Garrett v. BankWest, Inc.

Glen and Elizabeth Garrett (plaintiffs) were experienced ranchers who had a long relationship with BankWest, Inc. (defendant) stemming from ranch-operating loans that were secured by the Garretts’ livestock, crops, and machinery. The Garretts decided to expand their ranch operations and financed the purchase of irrigation equipment through John Hancock Life Insurance Company (Hancock) in exchange for a first mortgage on the Garretts’ ranch. BankWest expanded the Garretts’ operating loans into two lines of credit secured by a second mortgage on the Garretts’ ranch. The rural economy declined, and the Garretts had trouble paying all their loans. The Garretts signed a memorandum of understanding with BankWest that required the Garretts to sell property to reduce their debt and required BankWest to approve any large transfers of cash. The economy continued declining, and BankWest refused the Garretts’ request to loan them money to pay the Hancock loan. Although BankWest tried to negotiate with Hancock to purchase the entire loan, Hancock rejected the offer. Hancock foreclosed on the Garretts’ loans, and the Garretts entered into a liquidation agreement requiring them to give the ranch to BankWest to settle all the Garretts’ unpaid debts. The Garretts then sued BankWest for tort and contract-based claims for the breach of the duty to act in good faith because BankWest refused to continue the Garretts’ line of credit or pay the loan from Hancock. The trial court granted summary judgment for BankWest, and the Garretts appealed.