Chemical Bank v. Security Pacific National Bank

This case depends on the responsibilities of the lead bank acting for several banks in a multi-bank loan. Its outcome is determined by fiduciary law as modified by the credit agreement entered by the banks. Chemical Bank and National Westminister Bank USA (the plaintiffs), both New York corporations, brought suit against Security Pacific, a California corporation. The district court granted summary judgment in favor of the plaintiffs on their cause of action charging gross negligence in breach of Security Pacific’s contractual obligations, and it granted summary judgment to Security Pacific on the cause of action charging breach of its fiduciary obligation. We reverse both the summary judgment in favor of Security Pacific and the summary judgment in favor of plaintiffs.

FACTS

On April 8, 1983 the plaintiffs together with Security Pacific entered into a credit agreement with Osborne Computer Corporation (Osborne) under which the three banks agreed to provide $25 million in credit, of which Security Pacific would provide 60 percent and the plaintiffs 40 percent. The opening paragraph of this agreement specified that Security Pacific would be the agent for the three banks. The…