Thursday, December 26, 2013

Badgett v. Security State Bank (II) case brief

Badgett v. Security State Bank (II) case brief summary
807 P.2d 356 (1991)

Petitioner lender sought review of a decision of the Superior Court for Grays Harbor County, Washington, which reversed the trial court's decision to grant the lender's motion for summary judgment and dismiss respondent borrower's action seeking damages against the lender for its refusal to restructure the borrower's loans.

The lender entered into a contract to loan the borrower money. The loan was twice restructured, but on the borrower's third request, the lender refused. The borrower failed to make payments and the lender auctioned off certain collateral of the borrower. The borrower filed an action seeking damages and alleging that the lender unreasonably refused to restructure the loan. The lender counterclaimed for payment of money owed and foreclosure. The trial court granted summary judgment to the lender and entered a decree of foreclosure. The lower court reversed, and on appeal the court affirmed the trial court's findings.


  • The court held that the duty to cooperate existed only in relation to performance of a specific contract term. 
  • The court held that as a matter of law there could not be a breach of the duty of good faith when the lender simply stood on its rights to require performance of the contract according to its terms. 
  • The court held that prior course of conduct between the parties could not create a new obligation on the part of the lender.

The court reversed the findings of the lower court. The court reinstated the trial court's orders dismissing the borrower's complaint and re-entering the order of foreclosure.

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