MidwestOne Bank v. Krishan

IN THE COURT OF APPEALS OF IOWA

No. 21-1438
Filed December 7, 2022

MIDWESTONE BANK,
Plaintiff-Appellee,

vs.

MANOJ KRISHAN, PRITI KRISHAN, and CHRISTOPHER SCOTT LONG,
Defendants-Appellants,

and

ZERO ENERGY SYSTEMS, LLC, and CONSULTING ENGINEERS, CORP.,
Defendants.

MANOJ KRISHAN, PRITI KRISHAN, and CHRISTOPHER SCOTT LONG,
Counterclaim Plaintiffs,

vs.

MIDWESTONE BANK,
Counterclaim Defendant.
________________________________________________________________

Appeal from the Iowa District Court for Johnson County, Kevin McKeever,

Judge.

Appellants appeal various adverse summary judgment rulings.

AFFIRMED.

Peter C. Riley of Tom Riley Law Firm, P.L.C., Cedar Rapids, for appellants.

Charles E. Nelson of Ballard Spahr, LLP, Minneapolis, Minnesota, and

Benjamin M. Lange, Independence, for appellee.

Heard by Vaitheswaran, P.J., and Greer and Badding, JJ.
2

BADDING, Judge.

“You do not have to be a financial whiz to know this is horribly bad.” That

was the assessment from the president of MidWestOne Bank in the aftermath of

its failed lending relationship with entrepreneurs Christopher Scott Long and Manoj

Krishan for their company, Zero Energy Systems, LLC. The bank loaned Zero

Energy millions of dollars to fund the construction and operation of its facility

manufacturing prefabricated concrete walls. Long and Manoj guaranteed the

loans, as did Manoj’s wife, Priti Krishan. Amid construction cost overruns and

operating losses, the company’s debt ballooned to more than $16,000,000.

The bank sought to collect that debt in March 2018. After Zero Energy filed

for bankruptcy protection, the bank focused its collection efforts on Long and the

Krishans as guarantors of the loans. The district court granted summary judgment

to the bank on its claims for breach of contract and an annuity account the Krishans

pledged as security and on the guarantors’ counterclaims for breach of contract,

interference with contract, fraudulent misrepresentation and nondisclosure, and

punitive damages. Long and the Krishans appeal.

I. Background Facts and Proceedings

A. Lending Relationship

The relationship among the parties began in 2012, when MidWestOne Bank

and Zero Energy entered into a loan agreement, under which the bank extended

credit to Zero Energy in return for a promissory note to repay $5,282,128.80. Long

and Manoj—principals of Zero Energy—individually executed commercial

guaranties in favor of the bank, making them personally liable for Zero Energy’s

debt “now existing or hereafter arising or acquired, that [Zero Energy] . . . owes or
3

will owe [the bank].” In April 2013, the bank entered into a second loan agreement

with Manoj and his wife Priti for a non-revolving line of credit to the Krishans to be

“utilize[d] . . . as a cash injection into [Zero Energy],” in return for a promissory note

to repay $1,380,000.00. This loan was secured by the Krishans’ “Fidelity

Investments Annuity Contract,” which the bank could liquidate upon default and

failure to cure. The loan agreement required the Krishans to designate the bank

as the primary beneficiary of the account. The Krishans signed a promissory note

for this loan and, in February 2014, signed an additional promissory note as a

“renewal” of the prior note.

Over the next few years, the bank issued additional loans, the parties

refinanced and restructured the borrower obligations to extend the maturity dates,

and the bank received additional promissory notes and commercial guaranties. As

to the guaranties, Manoj signed a second guaranty in favor of the bank on Zero

Energy’s debt in December 2014. Again, the document personally guaranteed

payment “of the indebtedness of [Zero Energy] to [the bank], now existing or

hereafter arising or acquired, on an open and continuing basis.” Manoj signed a

third continuing guaranty in January 2015. In January 2016, Long signed a second

continuing guaranty, and Manoj signed a fourth continuing guaranty.

The maturity dates fell in March 2016. The loans were in default when that

time rolled around, but the bank agreed to allow a forbearance and deferment of

payment. Believing the company could turn things around, the bank extended

more project loans throughout the rest of 2016 and into 2017, all of which fell into

default.
4

Deep in the hole, the parties decided to enter into an amended and restated

credit agreement in June 2017, which has come to be known as the “June reset.”

At this time, Priti signed her first continuing guaranty of the Zero Energy debt, and

both Manoj and Priti signed a commercial pledge agreement.1 Under the loan

agreement, the bank issued three loans to restructure the company’s debt, and

Zero Energy executed three promissory notes in the amounts of $10,922,648.53

(Term Loan A), $1,071,430.56 (Term Loan B), and $5,000,000.00 (Working Capital

Loan). The Krishans’ personal loan was included in this consolidation, becoming

a debt of Zero Energy. Each note was secured by a mortgage; the commercial

guaranties provided by Long, Manoj, and Priti; commercial pledge agreements

executed by the Krishans; and separate security agreements.

B. Commencement of Litigation

In March 2018, the bank filed a “petition to foreclose mortgage, appoint

receiver and enforce guaranties” against Zero Energy, Long, and the Krishans.

The petition alleged the defendants were in default of the loan documents and in

breach of the overall credit agreement, the separate security agreements, the

Krishans’ pledge agreements for the $1,380,000.00 in the Fidelity account, and the

mortgage, none of which were cured despite service of notice of default and

demand for cure in January 2018. The total outstanding amount due, according

to the petition, was $16,240,759.76, which the bank sought to collect through the

following counts: (1) breach of contract by Zero Energy; (2) breach of contract by

Long and the Krishans; (3) foreclosure; (4) receivership; and (5) through (8) being

1 Manoj had previously executed a commercial pledge agreement in January 2015.
5

requests for declaratory relief, prejudgment attachment, replevin,2 and a temporary

injunction as to the Fidelity account.

A few weeks after the bank filed its petition, Zero Energy filed for

bankruptcy, staying the action as to the company. Long then answered the

petition, alleging as affirmative defenses that he “was induced by fraudulent

misrepresentations and nondisclosures to enter into the guaranty securing the

notes” and “enforcement of the guaranty is barred by equitable estoppel.” He also

alleged Zero Energy had defenses that would “relieve or reduce [his] guarantor

obligation.”

For his counterclaims, Long asserted the bank refused to negotiate with

Zero Energy on its desire to restructure the debt by using venture capital groups.

Instead, bank representatives proposed internal loan restructuring that they said

would be beneficial to the company but that Long alleged had the undisclosed

“primary purpose . . . to make it appear that the loan would be performing . . . to

enhance their ability to collect bonuses or compensation . . . , and not for the

purpose of benefiting [Zero Energy].” Long also alleged these same bank

representatives arranged for another bank customer to lend funds to the company

“to avoid adverse reporting at the end of the quarter” and engaged in other

nefarious acts, along with initiating default absent lack of payment under the notes

and prematurely liquidating collateral. So Long pled the following counter-

claims: (1) fraudulent misrepresentation or nondisclosure based on actions of

bank representatives, (2) a claim that the loan and security documents are non-

2 Count seven for replevin was later stricken.
6

enforceable due to count one, (3) interference with contract between Zero Energy

and venture capitalists, (4) breach of contract due to the bank’s acceleration, and

(5) punitive damages. The Krishans’ later answers and counterclaims echoed

Long’s. The bank replied, denying the allegations.

On the bankruptcy side of things, the parties entered into a stipulated order

terminating the automatic stay as to the bank after the bankruptcy trustee

“determined that the bankruptcy estate has no equity in the Collateral.” The

bankruptcy court accordingly authorized the bank “to proceed with its contractual

and state law remedies to foreclose on its Collateral, including the real property,

fixtures, and personal property as described in the Loan Documents.”

Once notified the stay was lifted, the court granted the bank’s request for a

receiver. By this point, in August 2018, Zero Energy had ceased operations. In

September, the court granted the bank’s application for a temporary injunction,

which prohibited the Krishans from withdrawing funds from the Fidelity account. In

April and May 2019, Manoj and Long were granted leave to amend to file a cross-

petition. The cross-petition named bank representatives Charles Funk, Chase

Stafford, and Kent Jehle as third-party defendants, and made claims for

indemnification based on the representatives’ alleged acts, interference with

contracts Zero Energy had with outside parties, interference with potential

contracts, fraudulent misrepresentation, and acting in concert. However, the

cross-petition, as amended, was later dismissed by the district court.3

3 Long and the Krishans have not appealed that ruling.
7

C. MidWestOne Bank’s First Motion for Summary Judgment

The bank filed its first motion for summary judgment in February 2020,

seeking dismissal of all counterclaims by Long and the Krishans. The bank argued

Long and the Krishans “lack standing to assert claims based upon alleged injuries

suffered in their capacity as principals and guarantors of Zero Energy.” The bank

also argued their claims were expressly waived in the loan documents and failed

on the merits.

In resistance, Long and the Krishans preliminarily claimed the bank’s motion

should be denied because it was “not properly supported” and did not “generate

the absence of genuine issues of material fact.” On a more specific level, Long

and the Krishans argued their claims are distinct from those of Zero Energy, the

breach claim is in dispute because the bank “had no basis to claim default,” a

finding that there was no interference “lacks any evidentiary support,” the loan

documents do not waive fraud claims, and the claims do not fail as a matter of law.

They then submitted a robust statement of facts in support of their resistance.4

In its ruling, the district court found genuine issues of material fact remained

as to whether Long and the Krishrans’ claims were separate from Zero Energy.

The court also found summary judgment based on alleged waiver of claims in the

loan documents was improper given the allegations of fraud, which were the

subject of remaining issues of material fact. But the court was “not persuaded that

the guarantors have set forth evidentiary facts showing the existence of a genuine

issue of material facts on the . . . breach of contract and tortious interference with

4The statement itself is 138 pages. The exhibits filed with the statement total
about 1000 pages.
8

contract counterclaims” and granted summary judgment on those claims. Finally,

the court found the remaining questions of fact on the fraud claims also generated

genuine issues of material fact on the issue of punitive damages. Long and the

Krishans moved to enlarge the court’s findings, which the court denied.

D. Competing Motions for Summary Judgment—Fidelity Account

At the same time they moved to enlarge, in October 2020, the Krishans filed

a motion for summary judgment on the bank’s claims to the Fidelity account,

arguing the bank lacked any legal interest in the account. The motion and

supporting documents asserted the account is an annuity governed by Texas law,

the terms of the account render it not assignable or transferrable, it is exempt from

attachment, and it cannot be pledged as security. The bank responded with its

own motion for summary judgment on the Fidelity account claims. There being no

dispute that the account was pledged as security and is governed by Texas law,

the bank asserted Texas law allows the account to be pledged as security.

Following more competing filings on summary judgment between the

parties, the district court granted the bank’s motion and denied the Krishans’

motion. The court found the undisputed facts showed the Krishans designated the

bank as the 100% beneficiary of the account in 2013 and, as a result under Texas

law, the benefits of the account inure to the bank. So the court declared the bank

could liquidate the account.

The Krishans sought a stay and enlargement of the court’s ruling, seeking

to restrict the bank’s access to the account until final disposition. The court granted

the stay. In a later supplement to their motion to enlarge, the Krishans argued

Texas law voids an attempt to pledge the account as security where the contractual
9

terms of the policy prohibit the same. In its resistance, the bank argued the statute

the Krishans relied on is inapplicable. The court later, in its ruling on the bank’s

third motion for summary judgment, denied the Krishans’ motion for enlargement

of findings.

E. MidWestOne Bank’s Third Motion for Summary Judgment

Meanwhile, in May 2021, the bank filed its third motion for summary

judgment, this time seeking judgment on Long and Krishans’ remaining

counterclaims—fraudulent misrepresentation relating to the 2017 credit agreement

and punitive damages—because the guarantors’ obligations pre-date the

June 2017 reset. In other words, the bank argued the guarantors’ obligations

would still exist despite any alleged fraud with the June 2017 credit agreement.

The bank also argued the fraud and punitive damages claims were based on

allegedly inaccurate representations that the June reset would be beneficial to

Zero Energy. Because there was no genuine issue of material fact that the

guarantors did benefit from the June reset, the bank argued summary judgment

was proper on those claims. Long and the Krishans resisted.

In its ruling, the court noted that in a previous order, it had found there was

no evidence that the bank “or its representatives made misrepresentations or

otherwise induced the guarantors into entering the loan agreement.” The court

also found the June reset was clearly beneficial to the guarantors, as the loans

they were liable under were already in default, but the reset allowed “additional

time to pay off the amounts they had guaranteed.” Furthermore, the court found

the guarantors already “had continuing personal obligations” to pay the debt before
10

the June reset.5 For these reasons, the court found the fraud claims failed as a

matter of law, as did the claim for punitive damages. Lastly, the court found no

remaining genuine issues of material fact on the bank’s breach-of-contract claims

against Long and the Krishans and granted summary judgment on that claim as

well.

The court denied Long and the Krishans’ later motion to reconsider and

issued entry of judgment and a decree. Long and the Krishans appeal, challenging

each of these adverse summary judgment rulings.6

II. Standard of Review

“The standard of review for district court rulings on summary judgment is for

correction of errors of law.” Kunde v. Est. of Bowman, 920 N.W.2d 803, 806

(Iowa 2018). Summary judgment is appropriate only when the moving party has

shown “that there is no genuine issue as to any material fact and that the moving

party is entitled to a judgment as a matter of law.” Iowa R. Civ. P. 1.981(3). “In

determining whether a grant of summary judgment was appropriate, we examine

the record in the light most favorable to the nonmoving party, drawing all legitimate

5 This was true as to Manoj and Long only, as Priti did not sign a continuing
personal guaranty until the June reset.
6 The sizeable appendix submitted in this appeal, topping out at 2692 pages,

contains more than 1000 pages worth of exhibits, including excerpts from
deposition transcripts. The appendix’s table of contents simply lists the exhibits by
letter or number with no description of what they are. And some exhibits have the
same number or letter as one or more of the other exhibits, thus making the already
large appendix hard to navigate. As a practice pointer for litigants, Iowa Rule of
Appellate Procedure 6.905(4)(c) mandates that when an exhibit is included in the
appendix, the table of contents shall “give a concise description of the exhibit.”
Furthermore, under rule 6.905(4)(b), “[i]f portions of a court reporter’s transcript of
testimony are included in the appendix, the table of contents shall state the name
of each witness whose testimony is included.”
11

inferences that may be drawn from the evidence in his or her favor.” Homan v.

Branstad, 887 N.W.2d 153, 163–64 (Iowa 2016). Summary judgment is

appropriate “if the record reveals only a conflict concerning the legal consequences

of undisputed facts.” Nelson v. Lindaman, 867 N.W.2d 1, 6 (Iowa 2016) (quoting

Wallace v. Des Moines Indep. Cmty. Sch. Dist. Bd. of Dirs., 754 N.W.2d 854, 857

(Iowa 2018)).

III. Analysis

A. Grant of MidWestOne Bank’s First Motion for Summary
Judgment—Contract-Based Counterclaims

The district court’s ruling on the bank’s first motion for summary judgment

disposed of the counterclaims brought by Long and the Krishans for breach of

contract and interference with contract.7 On these claims, the bank repeats the

arguments it made, but lost on, in district court—that Long and the Krishans cannot

recover on claims belonging to Zero Energy given the establishment of a

bankruptcy estate that has dominion over these claims. See Johnston Equip.

Corp. of Iowa v. Indus. Idem., 489 N.W.2d 13, 16 (Iowa 1992) (“[A] successful party

need not cross-appeal to preserve error on a ground urged but ignored or rejected

in trial court.”).

Zero Energy filed for bankruptcy on March 25, 2018, shortly after being sued

by the bank. “The filing of a [bankruptcy] petition creates a bankruptcy estate

consisting of all the debtor’s assets and rights.” Mission Prod. Holdings, Inc. v.

7 The bank submits that error was not preserved “because, as the [d]istrict [c]ourt
correctly pointed out,” Long and the Krishans did not “specifically address[] these
claims in their briefing” in resistance to the bank’s summary judgment motion. We
disagree. Although they provided more substance in resistance to summary
judgment on other claims, they still resisted these claims.
12

Tempnology, LLC, 139 S. Ct. 1652, 1658 (2019). The estate includes “all legal or

equitable interests of the debtor in property as of the commencement of the case.”

Lobbrecht v. Chendrasekhar, 744 N.W.2d 104, 106 (Iowa 2008) (quoting 11 U.S.C.

§ 541(a)(1)). “The property of a bankruptcy estate is ‘broadly defined,’ . . . [and]

includes all causes of action that the debtor could have brought at the time of the

bankruptcy petition.” Id. (alterations in original) (citation omitted). Because the

counterclaim allegations pre-date the creation of the bankruptcy estate, the claims

generally belong to the bankruptcy trustee, who elected not to pursue them. See

id. at 107–08 (describing when cause of action accrues for bankruptcy purposes);

see also In re Ozark Rest. Equip. Co., Inc., 816 F.2d 1222, 1225 (8th Cir. 1987)

(“Any of these actions that are unresolved at the time of filing then pass to the

trustee as representative of the estate, who has the responsibility under

Section 704(1) of asserting them whenever necessary for collection or

preservation of the estate.”). Instead, the trustee stipulated to granting the bank

relief from the automatic stay in district court so that the bank could pursue its

collection efforts against Zero Energy—efforts that resulted in a court-appointed

receiver’s sale of collateral for $2,000,000.00.

Long and the Krishans do not challenge the premise that they cannot assert

claims on Zero Energy’s behalf. They instead contend their contract-based

counterclaims sought recovery for individual injuries they sustained as guarantors

of the Zero Energy debt. While the counterclaims were framed that way, they were

still solely based on the allegation that “[b]ecause Zero Energy sustained

damages” on those claims, “that would reduce or eliminate [the] guarantor

obligation.” To illustrate, the counterclaims for breach of contract alleged:
13

“Because there were no breaches in payment, and no opportunity to cure any non-

payment breaches, the [b]ank in accelerating the loans and bringing action to

collect on them breached the contractual relationships of Zero Energy” and the

guarantors. And the counterclaims for interference with contract similarly alleged:

“The actions of the [b]ank in interfering with the venture capital restructuring in the

spring of 2017 was an improper interference with the contractual relationships of

Zero Energy and [the guarantors], and as a result, Zero Energy sustained

damages.” None of the counterclaims’ allegations, even as those allegations

morphed over the course of the litigation, asserted that the bank breached any of

its guaranty agreements with Long and the Krishans or that the bank interfered

with contracts they sought in their individual capacity. Nor is any argument to that

effect made on appeal.

Generally, guarantors may not pursue individual actions for injuries to a

corporation when the guarantor’s alleged injury merely stems from injury to the

corporation. See Quarles v. City of E. Cleveland, No. 99-3050, 1999 WL 1336112,

at *4 (6th Cir. Dec. 20, 1999) (“Quarles attempts only to collect damages allegedly

due the corporation solely because of his position as a guarantor of corporate

debt—a position unrelated to the underlying claims Quarles seeks to assert. Sister

courts that have addressed similar issues have unanimously agreed that, in order

to obtain standing to assert a claim, a guarantor’s injury must not stem from the

harm done to the corporation. Instead, any redressable injury must flow from

individualized harm done to the plaintiff, separate from any claims that the

corporation may assert.”); see also Taha v. Engstrad, 987 F.2d 505, 507 (8th

Cir. 1993) (“[G]uarantors of corporations generally may not bring individual actions
14

to recover what they consider their share of the damages suffered by the

corporation.” (citing Cunningham v. Kartridg Pak Co., 332 N.W.2d 881, 882 (Iowa

1983))).

Under Iowa law, a guarantor can only bring an individual action upon a

showing that he or she was owed a special duty or suffered a distinct injury. Id.

(citing Cunningham, 332 N.W.2d at 883). Here, the contract counterclaims hinged

on damages to Zero Energy on its potential claims against the bank, which

belonged to the bankruptcy estate, and were not based on any distinct injury or

alleged special duty owed to Long and the Krishans as guarantors. We

accordingly conclude that summary judgment was proper on these claims.

We also conclude that summary judgment was proper on the merits of the

counterclaims. Long and the Krishans seem to argue fact issues remain on

whether a default occurred, whether there was a right to cure, and consequently

whether the bank breached the June 2017 credit agreement by pursuing remedies.

See Iowa Arboretum, Inc. v. Iowa 4-H Found., 886 N.W.2d 695, 706 (Iowa 2016)

(setting out breach-of-contract elements). But the record is undisputed that Zero

Energy was in default of the June 2017 credit agreement for (1) failing to send

borrowing base certificates for September, October, and November 2017 until

January 22, 2018; (2) failing to maintain a minimum balance of $1,000,000.00 in a

Tri-Star account Manoj pledged as security for the loans; and (3) failing to prepay

revolving exposure in excess of the borrowing base. Two notices of default were

provided by the bank—one on December 14, 2017, and another on January 24,

2018, and the defaults were not cured. While Long and the Krishans argue Zero
15

Energy was not given time to cure the defaults, the loan documents allowed the

bank to immediately declare the loans due upon default with no cure period.

As for the contractual interference counterclaim, the only interference Long

and the Krishans raise on appeal that was alleged in their counterclaims is the

bank’s supposed refusal to work with other lenders by the bank subordinating its

own securities to those other lenders’ interests. But Iowa law is clear that “a party

does not improperly interfere with another’s contract by exercising its own legal

rights in protection of its own financial interests.” Meinecke v. Nw. Bank & Tr. Co.,

756 N.W.2d 223, 229 (Iowa 2008) (citation omitted).

We affirm the entry of summary judgment on these claims.

B. Ruling on Competing Motions for Summary Judgment—Fidelity
Account

The Krishans’ claims on this point fall under Texas insurance law. They

argue the Fidelity account is exempt under the Texas Insurance Code because the

account’s contractual terms prohibit assignment or commutation of benefits and so

any assignment of benefits—which they submit would include a pledge as

security—is void. On this basis, the Krishans argue they should have been granted

summary judgment on the claims relating to the Fidelity account. We conclude

Texas law is clear that the Krishans’ arguments do not shield the account from the

bank’s grasp.

The record is undisputed that the Fidelity account is an annuity contract

issued by a life insurance company and is therefore an “insurance policy” under

the Texas Insurance Code. See Tex. Ins. Code § 1108.002(1) (2018). “Except as
16

provided by Section 1108.053,” section 1108.051 governs benefits of an insurance

policy and provides any such benefits:

(1) inure exclusively to the benefit of the person for whose use
and benefit the insurance or annuity is designated in the policy or
contract; and
(2) are fully exempt from:
(A) garnishment, attachment, execution, or other
seizure;
(B) seizure, appropriation, or application by any legal
or equitable process or by operation of law to pay a debt or
other liability of an insured or of a beneficiary, either before or
after the benefits are provided; and
(C) a demand in a bankruptcy proceeding of the
insured or beneficiary.

In turn, section 1108.053(2) provides: “The exemptions provided by Section

1108.051 do not apply to . . . a debt of the insured or beneficiary secured by a

pledge of the insurance policy or the proceeds of the policy.” As for assignments

of benefits or rights under the policy or contract, the code “does not prevent an

insured, owner, or annuitant from assigning, in accordance with the terms of the

policy or contract: (1) any benefits to be provided under an insurance policy or

annuity contract to which this chapter applies; or (2) any other rights under the

policy or contract.” Id. § 1108.101(a) (emphasis added).

If an insurance policy, annuity contract, or annuity or benefit
plan described by Section 1108.051 prohibits a beneficiary from
assigning or commuting benefits to be provided or other rights under
the policy, contract, or plan, an assignment or commutation or
attempted assignment or commutation of the benefits or rights by the
beneficiary is void.

Id. § 1108.102.

In sum, the exemptions in section 1108.051 do not apply when the policy or

proceeds are “pledged” as security for a debt. Id. § 1108.053(2). And a policy

holder can “assign” benefits and rights under the policy so long as it follows the
17

terms of the policy or contract, but any assignment or commutation is void if the

policy or contract prohibits it. Id. §§ 1108.101(a), .102.

The Krishans’ position is that a pledge of the contract as security for a debt

is an assignment, and because the terms of the policy prohibit assignment, the

pledge is void. Before the recodification of Texas’s statutes, the Texas Court of

Appeals rejected the same argument—that “a pledge is the same as an

assignment for purposes of anti-assignment statutes” in the Texas Insurance

Code. Coffey v. Singer Asset Fin. Co., L.L.C., 223 S.W.3d 559, 563 (Tex.

App. 2007).8

In Coffey, the appellants received structured settlements and “the settling

insurance company purchased an annuity to fund the settlement payments.” Id.

at 561. They then obtained loans, which the lenders issued “in exchange for

receiving, as collateral for the loans, security interests in appellants’ future periodic

payments from the structured settlements.” Id. at 562. Later, the appellants

sought a declaratory “determination that the pledges of their respective structured

settlement payments as security for the loan are prohibited, and, as a result, are

void.” Id. The lenders moved for summary judgment, arguing “the insurance code

only prohibited assignments and commutations, not security interests.” Id.

On appeal, “because their structured settlement documents contain

provisions against assignment or commutation by the beneficiary,” the borrowers

argued the lenders’ “attempts to obtain security interests in the structured

8Coffey was decided under a prior version of the current statutes. See 223 S.W.3d
at 563 n.4. While the old provisions are not identical to the new ones, they
generally mirror one another.
18

settlement payments are prohibited” and void. Id. at 563. In support of this

argument, the borrowers contended an assignment and pledge are the same thing,

while the lenders argued the creation of a security interest is not an assignment or

commutation. Id.

After reviewing the loan terms, the Coffey court found the loan documents

merely created a lien, which is not an assignment or commutation. See id. at 566–

67. The court started with the meaning of the words “assignment” and “pledge,”

which it found were not synonymous. Id. at 565. An assignment, in its most

general sense, “means the transfer or setting over of property, or some right or

interest,” according to the Coffey court. Id. “In an absolute assignment, the

assignor loses all control over the property assigned and can do nothing to defeat

the rights of the assignee.” Id. In contrast, “a ‘pledge’ is a transaction by which

the collateral security is delivered by the debtor and accepted by the creditor, but

legal title does not pass to the secured party.” Id. at 566. The court reasoned the

transactions before it were “not assignments because the security interests in the

collateral terminate upon payment in full of the loan amounts.” Id. The court then

noted that section 3 of article 21.22, which is now section 1108.053(2), “specifically

permits the pledge of proceeds of annuity contracts as security for a debt,” and an

“interpretation that section 5 prohibits appellants from granting appellees a security

interest . . . would [require the court] to read section 3 out of the statute.” Id. at 567.

Here, the Krishans pledged the annuity as security for the debt they

guaranteed. The loan documents defined collateral to include the Fidelity account,

and the commercial pledge agreement only authorized the bank to “hold the

Collateral until all indebtedness has been paid and satisfied.” Similar to Coffey,
19

the loan documents created a terminable lien over the account, which is not an

assignment that can be voided as contrary to the terms of the annuity contract.

For these reasons, we agree summary judgment in the bank’s favor on the Fidelity

account was proper.

C. Grant of MidWestOne Bank’s Third Motion for Summary
Judgment—MidWestOne Bank’s Breach Claim and
Long/Krishans’ Fraud and Punitive Damage Counterclaims

1. The bank’s breach claim

Under a heading in their appellate brief labeled, “[The Bank’s] Underlying

Contract Claims,” Long and the Krishans chastise the bank and the district court

for how they handled summary judgment litigation. They argue the bank

“attempt[ed] to portray [Long and the Krishans] in an unfair and negative light,

confuse the trial court, and distract the trial court from the critical material issues.”

As for the court, Long and the Krishans assert it overlooked the bank’s technical

deficiencies with regard to prior summary judgments, thus reaching a result that

“consistently overlooked or failed to consider [their] arguments and briefing

regarding prior MSJs” that they “are extremely troubled by.” This portion of the

argument does not challenge the entry of summary judgment on the breach claim

or point to genuine issues of material fact negating the bank’s entitlement to

judgment as a matter of law. So there is not much that can be done without

“assum[ing] a partisan role and undertak[ing] the appellant[s’] research and

advocacy,” which is a role “we refuse to assume.” Inghram v. Dairyland Mut. Ins.

Co., 215 N.W.2d 239, 240 (Iowa 1974).
20

2. Fraud counterclaims

Similar to the contract-based counterclaims, the fraud-based counterclaims

focus on the injuries that stem from Zero Energy’s potential claims against the bank

for fraud. The same standing rules discussed above apply here as well to foreclose

the fraud claims. See, e.g., Guides, Ltd. v. Yarmouth Grp. Prop. Mgmt., Inc., 295

F.3d 1065, 1073 (10th Cir. 2002) (“[W]e reject the premise that a stockholder’s

status as a guarantor gives the stockholder status to assert an individual claim

against a third party where that harm is derivative of that suffered by the

corporation.”); Shelstad v. West One Bank, No. 94-35275, 1995 WL 383384, at *2

(9th Cir. June 28, 1995) (“A shareholder or guarantor lacks standing to assert fraud

. . . claims where the harm alleged is derivative of harm to the corporation.”);

Sparling v. Hoffman Constr. Co., Inc., 864 F.2d 635, 641 (9th Cir. 1988) (“Any harm

to the Sparlings due to their status as guarantors of the bonds given by the

corporation is also derivative of the harm to the corporation. Thus, this status does

not give the Sparlings standing.”); Stein v. United Artists Corp., 691 F.2d 885, 896

(9th Cir. 1982) (“[U]nder this policy against multiple liability for passed on injury,

the Steins have no standing as creditors or guarantors of Century, because their

losses in these respects simply reflect the injury to the corporation, which forced it

to default on the loans.”).

Also, as to Long and Manoj, they executed multiple continuing guaranties

on all Zero Energy debt—existing and future—well before the June reset. While

they claimed their signatures on the June reset guaranties were procured by fraud,

Long and Manoj would still be liable for the debt because of the prior continuing
21

guaranties. While Priti did not sign a guaranty until the June reset, her claim is still

derivative of injury to Zero Energy.

In any event, we agree with the district court that the undisputed facts show

the fraud claims fail on their merits. Long and the Krishans recite the elements of

their “fraud counterclaims”9 and complain the “court only addressed fraud

committed regarding the June Reset and did not address fraud committed” later or

“other acts previously identified.” They go on to highlight their allegations that they

were misled and therefore did not “realize they were essentially receiving nothing”

from the June reset and that the bank did not disclose it was about to foreclose or

that it was previously undersecured. They add that the terms of the June reset

provided the bank with “easier paths to trigger a default.”

But, going back to the actual allegations of the counterclaims, the

misrepresentation alleged was that “restructuring would be beneficial to [Zero

Energy]” and the nondisclosure alleged was that the “real purpose” of restructuring

was to enhance bank representatives’ bonus compensation. The district court

zeroed in on these specific allegations in its ruling, finding that because the

guarantors’ obligations were outstanding at the time of the June reset, the debt

restructuring was beneficial to the guarantors because they were given more time

to pay off the debts they guaranteed. We agree and conclude, using the same

reasoning, that there was no falsity. See Van Sickle Const. Co., 883 N.W.2d at

687. As to nondisclosure, the allegations highlighted on appeal are foreign to

9 Those include: “(1) representation, (2) falsity, (3) materiality, (4) scienter,
(5) intent to deceive, (6) reliance, and (7) resulting injury and damage.” Van Sickle
Const. Co. v. Wachovia Com. Mortg., Inc., 783 N.W.2d 684, 687 (Iowa 2010)
(quoting Lloyd v. Drake Univ., 686 N.W.2d 225, 233 (Iowa 2004)).
22

those that were raised in the counterclaim. And nowhere do Long and the Krishans

argue that bank representatives were under a duty to disclose the allegedly

concealed “real purpose” of restructuring. See Wright v. Brooke Grp. Ltd., 652

N.W.2d 159, 174 (Iowa 2002) (“Under Iowa law, the failure to disclose material

information can constitute fraud if the concealment is made ‘by a party under a

duty to communicate the concealed fact.’” (citation omitted)). So we affirm

summary judgment on these claims as well.

3. Punitive damages

On the issue of punitive damages, Long and the Krishans seem to concede

that if summary judgment was proper on the fraud claims then it was also proper

on the claim for punitive damages. We agree. See Higgins v. Blue Cross of W.

Iowa & S. Dakota, 319 N.W.2d 232, 235 (Iowa 1982) (“Punitive damages may not

be recovered for a mere breach of contract; it is only when the breach also

constitutes an independent tort, or other illegal or wrong act, that punitive damages

become a possibility.”).

IV. Conclusion

Having considered all of the claims raised on appeal, whether specifically

mentioned in this opinion or not, we affirm the district court’s rulings on summary

judgment.

AFFIRMED.