It's A First: Fiduciary Duty Claim Sticks Against A Bank

For the first time that I am aware of, the Business Court has found a Complaint to sufficiently allege a breach of fiduciary duty claim against a bank, in today's opinion in WNC Holdings, LLC v. Alliance Bank & Trust Co., 2012 NCBC 50.

The case has a familiar ring to it on the facts.  Real estate loan based on an appraisal alleged to have overvalued the property.  Bank loaned $1 million plus which the borrower says it wouldn't have borrowed but for the appraisal.  Property never developed due to financial downturn.

The borrower alleged the Bank had done more than just lend money, saying that it had served as a financial and development advisor for the project.  It said that the Bank had:

  • “review[ed] property development agreements and [made] suggested changes”
  • “[performed] inspections of the property and development," and
  • “complet[ed] financial feasibility pro [forma]” statements that are traditionally completed by the debtor.

Op. 62.

Those alleged facts were enough to Judge Murphy to state a claim for breach of fiduciary duty, and he denied the bank's motion to dismiss.

If you are a lawyer representing banks, there's still not much to worry about on the fiduciary duty front.  The Business Court said in an earlier case that  an ordinary debtor-creditor relationship generally does not give rise to the "special confidence" needed for a fiduciary relationship. Peak Coastal Ventures, LLC v. SunTrust Bank, 2011 NCBC 13 (N.C. Super. Ct. May 5, 2011).  It dismissed a fiduciary duty claim in Allran v. Branch Banking and Trust Corp., 2011 NCBC 21 (N.C. Super. Ct. July 6, 2011). And the Court of Appeals affirmed the dismissal of a fiduciary duty claim against a bank in Branch Banking & Trust Co. v. Thompson, 107 N.C. App. 53, 61, 418 S.E.2d 694, 699 (1992).

Judge Murphy mentioned all those cases, but he left out Wells Fargo Bank, N.A. v. Vandorn, 2012 NCBC 6 (N.C. Super Ct. January 17, 2012), in which Judge Gale said in dismissing a fiduciary duty claim against a bank that “in an ordinary lender-borrower relationship, the lender does not owe any duty to its borrower beyond the terms of the loan agreement."  Op. 17.

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