## Facts

- Jerome J. Bruha obtained revolving lines of credit from Sherman County Bank, evidenced by promissory notes.
- A key note stated Bruha promised to pay “$75,000 ‘or so much as may be outstanding’” and expressly described a revolving line of credit permitting repeated advances and repayments up to the limit.
- Bruha used borrowed funds to invest through Prime Trading Company in speculative trading accounts.
- Bruha later alleged bank officers and Prime Trading representatives misrepresented investment risks and returns, understated potential losses, and induced him to keep funds invested.
- Sherman County Bank failed; the FDIC became receiver and acquired Bruha’s notes as bank assets.
- Heritage Bank purchased the notes from the FDIC and sued Bruha to recover unpaid balances.
- The district court entered summary judgment for Heritage on the primary note, awarding $61,384.67 plus interest, rejected Bruha’s fraud-based defenses as federally barred, and concluded the note was nonnegotiable (so Heritage was not a holder in due course).

## Issues

1. Whether the note was a negotiable instrument under Nebraska UCC Article 3, permitting the FDIC or Heritage to claim holder-in-due-course status.
2. Whether 12 U.S.C. § 1823(e) barred Bruha’s fraud in the inducement and misrepresentation defenses based on alleged oral or side agreements.
3. Whether the district court erred in calculating interest on the judgment.

## Decision

- The court held the note was not negotiable because it lacked a fixed principal amount; therefore, neither the FDIC nor Heritage was a holder in due course.
- The court held federal law, including 12 U.S.C. § 1823(e), barred Bruha’s fraud and misrepresentation defenses because they depended on unwritten agreements or understandings that would diminish the FDIC’s interest in the notes and did not satisfy § 1823(e)’s writing and record requirements.
- The court affirmed Heritage’s right to judgment on liability but reversed in part due to a minor interest-calculation error and remanded to correct the interest computation.
- Disposition: affirmed in part, reversed in part, and remanded with directions.

## Legal Principles

- A promissory note must state a fixed principal amount to qualify as a negotiable instrument under UCC § 3-104(a); variable interest is permitted, but principal must be fixed and determinable from the instrument itself without reference to external facts.
- A revolving line-of-credit note payable up to a ceiling amount “or so much as may be outstanding” does not state a fixed principal and is nonnegotiable.
- Under 12 U.S.C. § 1823(e), an agreement that tends to diminish or defeat the FDIC’s interest in an asset acquired as receiver is unenforceable against the FDIC (and generally its transferees) unless the agreement is in writing, executed by the bank and obligor, contemporaneous with acquisition, board/committee-approved, and maintained as an official bank record.
- Fraud-in-the-inducement and misrepresentation defenses that rely on oral statements or side understandings about the loan transaction or related risks are barred when they function as unrecorded agreements diminishing the FDIC-acquired asset.

## Conclusion

The court concluded that although the revolving credit note was nonnegotiable and did not support holder-in-due-course status, federal FDIC protections barred the borrower’s fraud-based defenses resting on unwritten agreements; the judgment on liability was upheld while the case was remanded solely to correct the interest calculation.


Heritage Bank v. Bruha, 812 N.W.2d 260 (Neb. 2012)