Badgett v. Security State Bank

Badgett (plaintiff) had borrowed money from Security State Bank (defendant) to enter the dairy business. When Badgett later decided to retire from dairying, he proposed that Security consider letting him pay off his loan using proceeds from a federal Dairy Termination Program payment he hoped to win through a competitive bid. Security's loan committee refused to even consider the proposal, and Badgett's bid for the program was ultimately unsuccessful. After Badgett stopped making loan payments and later agreed to sell his dairy assets to satisfy the debt, he sued Security, claiming its refusal to consider his proposal breached the implied covenant of good faith and fair dealing. The trial court ruled for Security, but the court of appeals reversed, and Security appealed to the state supreme court.