Fanucchi & Limi Farms v. United Agri Products

414 F.3d 1075 (2005)

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Nature of the Case

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Facts

P financed its farming operations by borrowing against its future crop proceeds. In December 1994, D lent $700,000 to finance P's operating costs for 1995. There were several documents including an Agricultural Loan Agreement, a Promissory Note, an Agricultural Security Agreement, separate Commercial Guarantees personally executed by P, Richard Limi, and Linda Limi, and a Notice of Final Agreement. Together they constituted considerable detail about the loan. All the agreements have an integration clause. The loan amount was eventually increased to $1,475,000, with each increase made in writing. P's 1995 crops failed. P was unable to pay more than $1,000,000. P talked with D and D persuaded P not to file for bankruptcy. D's agent orally promised to subordinate the debt to new crop financing loans from other lenders for up to five years. These proceeds were to be split on a 60/40 basis, with 60 percent going to D and 40 percent going to P's other creditors. If P had paid its debt down to $300,000 or $400,000 at the end of the five-year period, D would forgive that amount. D confirmed that there was an oral agreement but not for 5 years but from year to year. P and D executed the agreement in 1996 and 1997. D's agent who made the deal was terminated in early 1998. D was no longer willing to perform in accordance with the agreement. In 1998, D was only willing to subordinate to one lender. D refused to subordinate to the parents of Ps. P sued D for breach of contract and promissory fraud. P argues that the oral agreement modified the original 1994 Loan. P argues that the subsequent oral agreement novated the 1994 Loan. The court dismissed the suit on summary judgment, and P appealed.