Bank not fiduciary in debtor-creditor relationship: JONG V. LEITCHFIELD DEPOSIT BANK (COA 11/21/2007)

BUSINESS LAW:  Creditor-Debtor relationship not a fiduciary
DATE RENDERED: 11/21/2007

This is an appeal from a summary judgment in favor of Leitchfield Deposit Bank ( the bank) enforcing personal guaranty agreements executed by the Appellants, Arie de Jong, Jr. and Charles Marty Higdon securing a loan made by the bank to the Appellee, Lakeview Golf Club, Inc.  The appellants contend that the circuit court erred in granting summary judgment because genuine issues of material fact exist and because the bank breached a fiduciary duty of disclosure; was guilty of misrepresentation in inducing them to enter into the transaction; breached an implied covenant of good faith and fair dealing; breached other duties owed to them; and that the circuit court erred in determining the amount of damages. Finding no error, COA affirmed summary judgment.

Lakeview was incorporated for the purpose of purchasing and operating a golf course and borrowed $1.1 million from the bank posting as security for the loan a promissory note, a mortgage on its real property, and a security interest in its personal property.  The appellants were allegedly told there was less debt than there actually was and the property was worth more than the appraised value.

COA rejected De Jong and Higdon’s first contention that the trial court erred in failing to separate their claims as they failed to demonstrate how they were prejudiced by such procedure.

COA also disagreed with De Jong and did not find that he had more than the typical debtor-creditor relationship with the bank and that the bank owed him a fiduciary duty of disclosure,  since there were no such facts or evidence to support a finding that the bank owed de Jong a fiduciary duty.

Banks do not generally have fiduciary relationships with their debtors. This flows from the nature of the c reditor debtor relationship.  De Jong did not allege that the bank profited from any confidence gained from him. He failed to produce any evidence that his relationship with the bank was other than a typical debtor-creditor relationship, or that the bank owed him a fiduciary duty of disclosure.

At almost every point of contention on this appeal, the appellants have stated potentially valid causes of action, but at each point they have failed to produce any evidence, in the record, to support such legal theories. The bank met its prima facie burden of demonstrating the absence of any genuine issue of material fact. 

By Michael Stevens

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