Filed: Apr. 28, 2005
Latest Update: Feb. 21, 2020
Summary: F I L E D United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS APR 6 2005 FOR THE TENTH CIRCUIT PATRICK FISHER Clerk GILBERT WALKER; MARY NETTA WALKER; FOUR WALKERS INC.; TRAVIS WALKER, Plaintiffs-Appellants, No. 03-6314 (D.C. No. 02-CV-1082-HE) v. (W.D. Okla.) FIRST NATIONAL BANK OF MEDICINE LODGE, Defendant-Appellee. ORDER AND JUDGMENT * Before TACHA , Chief Judge, HENRY , and O’BRIEN , Circuit Judges. After examining the briefs and appellate record, this panel has deter
Summary: F I L E D United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS APR 6 2005 FOR THE TENTH CIRCUIT PATRICK FISHER Clerk GILBERT WALKER; MARY NETTA WALKER; FOUR WALKERS INC.; TRAVIS WALKER, Plaintiffs-Appellants, No. 03-6314 (D.C. No. 02-CV-1082-HE) v. (W.D. Okla.) FIRST NATIONAL BANK OF MEDICINE LODGE, Defendant-Appellee. ORDER AND JUDGMENT * Before TACHA , Chief Judge, HENRY , and O’BRIEN , Circuit Judges. After examining the briefs and appellate record, this panel has determ..
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F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
APR 6 2005
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
GILBERT WALKER; MARY NETTA
WALKER; FOUR WALKERS INC.;
TRAVIS WALKER,
Plaintiffs-Appellants, No. 03-6314
(D.C. No. 02-CV-1082-HE)
v. (W.D. Okla.)
FIRST NATIONAL BANK OF
MEDICINE LODGE,
Defendant-Appellee.
ORDER AND JUDGMENT *
Before TACHA , Chief Judge, HENRY , and O’BRIEN , Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Plaintiffs Gilbert Walker, Mary Netta Walker, Travis Walker, and Four
Walkers, Inc., all residents of Oklahoma (collectively, the “Borrowers”), appeal
the district court’s grant of summary judgment in favor of defendant First
National Bank of Medicine Lodge, Inc., a Kansas corporation, (the “Bank”) on
their complaint alleging breach of contract, misrepresentation, breach of the
implied covenant of good faith and fair dealing, lender liability, promissory
estoppel, and fraud arising out of their indebtedness to the Bank. The district
court, applying Oklahoma law under its diversity jurisdiction, 1
ruled that the
Borrowers’ contract-related claims were barred by Oklahoma’s statute of frauds,
and that they had not presented sufficient evidence to support a claim for fraud or
misrepresentation. “We review the district court’s grant of summary judgment de
novo, applying the same legal standard used by the district court.” Sandoval v.
City of Boulder , 388 F.3d 1312, 1320 (10th Cir. 2004) (quotation omitted). We
affirm.
I. BACKGROUND
In December 1999, Four Walkers, Inc., executed four promissory notes to
the Bank, each with different loan amounts and maturity dates, for a total
1
The promissory notes specify that they are to be governed and construed in
accordance with Kansas law, but, as the district court noted, both parties have
stated throughout this litigation that Oklahoma law governs the loan agreements.
The district court therefore applied Oklahoma law, and neither party appeals that
decision.
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principal loan amount of $975,000. Included was an operating loan for $275,000
with a maturity date of December 20, 2000 (“Note 108”). Gilbert and Mary
Walker, who own all of the interest in Four Walkers, Inc, and their son, Travis
Walker, each guaranteed all the four loans, and Gilbert and Mary Walker signed a
mortgage and security agreement and an agricultural security agreement to secure
the loans. Additionally, Gilbert and Mary Walker signed a quitclaim deed
transferring certain real estate to Four Walkers, Inc.
Four Walkers, Inc. did not make payment on Note 108 by its December
2000 due date. In the spring of 2001, the Bank informed the Borrowers that it
was discontinuing agricultural loan operations. It agreed to extend Note 108’s
maturity date to June 2001, to give the Borrowers time to move their loans to
another financial institution. The Borrowers signed a Change in Terms
Agreement in April 2001, extending the final maturity date of Note 108 to June
30, 2001. Four Walkers, Inc. failed to pay the principal and interest due on Note
108 by the new due date, however. Because default on Note 108 constituted a
cross-default under all of the remaining notes, the Bank demanded immediate
payment on all loans, which, to date, the Borrowers have not made.
The Borrowers then filed the instant complaint against the Bank, alleging
that they were induced into borrowing from the Bank based on oral
representations by Bank agents stating that the Bank would remain in the local
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area making agricultural loans for a substantial period of time, and that Note 108
would be renewed so long as the Borrowers met certain financial conditions. The
Borrowers further allege that the Bank fraudulently added the quitclaim deed to
the loan documents without their knowledge, and that they signed it without
knowing that it conveyed real property to Four Walkers, Inc.
II. ANALYSIS
A. Statute of Frauds
Under Oklahoma law, a borrower may not “maintain an action to enforce or
seek damages for the breach of any term or condition of a credit agreement having
a principal amount greater than Fifteen Thousand Dollars . . ., unless such term or
condition has been agreed to in writing and signed by the party against whom it is
sought to be enforced or against whom damages are sought.” 15 Okla. Stat.
§ 140(B). It is undisputed that the loan agreements between the Borrowers and
the Bank are credit agreements within the meaning of section 140, and that none
of the alleged oral representations described by the Borrowers is included or
otherwise reflected in any of the loan documents. The district court ruled that,
because the Borrowers’ breach of contract, promissory estoppel, and lender
liability claims are predicated on alleged oral representations that were not
included in any loan documents or agreements, or otherwise reduced to writing,
these claims are clearly barred by section 140(B)’s statute of frauds provision.
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Aplt. App. Vol. III, at 394 (court order at 6, citing Big John’s Lumber Co. of
Muskogee, Inc. v. City Bank , 901 P.2d 832, 833-34 (Okla. Ct. App. 1995)).
On appeal, the Borrowers first contend that section 140’s statute of frauds
provision is not applicable where there is an allegation of fraud. As noted above,
they have asserted misrepresentation and fraud claims, alleging that the Bank
induced them to enter into the loan agreements and tricked them into signing the
quitclaim deed. They contend that in Brown v. Founders Bank and Trust Co. ,
890 P.2d 855 (Okla. 1994), the Oklahoma Supreme Court held that an allegation
of fraud avoids application of the statute of frauds, even to contract-related
claims. We disagree.
In Brown , the court held that the statute of frauds provision in section 140
does not bar a cause of action for fraud. See id. at 862-64. It concluded that the
purpose of the statute of frauds – to protect lenders from liability litigation and
promote certainty in credit agreements – would not be defeated by allowing fraud
claims because of the high standards needed to establish fraud.
Id. at 863.
Nothing in Brown or any other Oklahoma decision, however, supports the
Borrowers’ argument that a mere allegation of fraud avoids application of the
statute of frauds to contract and other claims. Brown simply holds that a
borrower is not precluded by section 140 from bringing a cause of action for
fraud, assuming the borrower can establish the elements of a fraud claim. See id .
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at 861-864. As discussed below, we agree with the district court that the
Borrowers failed to present evidence that would support a cause of action for
fraud against the Bank. Thus, the district court properly dismissed the breach of
contract, promissory estoppel and lender liability claims under section 140.
B. Trade Usage and Duty of Good Faith
Next, the Borrowers argue that the district court erroneously rejected their
breach of contract claim and their tortious breach of contract claim based on their
allegation that the Bank violated the implied usage of trade and implied
obligation of good faith provisions found in the Uniform Commercial Code
(“UCC”). See 12A Okla. Stat. §§ 1-203, 1-205. They argue that under trade
usage and the implied duty of good faith, the Bank was obligated to renew Note
108. Note 108 expressly provides, however, that payment was due on demand or,
if no demand was made, on the December 20, 1999 due date, later amended to
June 30, 2001. Further, it contains no provision obligating the Bank to renew or
extend the loan. The district court ruled that neither an implicit trade usage nor
an implicit obligation of good faith can override an explicit contractual term.
The Borrowers assert, without citation to any legal authority, that the
district court’s holding is contrary to the UCC. Borrowers are incorrect. As the
district court correctly explained, an explicit contract term, here the definitive and
unambiguous due date, controls over trade usage. 12A Okla. Stat. § 1-205(4).
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Similarly, the obligation of good faith cannot be employed to override express
contract terms or to obligate a party to accept additional terms or a material
change in the contract’s terms. See Kham & Nate’s Shoes No. 2, Inc. v. First
Bank of Whiting , 908 F.2d 1351, 1357-58 (7th Cir. 1990) (holding bank did not
violate good faith obligation by refusing to make further advances under loan
which did not require it, even where borrower able to repay); Roberts v. Wells
Fargo AG Credit Corp. ,
990 F.2d 1169, 1174 (10th Cir. 1993) (rejecting similar
argument, under Oklahoma law, that bank should have renewed note under
implied duty of good faith, though loan did not require renewal); Badgett v.
Security State Bank ,
807 P.2d 356, 359-60 (1991) (holding bank did not violate
good faith obligation by not renegotiating or restructuring loan because no
express term in the loan agreement required bank to do so). Thus, the district
court did not err in dismissing the Borrowers’ claims for breach and tortious
breach of contract.
C. Misrepresentation and Fraud
Finally, the Borrowers allege that they presented sufficient evidence to
submit their misrepresentation and fraud claims to a jury. We have reviewed the
record and the evidence presented, and we disagree. The allegations that the
Bank promised to renew Note 108 and promised to remain in the agricultural loan
business in the Borrower’s community are promises to act in the future.
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Oklahoma only permits a fraud claim based on the promise of future acts if the
plaintiff can establish that “the promise to act in the future is accompanied by an
intention not to perform and the promise is made with the intent to deceive the
promisee into acting where he would not otherwise have done so.” Citation Co.
Realtors v. Lyon , 610 P.2d 788, 790 (Okla. 1980) (noting general rule that
promise to do something in the future is not fraud). We agree with the district
court that the Borrowers presented no evidence that the Bank agents did not
believe their alleged representations at the time they made them. “There must be
evidence of each element of fraud presented before the issue may be properly
submitted to a jury.” Roberts , 990 F.2d at 1173 (upholding, under Oklahoma law,
grant of summary judgment to bank where borrower failed to present evidence
that bank’s “promise to perform was accompanied by an intent not to do so”).
We also agree with the district court that the Borrowers failed to present
evidence that would support a claim that the Bank fraudulently hid the quitclaim
deed from Gilbert and Mary Walker. The document is clearly entitled a quitclaim
deed in all-capital letters, and the Walkers admit that they signed the deed. They
contend, however, that an agent of the Bank hid the quitclaim deed under other
papers; Mr. Walker stated in his deposition that he specifically remembered that
this document was covered by other documents when he signed it, and that he was
prevented from reading it because of time, though he did not explain what those
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time constraints were. There is no evidence, however, that any agent of the Bank
told the Walkers they had to sign the documents quickly or that they otherwise
prevented the Walkers from reading the deed. As the district court ruled,
precisely the same allegations as made by the Walkers have been held by the
Oklahoma Supreme Court to be insufficient to establish an action for fraud. See
Silk v. Phillips Petroleum Co ., 760 P.2d 174, 178-79 (Okla. 1988) (rejecting
fraudulent concealment claim based on allegation that agent concealed lease
agreement under other documents and that she hurriedly signed it without reading
it, because no evidence that agent actively concealed lease from her or prevented
her from seeing or reading it).
The judgment of the district court is AFFIRMED.
Entered for the Court
Deanell Reece Tacha
Chief Judge
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