEY J. PROVENCE v. HILLTOP NATIONAL BANK

State: wyoming

Issuer: Wyoming Supreme Court

Document:

FORREST W. PROVENCE AND SHIRLEY J. PROVENCE v. HILLTOP NATIONAL BANK1989 WY 185780 P.2d 990Case Number: 89-82Decided: 10/10/1989Supreme Court of Wyoming
FORREST W. PROVENCE AND SHIRLEY J. PROVENCE, APPELLANTS 
(PLAINTIFFS),

v.

HILLTOP NATIONAL BANK, 
APPELLEE (DEFENDANT).

Appeal from the District 
Court, NatronaCounty, Dan Spangler, 
J.

Donald L. 
Painter, Casper, 
for 
appellants.

Richard E. Day 
and Richard L. Williams of Williams, Porter, Day & Neville, P.C. and Manuel 
A. Lojo, Casper, 
for appellee.

Before CARDINE, C.J., THOMAS, URBIGKIT and MACY, 
JJ., and ROONEY, J., Retired.

URBIGKIT, 
Justice.

[¶1.]     The Central Wyoming 
Livestock Exchange, Inc. of Glenrock, Wyoming (Livestock Exchange), a 
corporation in which Forrest W. and Shirley J. Provence (Provences) were major 
stockholders and personal secured guarantors by mortgage of their home, failed 
to repay the Hilltop National Bank (Hilltop Bank) loan. The Hilltop Bank 
assigned the collateral to the Small Business Administration (SBA) in 
utilization of the SBA 90% loan guarantee, following which the SBA called the 
loan and foreclosed including the individual Provence collateral which had been pledged for 
the business loan. Milton L. Keim (Keim) had, subsequent to the initial loan 
origination and closing, also executed a payment guarantee on the loan. After 
the foreclosure, the Provences sued the Hilltop Bank for monetary damages 
claiming negligence and breach of agreement for loss of their home when they 
were not given a mortgage release in exchange for the Keim guarantee which was 
provided.1 The district court granted summary 
judgment to the Hilltop Bank from which the Provences 
appeal.

[¶2.]     We 
affirm.

ISSUES

[¶3.]     The Provences frame the 
issue presented to this court by asking "[w]hether the District Court erred in 
granting summary judgment to Defendant on Plaintiffs' claim of estoppel." A question of law?

[¶4.]     The Hilltop Bank frames 
the issue presented to this court by asking whether "the Trial Court [was] 
correct in its ruling that there was no agreement between Appellants Provence 
and Appellee Hilltop National Bank to release the Appellants' residence mortgage 
solely upon the receipt of the personal guaranty of Mr. Keim?" A question of 
fact?

[¶5.]     The Hilltop Bank more 
inclusively claims the issue it presents must be answered first because the 
estoppel claim and supporting argument advanced by the Provences presupposes an 
agreement exists. The argument suggests that if there was no agreement between 
the Provences and the Hilltop Bank which called for the release of the 
Provence 
collateral upon the receipt of Keim's personal guarantee, then the Provences' 
theory of estoppel is without supportable foundation. The Hilltop Bank asserts 
it breached no agreement, had no duty (or right) to release the Provence collateral and is not subject to liability for 
violated estoppel since the right of decision rests with the guarantor, the 
United 
States agency - the SBA.

FACTS

[¶6.]     The transaction is a 
business loan for a livestock enterprise in Glenrock, Wyoming with a 90% guarantee by the SBA and 
cross-collateralized by guarantees and security which, at default date, included 
the following:

A. 
Collateral

1. First mortgage on 
commercial property (44 acres-Glenrock and improvements).

2. First mortgage on 
Provence 
residence (4955 Skyline Road-Casper).

3. Third mortgage on 
Steffensmeier residence (1400 Sunlight Drive-Casper).

4. First perfected 
Financing Statement/Security Agreement.

B. Co-borrowers or 
guarantors.

Forrest W. Provence and 
wife - co-borrowers

Marvin Steffensmeier and 
wife - co-borrowers

Milton Keim - personal 
guaranty.

[¶7.]     Originally, the 
Provences and Marvin and Carolyn Steffensmeier (Steffensmeiers) owned equal 
amounts of stock in the Livestock Exchange in their negotiation in behalf of 
that business with the Hilltop Bank as originating lender to obtain an SBA 
guaranteed loan of $650,000. In order to complete the loan agreement (Proposal # 
1), the Hilltop Bank, in conjunction with the co-borrowers, successfully 
approached the SBA to obtain the 90% guarantee which, within prudent lending 
criteria, made the loan possible for the Hilltop Bank. In return for the SBA 
guarantee, the Provences and the Steffensmeiers executed the negotiated loan 
promissory note of $550,000 and gave mortgages encumbering their homes. In 
accord with normal business practices for the SBA loan arrangement, the note and 
security were executed in favor of the Hilltop Bank. There was in addition the 
basic three-party agreement encompassing the SBA guarantee which is contained 
within the SBA loan authorization and sets the terms of borrowing and conditions 
for assignment to the SBA upon payment default and lender request for the agency 
to honor its 90% guaranteed amount. 

[¶8.]     Within a month 
following loan closing, Keim additionally became involved in the venture. He 
notified the Hilltop Bank in a letter acknowledged by the Provences and the 
Steffensmeiers that he had agreed to purchase the Provences' stock in the 
Livestock Exchange and asked the Hilltop Bank to release the collateral pledged 
by the Provences. In exchange, he would provide "a first mortgage on a 
commercial office building, a second mortgage on [his] personal residence, and 
[he] and [his] wife's personal guaranties of all indebtedness at the bank". One 
day later and as a gesture of "good faith" before leaving on a vacation, Keim 
signed a personal guaranty to the Hilltop Bank for the Livestock Exchange's 
indebtedness. Apparently, a down payment was made on his investment in the 
business which was to be $100,000.

[¶9.]     Recognizing the SBA 
would have to approve any modification to the agreement if the modified loan was 
to continue to be guaranteed, the Hilltop Bank wrote to the SBA to review and 
approve the Keim-Provence-Steffensmeier proposal. On March 22, 1985, the SBA 
approved this proposal (Proposal # 2) which called for the release of the 
security provided by the Provences upon Keim assuming the Provences' obligations 
and giving mortgages on his residence and business property as collateral for 
the indebtedness. The exchange, substitution and transfer was scheduled to take 
place on March 27, 1985, but before that closing date, Keim advised that the 
terms of his involvement had to be changed since his wife would sign neither the 
guarantee nor the home mortgage. Consequently, he could not provide the 
collateral necessary to complete Proposal # 2.2

[¶10.]  On March 28th, Keim, Provence, and Steffensmeier advised the SBA 
and the Hilltop Bank that Proposal # 2 would be modified. In this new proposal 
(Proposal # 3), there would be a new mix of obligations, collateral and stock 
ownership. Under Proposal # 3, the three men would each own one-third of the 
stock. This proposal was not accepted by either the SBA or the Hilltop Bank. The 
only legally enforceable agreement at this point was the original loan agreement 
(Proposal # 1) found in the SBA loan authorization, which continued to include 
the additional security of Keim's personal guarantee. Only too soon thereafter, 
the loan went into default and all collateral was assigned by the Hilltop Bank 
to the SBA. The SBA withdrew approval of the noncompleted modification and 
foreclosed on the collateral used to secure the loan, including the Provences' 
home.

[¶11.]  After their home had been foreclosed by 
the SBA, the Provences brought suit against the Hilltop Bank claiming it 
negligently failed to release or obtain the release of their collateral, 
breached an agreement to obtain the release of that collateral and breached a 
duty to obtain the release of that collateral. The Hilltop Bank's success by 
summary judgment dismissal of the complaint presents the case for appellate 
review. Springs Industries, Inc. v. Kris Knit, Inc., 880 F.2d 1129 (9th Cir. 
1989).

ANALYSIS

[¶12.]  In consideration of the divergent 
phraseology of the issues by the litigants, this court must first determine 
whether the appeal presents an argument about the existence of an issue of fact, 
Davenport v. Epperly, 744 P.2d 1110 (Wyo. 1987); Cordova v. Gosar, 719 P.2d 625 
(Wyo. 1986) (stage six issue of fact review), or whether with a determined 
factual record, a legal issue which was presented was properly decided by the 
trial tribunal, Cordova, 719 P.2d 625 (stage five). For the issue of fact 
review, summary judgment is proper if the party awarded the judgment met the 
burden of proof to demonstrate there was no genuine issue of material fact. 
Summary judgment as a process is also proper when the parties agree as to the 
material facts, since without an issue of material fact, the decision would 
properly be submitted to the court for decision as a matter of law. Material 
facts establish or refute the elements needed in a cause of action brought by 
the plaintiff or in the defense raised by the defendant. Cordova, 719 P.2d at 
634-40; Garner v. Hickman, 709 P.2d 407, 410 (Wyo. 1985) (accord Dudley v. East Ridge Development Co., 
694 P.2d 113 (Wyo. 1985)). Material facts are the basis for 
and are therefore different from legal conclusions, such as estoppel. This court 
reviews de novo the grant of summary judgment. Davenport, 744 P.2d 1110; Taylor v. List, 880 F.2d 1040 (9th Cir. 1989). 
"The motion for summary judgment should be sustained in the absence of a real 
and material fact issue considering movant's burden, respondent's right to the 
benefit of all favorable inferences and any reasonable doubt, with credibility 
questions to be resolved by trial" if then with facts undisputed, movant is 
entitled to judgment as a matter of law. Cordova, 719 P.2d  at 640. See Davenport, 744 P.2d 1110.

[¶13.]  The district court by decision letter and 
summary judgment order determined as a matter of law within the undisputed facts 
there was no legally enforceable agreement between the Provences and the Hilltop 
Bank. Because the Provences indicate they "are in entire agreement with the 
facts as set forth in Defendant's Memorandum," the district court was properly 
presented with only an issue of law for decision. Kennedy v. Kennedy, 761 P.2d 995, 998 (Wyo. 
1988). See also Wyoming Sawmills, Inc. v. Morris, 756 P.2d 774, 775 (Wyo. 1988); Matter of Bagshaw, 753 P.2d 1044, 1045 
(Wyo. 1988); and Miles v. CEC Homes, Inc., 753 P.2d 1021, 1023 (Wyo. 1988).

[¶14.]  The argument made by the Provences in 
contention that their home should have been freed from the SBA foreclosure is 
more sophisticated than contention that a factual issue existed. The syllogism 
they pursued is that they arranged to get additional collateral added which 
should have been sufficient to require the release of the mortgage on their 
home. They argue that the Hilltop Bank

[¶15.]  is estopped to assert or permit through 
assignment of collateral the Small Business Administration to assert liability 
against Appellants' real estate, their home.

The Doctrine of Quasi 
Estoppel [should be] used by the Court to prevent an unconscionable change of 
position such as this. The elements for application of this doctrine are: (1) 
Whether the party against whom the estoppel is sought has gained from a change 
of position; (2) Whether the change in position is unconscionable; and (3) 
Whether the first position was based upon the same information. National Crude, 
Inc., v. Ruhl, 600 P.2d 716 (Wyo., 1979). Those requirements are clearly 
satisfied when (1) The bank or its assignee has been able to charge additional 
parties or property with liability for collection of a debt; (2) The change is 
unconscionable because the bank could collect in full from Mr. Keim based upon 
his net worth and because Appellants have lost their home; and (3) Appellee's 
information was based upon the same information 
throughout.

[¶16.]  The difficulty they face with this 
posture is two-fold. First, the argument contends by premise that the Hilltop 
Bank became obligated with only partial performance even though the SBA did not 
concur. Secondly, the Hilltop Bank is charged with responsibility for what the 
SBA might have done in foreclosure liquidation under the security documents and 
that Keim had a primary liability before resort to the original guarantee 
security that they had provided at the time of the loan origination.3

[¶17.]  The essential elements of promissory 
estoppel are well established: (1) a clear and definite agreement; (2) proof 
that the party urging the doctrine acted to its detriment in reasonable reliance 
on the agreement; and (3) a finding that the equities support enforcement of the 
agreement. * * * The burden of proving estoppel is on the party asserting it and 
strict proof of all elements is required. National Bank of Waterloo v. Moeller, 434 N.W.2d 887, 889 (Iowa 1989). The required 
"clear and definite agreement" was not present here.

[¶18.]  Factually emplaced, the Provences argue 
as a matter of law even when they were unable to complete a modification and 
collateral substitution arrangement as initially proposed, that the additional 
security which was obtained by the volunteered Keim guarantee was sufficient to 
affect an estoppel so that their house mortgage should have been released. 
Euphemistically, this might be characterized as the half of a loaf-full remedy 
inquiry. Factually, lacking a completed separate modification agreement between 
the Hilltop Bank and the Provences for the Hilltop Bank to release the 
Provence 
collateral upon the personal guarantee by Keim, duty to release the home 
mortgage did not accrue as a matter of law. Dudley, 694 P.2d 113. Nothing presented in this record 
disclaims the primary decision for modification of loan conditions rested with 
big brother, the SBA, because of its 90% loan guarantee. It was that guarantee 
which made the original loan possible and, as such, that agency with the heavy 
default risk had primary control of the modification and foreclosure processes. 
Admittedly, the SBA got a benefit not included in the original loan 
authorization - the Keim guarantee - but it did not get what it had agreed to 
accept for release of the home mortgage; namely, substitute real estate security 
from Keim and his wife and the guarantee of Mrs. Keim. The benefit received by 
the SBA did not require the Hilltop Bank to breach its own guarantee with a 
federal agency by releasing the original mortgage security without required 
authorization.

[¶19.]  We would first concur with the district 
court that collateral estoppel cannot be asserted against the originating bank 
for what the SBA would or would not do to maintain its guarantee. Secondly, the 
additional security obtained by the Keim guarantee was not sufficient to 
effectuate compliance with the negotiated requirement for release of the 
previously pledged collateral. In retrospect, Mrs. Keim saved her home and the 
Provences lost their home when the proposed business enterprise and covering 
loan went sour. The Provences signed and Mrs. Keim did not. The Hilltop Bank did 
not control either decision. We cannot find a premise presented where estoppel 
as a remedy as a matter of law could properly be emplaced. National Crude, Inc. 
v. Ruhl, 600 P.2d 716, 720 (Wyo. 1979); Wood v. 
Trenchard, 550 P.2d 490, 493 (Wyo. 1976); 
Pickett v. Associates Discount Corp. of Wyoming, 435 P.2d 445, 447 (Wyo. 
1967).

[¶20.]  The originating lender cannot be fiscally 
responsible for continued enforcement of the original loan terms by the federal 
agency after failure of the Provences' effort to consummate a security release 
agreement for their mortgaged home with approval of the SBA. This attack on 
summary judgment fails where the district court correctly discerned that no 
triable issue of disputed material fact existed and with those uncontroverted 
facts established, then entered decision against the participating obligors on 
their executed agreements as a matter of law. Allen v. Slim Pickens Enterprises, 
777 P.2d 79 (Wyo. 1989); Northwinds of Wyoming, 
Inc. v. Phillips Petroleum Co., 779 P.2d 753 (Wyo. 1989) (Nos. 89-33 and 89-34, decided 9/8/89); 
Dudley, 694 P.2d 113.

[¶21.]  The judgment of the district court is 
affirmed.

FOOTNOTES

1 By virtue of SBA 
accession to ownership of their home by foreclosure, the Provences claim they 
were damaged by the Hilltop Bank in the sum of $150,000 plus accruing rent in 
arrangement for their continued occupancy of the house by a monthly 
lease.

2 In retrospect, Mrs. Keim 
was the only smart person in the transaction in refusing to sign the guarantee 
and mortgage which would have included an encumbrance on her own home.

3 Keim contributed about 
$60,000 in foreclosure settlement to cover his most inopportune pre-vacation 
executed guarantee.