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AgSouth Farm Credit, ACA v. West

Court of Appeals of Georgia, First Division

October 30, 2019

AGSOUTH FARM CREDIT, ACA
v.
WEST et al.

          BARNES, P. J., MERCIER and BROWN, JJ.

          BARNES, PRESIDING JUDGE

         When AgSouth Farm Credit, ACA did not extend loans to Jason West and Chris West in amounts that would have totaled more than $2, 000, 000, they sued the lending cooperative accusing it of causing them to experience hardships and losses. AgSouth moved for summary judgment on all claims, but the trial court denied the motion. For reasons that follow, the judgment is vacated in part and reversed in part, and the case is remanded with direction.

         Summary judgment is properly granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law[.]" OCGA § 9-11-56 (c). "In our de novo review of the grant [or denial] of a motion for summary judgment, we must view the evidence, and all reasonable inferences drawn therefrom, in the light most favorable to the nonmovant." (Citation and punctuation omitted.) Cowart v. Widener, 287 Ga. 622, 624 (1) (a) (697 S.E.2d 779) (2010); Norton v. Budget Rent A Car System, 307 Ga.App. 501, 501 (705 S.E.2d 305) (2010) (we review the denial of summary judgment de novo, viewing the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party).

         So viewed, the evidence showed the following. In 2005, Jason West and Chris West (the "Wests"), together with their father, formed West Farms, Inc., through which they farmed primarily cotton and peanuts across roughly 2, 000 acres in Tattnall and Candler Counties. Approximately 1, 600 of those acres were leased from numerous landowners on handshake deals; the remaining acreage of the land farmed was owned by the Wests' father.

         Starting in about 2013, West Farms experienced a series of poor financial years. In his deposition, Chris West described, "2013 was not very good. 2014 was a mediocre year. 2015 was not good." By "mediocre," as Chris West added, "I mean we . . . got by, but we weren't making money." Jason West similarly described in his deposition that 2014 was a "bad"/"break even" year, and that 2015 was a "harsh year" that culminated in a large loss. He also recounted that in either 2013 or 2014, West Farms borrowed from Pineland Bank over $800, 000 as operating funds; and in connection with the debt owed to Pineland, the farmed land owned by the Wests' father eventually served as collateral. With respect to 2015, as the West Farms' accountant deposed, the company lost $717, 414.

         During that time period, West Farms turned to AgSouth, a member-owned agricultural lender with the objective of, among other things, ensuring the availability of sound and adequate credit to bona fide farmers. In particular, for two years, West Farms procured from AgSouth annual operating loans of $900, 000. As background for those loans, Chris West explained during his deposition, "[I]t's renewed every year. And you pay back the principal or the 900, 000 plus interest you pay back every year and then it's renewed yearly."

         The instant litigation stems primarily from what happened when the Wests sought to borrow funds from AgSouth in 2016. By that point, West Farms had amassed substantial debt. As Chris West deposed, "[T]he problem was we had had some bad years and we owed some money to Growers Supply[1] and we owed money to Pineland Bank and we needed to get that set up on some long-term financing." Recalling that the bulk of that "long-term" debt was owed to Pineland Bank, Chris West described how the nearly $800, 000 debt had accumulated: "Some of it was a piece of land that my dad purchased that still had money owed on it. Some of it was equipment that had money owed on it and we used Pineland Bank to buy some equipment and it was still - and then some of it was loss due to poor farming years." The combined "long-term" debt, as Chris West recalled, was approximately $1, 050, 000. In addition to these "long-term" creditors, West Farms' owed numerous other creditors - including John Deere Financial ($170, 000) and/or Farm Plan ($170, 000); Triangle Chemical ($20, 000); Claxton Oil ($9, 000); C & H Credit; Rabo AgriFinance ($20, 000); as well as AgSouth.[2]

         Hence, by mid-2016, the Wests had approached AgSouth's employee Rodney Fowler about borrowing funds sufficient not only to cover the upcoming annual operations, but also to refinance West Farms' "long-term" debt and buy out their father's interest in West Farms. To that end, Jason West and Chris West each sought to borrow from AgSouth $1, 100, 000.[3] Accounting for the bulk of the anticipated amount, Jason West deposed, "I was going to get $450[, 000] worth of operating money. . . [and] $550, 000 worth of long-term money. Chris would have gotten the same." As Jason West elaborated in his deposition,

The whole deal of this loan that we are discussing was we were going to buy the farm from [D]addy and refinance it long-term. Get [D]addy completely out of it, let him retire. We could long-term what we owed out on the Pineland Bank and Growers and be able to make it work. That was what we were - direction we were heading at. So, it would have been - still been West Farms, but it would have been Chris and Jason operating it instead of [D]addy being involved. . . . [T]he operating loan wouldn't have been in place as West Farms, it would have been as individuals then.

         Fowler deposed, "I felt confident we could close by the end of February." As he and the Wests worked toward that goal, they engaged in numerous discussions about, among other things, West Farms' open accounts, the creditors, and various requirements for obtaining $2.4 million in new loans.[4] In addition, Fowler ordered an appraisal of the farm as a whole; he also communicated directly with certain of West Farms' creditors, including inquiring about "an extension [from Pineland] to allow us more time to accomplish what we were trying to accomplish." Regarding the latter, Fowler explained, "I was hoping Pineland was going to be able to help out the Wests."

         Notwithstanding the efforts of all parties, Fowler informed the Wests in mid-February 2017 that AgSouth would not be able to extend them any loan(s) at that time. When Fowler was asked during his deposition why the loan(s) had not closed, he responded, "It was an incomplete application due to coming up short on their operating loan and they were unable to tell me their accounts receivable to be able to pay off their operating loan. And open accounts that I discovered in February of '17." According to Fowler, the Wests had failed to timely provide full and complete information about West Farms' financial circumstances.

         But according to the Wests, they wholly complied with each of Fowler's ongoing requests; and all the while, Fowler had assured them that their loans would close in February 2017; because of their reliance upon Fowler's representations, they had sought no alternative financing; and when Fowler ultimately declined to extend them loans, he had provided them with no explanation.

         In their lawsuit against AgSouth, the Wests alleged that they were members of AgSouth; and that they were thus entitled to have fiduciary care extended to them by AgSouth in all transactions between them. The Wests complained that, because of AgSouth's improper actions, they defaulted on several loans, lost leaseholds upon land that generated 80 percent of their income, were ousted from several farming committees and boards (because they were no longer able to farm); and their "family farm [was] on the verge of foreclosure." Seeking damages from AgSouth, the Wests advanced substantive claims of breach of fiduciary duty, negligence, breach of oral contract, promissory estoppel, and fraud.

         AgSouth admitted in its answer that the Wests - having cosigned on a loan to West Farms - were members of AgSouth; and that "[the Wests] may be afforded certain borrower rights pursuant to the Farm Credit Act of 1971, as amended, and its accompanying regulations."[5] Notwithstanding, AgSouth denied liability as to each of the Wests' claims. After a discovery period, AgSouth moved for summary judgment on all claims advanced against them, and Wests filed opposition thereto. The trial court conducted a hearing, [6] then denied the motion. In this interlocutory appeal, AgSouth argues that it was entitled to summary judgment as follows.

         1. AgSouth contends that the trial court erred in denying it summary judgment on the Wests' claim of breach of fiduciary duty, maintaining that it owed the Wests no such duty.

         "A claim for beach of fiduciary duty requires proof of three elements: (1) the existence of a fiduciary duty; (2) breach of that duty; and (3) damage proximately caused by the breach." (Punctuation and footnote omitted.) All Bus. Corp. v. Choi, 280 Ga.App. 618, 621 (1) (634 S.E.2d 400) (2006). The party "asserting the existence of a fiduciary or confidential relationship bears the burden of establishing its existence." O'Neal v. Home Town Bank, 237 Ga.App. 325, 330 (5) (514 S.E.2d 669) (1999).

A fiduciary or confidential relationship arises where one party is so situated as to exercise a controlling influence over the will, conduct, and interest of another or where, from a similar relationship of mutual confidence, the law requires the utmost good faith, such as the relationship between partners, principal and agent, etc. Such relationship may be created by law, contract, or the facts of a particular case. Moreover, since a confidential relationship may be found whenever one party is justified ...

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