Summary of a Recent
Judicial Development in
Finance & Credit

Court Finds No Fiduciary Duty Between Loan Officer
or Bank and Borrowers

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Flying J Fish Farms v. Peoples Bank of Greensboro, 12 So.3d 1185 (Ala. 2008), the Supreme Court of Alabama granted summary judgment for the defendants on claims of breach of fiduciary duty, suppression and deceit, negligence, and negligent/wanton supervision because the plaintiffs had failed to provide substantial evidence in support of their claims and to establish the existence of a fiduciary duty between the parties.

Background

The plaintiffs obtained financing from Peoples Bank for their catfish-farming operation. Id. at *1. Loan officers met with the plaintiffs each year to discuss their financing, and one offered suggestions on ways to improve their operation based on his own experience in the catfish-farming business. Id. The two loan officers assigned to the plaintiffs' accounts were both shareholders in Alabama Catfish, a major catfish-processing business in the area, but they did not disclose that information to the plaintiffs. Id. Based on the loan officers' advice the plaintiffs mainly attempted to sell their fish to Alabama Catfish, but their fish were often refused as being "off-flavor." Id. Alabama Catfish subsequently began using its own ponds or its shareholders' ponds to raise its own catfish for its processing plant, and notified its growers that one of the loan officers, along with a few other people, had purchased the company. Id. at *2. The plaintiffs sued the Bank, the loan officers, and Alabama Catfish claiming that they had breached a fiduciary duty, suppressed material facts, were unjustly enriched, were negligent and/or wanton, and that the Bank had negligently and/or wantonly supervised the loan officers. Id. The trial court granted summary judgment for Alabama Catfish on all claims, and granted summary judgment for the Bank on all claims except for the negligence and/or wantonness and negligent and/or wanton-supervision claims, and the plaintiffs and the Bank appealed. Id.

Arguments

The plaintiffs argued that the loan officer's "superior knowledge" of the catfish industry was a basis for the formation of a fiduciary duty, that he exerted an "overmastering influence" over them, and that his fiduciary duty carried over to Alabama Catfish. Id. at *3-4. They further argued that the defendants had a fiduciary duty to disclose information about the loan officers' involvement in Alabama Catfish. Id. at *5.

Analysis and Holdings

The court found that the plaintiffs had not shown substantial evidence to indicate that they had a fiduciary relationship with the Bank, the loan officer, or Alabama Catfish, and therefore it affirmed summary judgment in favor of the defendants on the fiduciary duty claim. Id. at *4. For the same reason, the court affirmed summary judgment for the defendants on the suppression and deceit claims, and it further concluded that the plaintiffs could not show they made any payments to the Bank or to Alabama Catfish because of mistake or fraud, so their claim of unjust enrichment was without merit. Id. at *5-6. The court also reversed and granted summary judgment for the Bank on the negligence/wantonness claim because the plaintiffs had not presented substantial evidence to support it, and for the same reason, it also dismissed the negligent and/or wanton-supervision claim. Id. at *8-9. Lastly, because the underlying claims had been dismissed, the court dismissed the plaintiffs' conspiracy and loss-of-consortium claims. Id. at *9.

The case was decided on October 24, 2008.