Court Addresses Agricultural Cooperative Bank Liability to Potential Borrower

On October 30, 2019, the Georgia Court of Appeals vacatedreversed, and remanded the denial of a cooperative bank‘s summary judgment motion on fiduciary duty and other claims from prospective borrowers in AgSouth Farm Credit, ACA v. West.  Borrowers brought action against an agricultural cooperative bank. They alleged the bank‘s failure to extend loans caused them to experience hardships and losses, and asserted claims for breach of fiduciary duty, negligence, breach of oral contract, promissory estoppel, and fraud. The trial court denied bank‘s motion for summary judgment, and the bank appealed. 

The Court of Appeals held as follows: 

  • As a matter of first impression, membership in an agricultural lending cooperative does not automatically give rise to a fiduciary relationship. 
  • Remand was warranted for the trial court to determine in the first instance whether borrowers pointed to specific evidence of bank‘s employee’s conduct that transcended the bank-borrower relationship customarily found between a member-owned agricultural bank and farm operator, and thereby showed a triable issue as to the existence of a fiduciary relationship. 
  • Bank‘s privately established guidelines were insufficient to create a legal duty, as required to support memberborrowers’ negligence cause of action.   
  • To the extent member-borrower’s negligence claim rested on any fiduciary relationship, such a claim is indistinguishable from a claim of breach of fiduciary duty.   
  • Remand was warranted for the trial court to determine in the first instance whether or not borrowers’ oral contract claim lacked evidentiary support of a meeting of the minds as to the interest rates or as to the maturity dates with regard to the purported contract. 

With regard to the fiduciary claim, the court held, “While Georgia has not previously ruled upon the particular “membership based relationship” identified here, we agree with those foreign jurisdictions that have specifically held that membership in an agricultural lending cooperative, such as AgSouth, does not automatically give rise to a fiduciary relationship.  In addition, the court required specific evidence of [the bank’s] conduct that transcended the lender-borrower relationship customarily found between a member-owned agricultural lender and farm operator and thereby showed a triable issue as to the existence of a fiduciary relationship.”