First National Bank of Logansport v. Logan Manufacturing Co.

In 1982, Donald Moore, et al. (Garrett and Moore) (plaintiffs) became interested in purchasing a failing business called Winamac Plastics Drinkwear (Winamac) and moving it from Michigan to Indiana. Garrett and Moore sought a loan from the First National Bank of Logansport (Bank) (defendant) and were granted a $100,000 loan by a Bank representative, Max Brandt. $80,000 of that loan was so Garrett and Moore could acquire Winamac. Subsequently, Brandt prepared a separate business loan application for Winamac, and at the same time, an independent supplemental loan to Garrett and Moore. The Winamac loan application was denied. Garrett and Moore became frustrated because they could not operate the business without that loan, but Brandt assured them that the Bank would assist them in the purchase of the Winamac machinery they had not yet purchased and help them go into business under another name. Brandt also convinced them to continue the process of moving the Winamac business to Indiana. Brandt then processed another loan application for Winamac under the name Logan Drinkwear. A term loan and an operating loan were approved and the Bank issued letters of commitment for the loans. The letters stated, for the first time, that the loans would have to be guaranteed by the state, but Brandt assured Garrett and Moore that this would not be a problem. However, the Bank refused to close on either loan. Garrett and Moore were unable to acquire another loan from another lender until 1987, at which point they opened a similar plastics company in Iowa. Garrett and Moore brought suit against the Bank for its failure to close on the loans. The trial court awarded Garrett and Moore the following damages: (1) lost profits for the period between the Bank’s refusal to grant the loan in 1983 and the acquisition of the loan from another lender in 1987; (2) loss of equipment they owned and lost as collateral in a separate loan they could not pay off due to the Bank’s refusal to close on the loans in this case; and (3) out of pocket expenses incurred in moving Winamac from Michigan to Indiana in the amount of $73,080. The court of appeals (1) affirmed the damages for lost profits, (2) reversed the damages for lost equipment because they were not reasonably foreseeable, and (3) reversed the damages for out of pocket expenses because of a determination that those expenses were included in the lost profits. Both parties appealed.