United States District Court, D. South Dakota, Southern Division
NORTHWEST BANK, formerly known as First National Bank, Plaintiff,
SOVEREIGN HOLDINGS, INC., Defendant.
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT
KAREN E. SCHREIER, UNITED STATES DISTRICT JUDGE.
Plaintiff, Northwest Bank, filed suit against defendants, Sovereign Holdings, Inc., Hepar, L.L.C., and Mary Ellen Nylen, asserting claims for breach of contract, conversion and fraudulent transfer, breach of fiduciary duty, and injunctive relief through the imposition of a constructive trust. Docket 1. Northwest and defendants stipulated to the dismissal of all claims except the breach of contract claim against Sovereign. Docket 38. Northwest now moves for partial summary judgment on the breach of contract claim. Sovereign opposes the motion. For the following reasons, Northwest’s motion is granted.
Construing the facts in a light most favorable to the non-moving party, Sovereign, the facts are as follows:
Northwest Bank is a state bank incorporated in Iowa with a principal place of business in Spencer, Iowa. Sovereign is a business incorporated in South Dakota with a principal place of business in Jefferson, South Dakota. Hepar is a limited liability company organized in South Dakota with a principal place of business in Jefferson, South Dakota. Hepar is a 100% owned subsidiary of Sovereign. Mary Ellen Nylen is President and Treasurer of Sovereign. Mark Nylen is Vice President and Secretary of Sovereign. Hepar Bioscience, L.L.C. is a separate company owned and managed at least in part by Mark Nylen or Mary Ellen Nylen.
To secure loans made by Northwest to Hepar Bioscience, Sovereign executed multiple guarantees to Northwest. Sovereign executed guarantees on December 13, 2011, January 4, 2012, and May 20, 2013. Docket 1-1; Docket 1-2; Docket 1-3. On September 17, 2014, under a business loan agreement and promissory note, Northwest loaned Hepar Bioscience $19, 678, 345.72.
On February 20, 2015, Hepar Bioscience filed a petition under Chapter 11 of the United States Bankruptcy Code in United States District Court for the District of South Dakota. On March 13, 2015, Northwest accelerated the amount due on the loan and demanded that Sovereign remit full payment on the outstanding debt as provided in the loan guarantees. As of May 2015, the outstanding principal on the loan is $18, 561, 612.25.
STANDARD OF REVIEW
“One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses[.]” Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Celotex Corp., 477 U.S. at 323 (“[A] party seeking summary judgment always bears the initial responsibility of . . . demonstrat[ing] the absence of a genuine issue of material fact.” (internal quotations omitted)). The moving party must inform the court of the basis for its motion and also identify the portion of the record that shows there is no genuine issue in dispute. Hartnagel v. Norman, 953 F.2d 394, 395 (8th Cir. 1992) (citation omitted).
Once the moving party has met its initial burden, the nonmoving party must establish “that a fact . . . is genuinely disputed” either by “citing to particular parts of materials in the record, ” or by “showing that the materials cited do not establish the absence . . . of a genuine dispute.” Fed.R.Civ.P. 56(c). “The nonmoving party may not ‘rest on mere allegations or denials, but must demonstrate on the record the existence of specific facts which create a genuine issue for trial.’ ” Mosley v. City of Northwoods, Mo., 415 F.3d 908, 910 (8th Cir. 2005) (quoting Krenik v. Cty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995)). For purposes of summary judgment, the facts and inferences drawn from those facts are “viewed in the light most favorable to the party opposing the motion.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)).
Because neither party disputes the validity of the guarantees, the court finds that the guarantees constitute valid contracts. See City of Davenport v. Shewry Corp., 674 N.W.2d 79, 86 (Iowa 2004) (“[A] guaranty is a contract by one person to another for the fulfillment of a promise of a third person.”) (alterations in original). Due to a choice of law provision in the guarantees, the parties also agree that Iowa law governs the breach of contract claim. Docket 1-1 at ¶14; Docket 1-2 at ¶14 (stating the “Guaranty is governed by the laws of Iowa[.]”). As such, the only issue is whether Sovereign’s conduct constitutes a breach of the guarantees.
Under Iowa law, a plaintiff must establish the following elements to succeed on a breach of contract claim:
(1) the existence of a contract, (2) the terms and conditions of the contract, (3) that [plaintiff] has performed all the terms and conditions required under the contract, (4) the defendant’s breach of the contract in some particular way, and (5) that ...