Mitchell v. Team Financial

states that Pmc was aware of the incident involving mary at
the alegent site shortly after it was reported by her, and that
while Pmc was aware of the potential of a claim shortly after
the incident, Pmc was unaware that suit had been filed until
receipt of the June 7 letter from Gibbons, from which we
have quoted above. karp’s affidavit stands uncontested by the
kotlarzes. as a result, Pmc has carried its burden imposed by
Smeal to show lack of notice of the suit, which notice—because
of the passage of § 25-20.02—Pmc must have had before the
statute of limitations ran on march 30, remembering that the
6-month grace period for service under § 25-27 is no longer
included in the calculation, as it was in Smeal. see, also, Reid
v. Evans, 273 neb. 74, 733 n.W.2d 86 (2007). therefore, the
statute of limitations bars the kotlarzes’ suit against Pmc, the
joint venture.
cOncLUsiOn
We, therefore, reverse the grant of summary judgment as to
defendant Olson, because there are material issues of fact as to
such defendant, and we remand the cause for further proceed-
ings as to such defendant. We affirm the grant of summary judg-
ment and the dismissal with prejudice as to Pmc, but on the
basis that the suit against such defendant is barred by the statute
of limitations.
affirMed in part , and in part
reversed and reManded .
john c. M itchell , appellee and cross - appellant ,
v . teaM financial , inc ., et al ., appellants
and cross - appellees .
740 n.W.2d 368
Filed October 9, 2007. 	no. a-05-27.
. Contracts: Guaranty: Words and Phrases. a guaranty is a collateral undertaking
by one person to answer for the payment of a debt or the performance of some
contract or duty in case of the default of another person who is liable for such pay-
ment or performance in the first instance.
4 	6 nebraska aPPeLLate rePOrts
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/01/2026 04:16 AM CST

2. Contracts: Guaranty: Debtors and Creditors: Words and Phrases. a guaranty
is basically a contract by which the guarantor promises to make payment if the
principal debtor defaults.
3. Contracts: Guaranty. a court relies on general principles of contract and guaranty
law to determine the obligations of the guarantor.
4. Contracts: Guaranty: Intent. because a guaranty is a contract, it must be under-
stood in light of the parties’ intentions and the circumstances under which the
guaranty was given.
5. Contracts: Sales: Time. an earn-out provision makes a portion of the payment
to the sellers contingent upon the target’s reaching specified milestones during a
specified period after the closing.
6. Contracts: Sales: Value of Goods. earn-out provisions in merger-and-acquisition
agreements are intended to accommodate the seller’s desire for compensation for
the anticipated future value of the transferred assets and the buyer’s reciprocal
desire to avoid overpaying for potential, but as yet unrealized, value.
7. Contracts: Sales: Time. in an earn-out provision, a portion of the purchase price
depends on the success of the business during the year or two following the sale.
8. Contracts. if a contract of indemnity refers to and is founded on another contract,
either existing or anticipated, it covenants to protect the promisee from some
accrued or anticipated liability arising on the other contract.
9. Contracts: Debtors and Creditors. the promise of the indemnitor is not to
answer for the debt, default, or miscarriage of another, but may be to make good
the loss resulting from such debt, default, or miscarriage.
0. Contracts. a court interpreting a contract must first determine as a matter of law
whether the contract is ambiguous.
. ____. a contract written in clear and unambiguous language is not subject to inter-
pretation or construction and must be enforced according to its terms.
2. Contracts: Words and Phrases. a contract is ambiguous when a word, phrase,
or provision in the contract has, or is susceptible of, at least two reasonable but
conflicting interpretations or meanings.
3. Contracts. a contract must receive a reasonable construction and must be con-
strued as a whole, and if possible, effect must be given to every part of the
contract.
4. Contracts: Guaranty. a guarantor is not liable on his own contract when the
creditor has violated his own obligations and deprived the guarantor of the means
of preventing the loss protected by the guaranty.
appeal from the district court for douglas county: M arlon
a. polK, Judge. affirmed.
alan e. Pedersen, of mcGill, Gotsdiner, Workman & Lepp,
P.c., L.L.O., for appellants.
richard a. deWitt and david J. skalka, of croker, huck,
kasher, deWitt, anderson & Gonderinger, L.L.c., for appellee.
mitcheLL v. team FinanciaL 	5
cite as 6 neb. app. 4

irwin , sievers, and cassel, Judges.
irwin, Judge.
i. intrOdUctiOn
team Financial, inc. (tFin), team Financial acquisition
subsidiary, inc. (tac), and teambank, n.a. (collectively the
defendants), appeal a judgment of the district court for douglas
county granting summary judgment in favor of John c. mitchell
and denying partial summary judgment for the defendants. On
appeal, the defendants assert the district court erred in finding
that a provision under an agreement with mitchell constituted a
guaranty and in finding that the defendants breached the terms
of the agreement, releasing mitchell as guarantor. For the rea-
sons stated below, we affirm the trial court’s order.
ii. backGrOUnd
On October 29, 999, tFin and tac, a bank holding
company that is wholly owned by tFin, entered into an
“acquisition agreement and Plan of merger” (the agreement)
with Fort calhoun investment co. (Fcic), a bank holding com-
pany, and mitchell, an Fcic stockholder who has general power
of attorney to act for the remaining stockholders in Fcic.
Under the terms of the agreement, tac and tFin agreed to
purchase 00 percent of the outstanding Fcic common stock
for $3,600,000.
at the time of the merger, Fort calhoun state bank (the
bank) was a wholly owned subsidiary of Fcic, and the bank
held a reserve amount of $84,30 for loan loss. Prior to the clos-
ing of the agreement, tac conducted a review of the bank’s
loans. it regarded one loan in particular, “Loan no. 6350,” to
be a “potential problem loan.” although 74 percent of loan no.
6350 was covered by an “sba guarantee,” the remaining 26
percent, or $75,534.3, was unsecured. as a result, the par-
ties to the agreement agreed that an additional reserve amount
(ara) of $70,000 would be set aside for loan loss in connec-
tion to loan no. 6350. this provision was incorporated into
the agreement under section 2.4, which read in pertinent part:
based on a review of loans of [the bank], tac and Fcic
have agreed that there should be established an additional
reserve for loan loss [in the amount of $70,000] in
6 	6 nebraska aPPeLLate rePOrts

connection with the uninsured portion of Loan no. 6350
with [that loan’s] promissory note and related loan docu-
ments hereinafter referred to as “Loan no. 6350”.
such additional reserve amount, [$70,000,] shall
be deducted at closing from the Purchase Price (cash
consideration) provided for in section 2.2.
section 2.4 under the agreement further provided:
(ii) . . . [a]s long as Loan no. 6350 is not in default,
[the bank] shall distribute and pay to [mitchell] interest on
the [ara].
. . . .
(v) if Loan no. 6350 should be in default, the [ara]
may be reduced by [the bank] to the extent of any loss to
[the bank].
. . . .
(vii) Following default[, the] bank or its successor shall
not be obligated to pay any of the [ara] to [mitchell]
until said loan is paid in full or written off by [the bank].
(viii) [mitchell] shall have the option to have the portion
of [the loan’s promissory] note not guaranteed by [the sba
guaranty] and the security thereon assigned to [mitchell].
(ix) Upon payment in full of said loan or upon said note
being written off, any remaining balance of the [ara]
shall be paid to [mitchell].
(x) . . . [i]f the borrower . . . should make 24 consecu-
tive timely monthly payments (not more than 30 days past
due) of the regular principal and interest payments due on
. . . Loan no. 6350 and if the borrower is not otherwise
in default pursuant to the terms of the loan documents,
then any remaining balance in the [ara] shall be paid
forthwith to [mitchell] free and clear of any obligation for
payment of Loan no. 6350 . . . .
(xi) [the bank] shall make quarterly reports to [mitchell]
from such time [as] Loan no. 6350 is in default until the
[ara] is exhausted.
the evidence indicates that prior to the closing of the
agreement, the bank conducted a board of directors’ meeting
on February 29, 2000. mitchell, who served as chairman of
the board of directors, was present. at the meeting, a list of
mitcheLL v. team FinanciaL 	7
cite as 6 neb. app. 4

substandard loans was circulated, and a loan report indicated
that the principal debtor for loan no. 6350 had not made his
February payment, which had been due on February 3.
the parties closed the agreement on march 24, 2000. although
the evidence does not indicate the exact date, at some point after
the closing of the agreement, the bank merged into teambank,
n.a., a wholly owned subsidiary of tFin and tac. because the
terms of the agreement include successors to the bank, we will
continue to refer to the newly merged bank as “the bank.”
On march 7, 200, the bank sent notice to the principal debtor
for loan no. 6350, informing him that he was in default on the
loan and that the full sum was due on or before april 7.
On december 3, 2002, more than 24 months after the clos-
ing of the agreement, mitchell tendered a formal demand of
payment to the defendants for the ara of $70,000. tFin’s
attorney responded by letter, stating, “my general understanding
is that [loan no. 6350] went into default some time following
the effective time of the merger and thereafter the collection
efforts have been continuing.” tFin later sent a followup letter
stating that when the agreement became effective on march 24,
2000, loan no. 6350 was already in default. an additional
followup letter further indicated that because there was a princi-
pal balance of $75,534.3 due on the unsecured portion of the
loan, the defendants intended to withhold the ara to satisfy
the loss.
On February 25, 2004, mitchell filed a complaint alleg-
ing two causes of action: breach of contract and declaratory
judgment seeking discharge of guarantors. in the first cause of
action, mitchell alleged that the defendants breached section
2.4 of the agreement because the bank failed to make either
interest payments from the ara or quarterly reports indicat-
ing that loan no. 6350 was in default. mitchell asserted that
his rights under the agreement were greatly impaired because
he was unable to reduce or mitigate his exposure to loss as the
guarantor of loan no. 6350. Under the second cause of action,
mitchell alleged that he should be discharged and excused from
payment of any amount of the guaranty due to acts or omissions
by the defendants. We note here that mitchell filed the com-
plaint in his personal capacity. he asserted by affidavit that he
8 	6 nebraska aPPeLLate rePOrts

is entitled to the full $70,000 because he distributed the cash
consideration in the agreement to the other Fcic shareholders,
but did not reduce their payments by the $70,000 ara. this
position is not disputed by the defendants.
mitchell filed a motion for summary judgment on march
23, 2005. On may 6, the defendants filed a motion for partial
summary judgment, asserting that mitchell’s second cause of
action seeking a declaratory judgment and discharge of guaran-
tors should be dismissed. Following an evidentiary hearing, the
trial court granted mitchell’s motion for summary judgment and
dismissed the defendants’ motion on september 9.
the trial court looked to whether the $70,000 ara under
section 2.4 constituted an earn-out provision, an indemnity
clause, or a guaranty. the court found that section 2.4 “d[id]
not appear to be an earn-out provision” because “[n]othing
in section 2.4 addresses the overall earnings or value of [the
bank]; rather, section 2.4 is entirely concerned with the spe-
cific performance of Loan no. 6350” (emphasis in original).
the court further found that section 2.4 did not constitute an
indemnity clause because “[n]othing in the provisions of section
2.4 serves to protect tFin or tac from a liability they owe or
may owe to a third party.” the trial court found that section 2.4
operated as a guaranty. the court noted that the $70,000 ara,
supplied by mitchell, would be reduced by the bank only upon
the principal debtor’s failure to pay. the court further noted that
upon satisfaction of the debt, any remaining balance in the ara
would be paid to mitchell “free and clear of any obligation for
payment of Loan no. 6350” (emphasis in original). the court
found that the defendants breached the agreement by failing to
make quarterly reports to mitchell and concluded that mitchell
should be released as guarantor.
iii. assiGnments OF errOr
the defendants assign two errors on appeal. First, they assert
that the district court erred in finding that section 2.4 under the
agreement constitutes a guaranty by mitchell to the bank for
loan no. 6350. second, they assert that the district court erred
in finding that mitchell should be released from his obligations
as guarantor.
mitcheLL v. team FinanciaL 	9
cite as 6 neb. app. 4

On cross-appeal, mitchell assigns one error. he asserts that in
the event this court finds in favor of the defendants, the district
court erred in admitting certain parol evidence. because we find
that summary judgment in favor of mitchell was proper, this
cross-appeal is moot and we need not address it further.
iV. anaLYsis
. standard of review
summary judgment is proper when the pleadings and evi-
dence admitted at the hearing disclose that there is no genuine
issue as to any material fact or as to the ultimate inferences that
may be drawn from those facts and that the moving party is enti-
tled to judgment as a matter of law. NEBCO, Inc. v. Adams, 270
neb. 484, 704 n.W.2d 777 (2005); Fraternal Order of Police v.
County of Douglas, 270 neb. 8, 699 n.W.2d 820 (2005).
in reviewing a summary judgment, an appellate court views
the evidence in the light most favorable to the party against
whom the judgment is granted and gives such party the bene-
fit of all reasonable inferences deducible from the evidence.
NEBCO, Inc. v. Adams, supra; Plowman v. Pratt, 268 neb. 466,
684 n.W.2d 28 (2004).
2. section 2.4 under aGreeMent
the defendants challenge the trial court’s finding that section
2.4 under the agreement constitutes a guaranty. they argue that
section 2.4 is not a guaranty because it operates as either an
earn-out provision or an indemnity clause. We disagree.
(a) section 2.4 as Guaranty
[-4] a guaranty is a collateral undertaking by one person to
answer for the payment of a debt or the performance of some
contract or duty in case of the default of another person who
is liable for such payment or performance in the first instance.
Northern Bank v. Dowd, 252 neb. 352, 562 n.W.2d 378 (997);
Chiles, Heider & Co. v. Pawnee Meadows, 27 neb. 35, 350
n.W.2d  (984). as such, a guaranty is basically a contract by
which the guarantor promises to make payment if the principal
debtor defaults. Northern Bank v. Dowd, supra. We rely on
general principles of contract and guaranty law to determine
the obligations of the guarantor. Rodehorst v. Gartner, 266 neb.
20 	6 nebraska aPPeLLate rePOrts

842, 669 n.W.2d 679 (2003). because a guaranty is a contract,
it must be understood in light of the parties’ intentions and the
circumstances under which the guaranty was given. NEBCO,
Inc. v. Adams, supra.
in the instant case, section 2.4 functions as a guaranty by
mitchell for the unsecured portion of loan no. 6350 because
mitchell, as guarantor, provided the $70,000 to the bank and
promised to answer for up to $70,000 of the principal debtor’s
default. the terms under section 2.4 of the agreement state that
the $70,000 ara may be used by the bank only in connection
with the uninsured portion of loan no. 6350. Under those
terms, if the debtor fails to make proper payments to the bank
and loan no. 6350 goes into default, the ara may be reduced
by the bank only to the extent that the bank experienced any
loss. moreover, the evidence further indicates that section 2.4
is a guaranty because the remaining balance of the ara is to
be returned to mitchell free and clear of any obligation upon 24
timely consecutive payments on loan no. 6350 or upon the
loan’s full payment.
the defendants argue on appeal that mitchell cannot be a
guarantor because “the identity of the debtor is not even estab-
lished in the . . . agreement.” brief for appellants at 22. this
assertion is untrue. the agreement expressly provides that the
ara in the amount of $70,000 is to be used only with “the
uninsured portion of Loan no. 6350 with [the loan’s] promis-
sory note and related loan documents.” the loan documents for
loan no. 6350 expressly provide the name of the principal
debtor. the defendants also argued to the trial court that section
2.4 cannot operate as a guaranty because mitchell promises to
protect the Bank against loss or damage, not TAC and FCIC,
the parties to the agreement. as noted by the trial court, “tFin
and tac concede that section 2.4 is beneficial to them in that it
protects the value of [the bank], a wholly-owned subsidiary of
tFin and tac.” therefore, although mitchell’s promise to guar-
antee loan no. 6350 benefits the bank, it also inures to the
benefit of tFin and tac. as such, after viewing the evidence
in the light most favorable to the defendants, we find no error in
the trial court’s finding that there is no genuine issue of material
fact regarding section 2.4 as a guaranty.
mitcheLL v. team FinanciaL 	2
cite as 6 neb. app. 4

(b) section 2.4 as earn-Out Provision
the defendants argue that section 2.4 operates as an earn-
out provision, or price adjustment term, instead of a guaranty
because the purchase price would be reduced by the $70,000
ara upon the principal debtor’s default. We find no merit to
this argument.
[5-7] nebraska statutory and case law does not define “earn-
out” provision. however, as defined by the Practising Law
institute: “an earnout provision makes a portion of the pay-
ment to the sellers contingent upon the target reaching speci-
fied milestones during a specified period after the closing.
the milestones used are usually financial, such as net reve-
nues, gross profits, ebit, ebitda, net income or earnings
per share.” maryann a. Waryjas, Structuring and Negotiating
Earn-Outs, acquiring or selling the Privately held company
2007, at 759, 76 (PLi corporate Law & Practice, course
handbook series 2007). earn-out provisions in merger-and-
acquisition agreements have further been described as provi-
sions that are “intended to accommodate the seller’s desire for
compensation for the anticipated future value of the transferred
assets and the buyer’s reciprocal desire to avoid overpaying
for potential, but as yet unrealized, value.” Highland Capital
Mgt. LP v. Schneider, 8 n.Y.3d 406, 408 n., 866 n.e.2d
020, 02-22 n., 834 n.Y.s.2d 692, 693-94 n. (2007). as
explained in robert m. Fogler & rob Witwer, Buying, Selling,
and 	Combining 	Businesses 	Under 	the 	Colorado 	Business
Corporation Act, 33 colo. Law. 73, 78 (nov. 2004), in an earn-
out provision, “a portion of the purchase price depends on the
success of the business during the year or two following the
sale,” and that is usually “tied to projected revenue or profit
numbers.” Furthermore, earn-out provisions alleviate the effects
of information disparity by punishing a seller’s withholding of
information; they encourage seller shareholders to assist with
transitional issues, and they discourage seller shareholders from
inflating financial performance numbers. Id.
Viewing the evidence in the light most favorable to the
defendants and giving them the benefit of all reasonable
inferences, the evidence fails to prove that section 2.4 is an
earn-out provision. the $70,000 ara was not set aside by
22 	6 nebraska aPPeLLate rePOrts

the Defendants for mitchell as contingent payment upon the
completion of specified milestones by the acquired business.
rather, the $70,000 ara was set aside by Mitchell as security
to the defendants for the unsecured portion of loan no. 6350.
Unlike an earn-out provision, which typically concerns the suc-
cess of the entire business in the year or two following the sale,
section 2.4 provides that the ara in the instant case is to be
utilized only when the principal debtor fails to make payments
on the unsecured portion of loan no. 6350. the application of
the ara funds is in no way related to the overall performance
of the acquired business.
(c) section 2.4 as indemnity Provision
the defendants next argue that to the extent we determine
that section 2.4 constitutes something more than an earn-out
provision, it is an indemnity clause. they argue that section 2.4
is an indemnity provision because it protects tac and tFin
should they incur potential obligation or suffer any loss due to
the substandard loan. We also find no merit to this argument.
[8,9] Under nebraska case law, if a contract of indemnity
refers to and is founded on another contract, either existing
or anticipated, it covenants to protect the promisee from some
accrued or anticipated liability arising on the other contract. see
Currency Services, Inc. v. Passer, 78 neb. 286, 33 n.W.2d
9 (965). stated another way, the promise of the indemnitor is
not to answer for the debt, default, or miscarriage of another,
but may be to make good the loss resulting from such debt,
default, or miscarriage. see, Assets Realization Co. v. Roth, 226
n.Y. 370, 23 n.e. 743 (99); Eckhart v. Heier, et al., 37 s.d.
382, 58 n.W. 403 (96); 28 c.J. Guaranty § 8 at 892 (922).
the distinction between a guaranty provision and an indemnity
provision is explained as follows:
[t]he promisor in an indemnity contract undertakes to pro-
tect his promise against loss or damage through a liability
on the part of the latter to a third person, while the under-
taking of a guarantor or surety is to protect the promisee
against loss or damage through the failure of a third person
to carry out his obligations to the promisee.
38 am. Jur. 2d Guaranty § 4 at 882 (999).
mitcheLL v. team FinanciaL 	23
cite as 6 neb. app. 4

in the instant case, section 2.4 does not operate as an indem-
nity provision. mitchell did not undertake to protect tac against
loss or damage caused by liability on the part of tac to a third
person. On the contrary, mitchell undertook to protect the bank,
a wholly owned subsidiary of tac, against loss or damage
caused by liability on the part of a third party to tac. Whereas
the promise of an indemnitor is to “make good any loss result-
ing from non-payment,” mitchell’s promise is to answer for the
debt, default, and miscarriage of another. see Eckhart v. Heier,
et al., 37 s.d. at 384, 58 n.W. at 403. as such, we find no
error by the trial court in concluding that section 2.4 was not an
indemnity provision.
3. release of G uarantor
the defendants assert that in the event this court finds section
2.4 to be a guaranty, the trial court erred in releasing mitchell as
a guarantor. the defendants argue that a genuine issue of mate-
rial fact exists regarding whether the bank breached its contrac-
tual obligation to mitchell under the agreement. We disagree.
[0-3] a court interpreting a contract must first determine
as a matter of law whether the contract is ambiguous. Kluver v.
Deaver, 27 neb. 595, 74 n.W.2d  (2006). a contract written
in clear and unambiguous language is not subject to interpreta-
tion or construction and must be enforced according to its terms.
Id. a contract is ambiguous when a word, phrase, or provision
in the contract has, or is susceptible of, at least two reasonable
but conflicting interpretations or meanings. Id. a contract must
receive a reasonable construction and must be construed as a
whole, and if possible, effect must be given to every part of the
contract. Id.
the trial court concluded the plain meaning of section 2.4(x)
to be that loan no. 6350 is in default when the payments are
more than 30 days past due. it based this finding on section
2.4(x), which provides that any remaining balance of the ara
should be paid to mitchell “if the borrower . . . should make 24
consecutive timely monthly payments (not more than 30 days
past due)” (emphasis supplied). Under the trial court’s holding, a
payment is considered timely unless it is over 30 days past due.
at that point, it is no longer timely and the loan is considered
24 	6 nebraska aPPeLLate rePOrts

to be in default. construing the agreement as a whole, we find
no error in the trial court’s finding that the term “default” means
“more than 30 days past due.”
mitchell asserts that the bank breached its obligations under
the agreement because the principal debtor defaulted on the loan
and the bank failed to notify mitchell of the principal debtor’s
default. as a result, he claims the trial court correctly held that
he should be released as guarantor. to determine whether the
trial court correctly determined that mitchell is not liable for the
principal debtor’s failure to pay on loan no. 6350, we must
determine the obligations of the parties.
[4] the nebraska supreme court has held that a guarantor
is not liable on his own contract when the creditor has violated
his own obligations and deprived the guarantor of the means of
preventing the loss protected by the guaranty. National Bank of
Commerce Trust & Sav. Assn. v. Katleman, 20 neb. 65, 266
n.W.2d 736 (978).
in the instant case, neither party disputes the fact that the
principal debtor defaulted on the loan. tFin and tac initially
stated in a letter that the principal debtor defaulted on the loan
after the closing of the agreement, but later retracted this asser-
tion in a letter claiming the principal debtor defaulted on the
loan prior to the march 2000 closing of the agreement. the
evidence shows that the defendants formally notified the prin-
cipal debtor by letter in march 200 that loan no. 6350 was
in default. as such, the evidence is undisputed that loan no.
6350 was in default.
next, we look to the parties’ obligations under the agreement.
section 2.4(ii) provides, “[a]s long as Loan no. 6350 is not in
default, [the bank] shall distribute and pay to [mitchell] interest
on the [ara].” section 2.4(xi) further provides, “[the bank]
shall make quarterly reports to [mitchell] from such time [as]
Loan no. 6350 is in default until the [ara] is exhausted.”
as such, from the date of the agreement’s closing in march
2000, the bank was under an obligation to send mitchell, at
an interval of four times a year, either payments from the ara
interest or reports indicating the loan’s default status. the evi-
dence indicates that the bank did not meet either obligation at
any time because mitchell never received interest payments or
mitcheLL v. team FinanciaL 	25
cite as 6 neb. app. 4

quarterly reports. as such, because the defendants violated their
own obligations under the agreement, mitchell, as guarantor, is
not liable. see National Bank of Commerce Trust & Sav. Assn.
v. Katleman, supra.
the defendants argue that “factual issues exist” regarding
whether mitchell had notice of the default. brief for appellants
at 30. they appear to imply that if mitchell had notice of a
default at the time of the closing, such notice would alleviate
their responsibility to make quarterly reports. We note that the
defendants fail to specify in their brief which factual issues indi-
cate that mitchell had notice of the default prior to the closing of
the agreement. to the extent that the defendants are referring to
mitchell’s knowledge, as of the February 29, 2000, board meet-
ing, that loan no. 6350 was past due, we find such knowledge
insufficient to constitute notice of default. On February 29, loan
no. 6350 was only 6 days past due, and according to the
language of the agreement, it was not yet in default. to the
extent that the defendants are referring to an alleged telephone
discussion between the bank’s president and mitchell, whereby
the president alleges mitchell was told that the loan was “delin-
quent,” we also find such evidence insufficient to constitute
notice of default. the term “delinquent” does not necessarily
indicate that the loan was more than 30 days past due. moreover,
we further note that the defendants had a continuing obligation
to inform mitchell of the loan’s status in that the agreement
required they make quarterly reports.
accordingly, we find no error in the trial court’s finding that
there is no genuine issue of material fact in dispute regarding the
breach of the agreement by the defendants. the principal debtor
defaulted on the loan, section 2.4 required that the defendants
make quarterly reports to mitchell regarding a default on the
loan, and no reports were made. as such, we find no error in
upholding the release of mitchell as guarantor.
V. cOncLUsiOn
We conclude that the trial court did not err in granting
summary judgment in favor of mitchell and in denying partial
summary judgment to the defendants. there is no genuine issue
of material fact in dispute regarding the nature of section 2.4 as
26 	6 nebraska aPPeLLate rePOrts

a guaranty provision. We further conclude that there is no gen-
uine issue of material fact in dispute regarding the defendants’
breach of the agreement. as such, we affirm.
affirMed .
mitcheLL v. team FinanciaL 	27
cite as 6 neb. app. 4