Title: Country Corner Food and Drug, Inc. v. First State Bank and Trust Company of Conway, Arkansas, Tommy Watson and Virgil C. Shannon

State: arkansas

Issuer: Arkansas Supreme Court

Document:

COUNTRY CORNER FOOD AND DRUG, INC. v. FIRST
STATE BANK and TRUST COMPANY of Conway,
Arkansas, Tommy Watson and Virgil C. Shannon

97-608                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
                Opinion delivered April 23, 1998


1.   Civil procedure -- amended complaint timely filed -- appeal
     reviewed on merits. --- Where appellant's amended complaint
     was timely filed within the ten days allowed by the circuit
     court, the supreme court reviewed the appeal on the merits.

2.   Civil procedure -- Ark. R. Civ. P. 12(b)(6) -- standards to be
     applied in reviewing dismissal order. -- In reviewing a trial
     court's decision on a motion to dismiss under Rule 12(b)(6),
     the supreme court treats the facts alleged in the complaint as
     true and views them in the light most favorable to the party
     who filed the complaint; in deciding dismissal motions, the
     trial court must look only to the allegations in the
     complaint; to state a cause of action, the complaint must
     allege facts and not mere conclusions; when a complaint is
     dismissed without prejudice, the plaintiff has the option of
     pleading further or appealing; if the plaintiff appeals, the
     option to plead further is waived in the event of an
     affirmance by the appellate court. 

3.   Civil procedure -- determination whether matter sufficiently
     pleaded -- court looks to underlying facts supporting alleged
     cause of action. -- Arkansas is a fact-pleading state; the
     supreme court looks to the underlying facts supporting an
     alleged cause of action to determine whether the matter has
     been sufficiently pleaded.

4.   Fraud -- proof of -- elements required. -- Actual fraud is
     established by proving the existence of the following five
     elements: (1) a false representation, usually of a material
     fact; (2) knowledge or belief by the defendant that the
     representation is false; (3) intent to induce reliance on the
     part of the plaintiff; (4) justifiable reliance by the
     plaintiff; and (5) resulting damage to the plaintiff; in order
     to prevail over a Rule 12(b)(6) motion, appellant must plead
     sufficient facts to support all five elements.

5.   Fraud -- statements by appellee bank's representatives did not
     support fraud action -- no facts alleged supporting allegation
     that statements by bank were false at time they were made. --
     Statements by appellee bank's representatives concerning
     renewal of a note did not support an action for fraud where
     there were no facts alleged supporting an allegation that the
     statements by appellee were false at the time they were made. 

6.   Fraud -- statements by appellee bank's representatives did not
     support fraud action -- no facts pleaded by appellant to show
     justifiable reliance. -- Even assuming that appellee knew that
     statements concerning renewal of the note were false, the
     statements by appellee bank's representatives did not support
     an action for fraud where there were no facts pleaded by the
     appellant to show justifiable reliance on its part; the
     statements allegedly made by appellee merely lessened
     appellant's immediate financial burden in the interim by
     requiring it only to pay interest. 

7.   Fraud -- statements by appellee bank's representatives did not
     support fraud action -- bank had right to refuse loan. -- 
     Even if appellee bank made statements concerning renewal of a
     note with the intent that appellant rely on them, appellee had
     the right to refuse to renew the loan; appellant pleaded no
     facts that would show that appellee was obligated to renew the
     loan without the guarantors being on the new note.

8.   Torts -- tortious interference -- failure to show precise
     business expectancy or contractual relationship obstructed by
     appellee's actions fatal to cause of action. -- Appellant's
     claim that it sufficiently pleaded a claim for tortious
     interference with contractual relationship or business
     expectancy against appellee was without merit; none of
     appellant's allegations indicated with what contract or with
     what business expectancy appellee intended to interfere;
     failure to provide some precise business expectancy or
     contractual relationship being obstructed by appellee's
     actions was fatal to the cause of action.  

9.   Banks & banking -- fiduciary duty -- essential threshold to
     establish. -- To establish a fiduciary duty and breach thereof
     by a bank, the supreme court has emphasized the necessity of
     factual underpinnings to establish a relationship of trust and
     confidence between a bank and its customers that is more than
     a debtor-creditor relationship.

10.  Banks & banking -- breach of fiduciary duty by appellee bank
     alleged -- proof insufficient to establish fiduciary duty. -- 
     Although appellant alleged that there was a breach of
     fiduciary duty by appellee bank, the allegations made by
     appellant failed to meet the essential threshold required to
     establish such a duty; lack of sophistication and the alleged
     advice not to seek independent counsel may have resulted in
     appellant's being misled, but these facts did not create a
     fiduciary relationship; the point had no merit.

11.  Torts -- tort of breach of duty to act in good faith alleged -
     - case relied upon to establish inapplicable. -- Although
     appellant relied on Gordon v. Planters & Merchants Bankshares,
     326 Ark. 1046, 935 S.W.2d 544 (1996), to establish the tort of
     a breach of a duty to act in good faith, in that case the duty
     of good faith as set out by Ark. Code Ann.  4-1-203 (Repl.
     1991) was considered only in terms of considering whether
     punitive damages were allowable; the supreme court has
     recognized the affirmative tort of bad faith only against
     insurance companies.  

12.  Contracts -- breach of duty to act in good faith alleged -- no
     authority given in support of new cause of action -- court
     declined to recognize new tort. -- The fact that every
     contract imposes an obligation to act in good faith does not
     create a cause of action for a violation of that obligation;
     the supreme court has never recognized a cause of action for
     failure to act in good faith; where appellant provided no
     authority or argument for why the court should recognize a new
     tort for failure to act in good faith or how such a
     recognition could be reconciled with previous case law, which
     only recognizes the tort of bad faith against insurance
     companies, the supreme court declined to recognize this new
     tort in Arkansas.

13.  Torts -- how duress shown -- facts insufficient to show
     duress. -- To show duress, one must show that the duress
     resulted from the wrongful and oppressive conduct, and not by
     his own necessity; here, if appellee bank had the right to
     deny the renewal, such an action could not have been wrongful
     and oppressive; appellant pleaded no facts to show that
     appellee was required to renew the note or that the failure to
     renew it was an attempt to force appellant to do or to refrain
     from doing a particular act. 

14.  Torts -- independent tort for duress not recognized --
     appellant's argument without merit. -- Where appellant
     conceded that duress is not ordinarily recognized as an
     offensive doctrine; where appellant neither cited no cases to
     support recognition of the independent tort of duress nor it
     presented a valid argument for why the court should now
     recognize the tort; and where the facts pleaded by appellant
     in support of a new cause of action for duress did not meet
     its own definition in that facts showing coercion were not
     pleaded, there was no factual basis for the cause of action.

15.  Damages -- punitive-damages claim correctly dismissed -- no
     underlying compensatory claim existed. -- A claim for punitive
     damages is dependent on the existence of an underlying
     compensatory claim; here, the trial court correctly dismissed
     this claim due to the absence of any viable compensatory
     claims.

16.  Judgment -- summary judgment -- allegations in complaint are
     not proof for summary judgment purposes. -- Allegations in a
     complaint are not proof for summary judgment purposes.

17.  Judgment -- summary judgment properly granted -- appellant's
     case against appellee guarantors predicated on nonexistent
     requirement. -- In its order for summary judgment, the trial
     court found that appellant's allegations were predicated on
     the guarantors' failure to guarantee a new note; the language
     of the loan agreement made it clear that the guarantors were
     liable for the debt evidenced by a renewal note irrespective
     of whether they actually signed a renewal note as guarantors;
     thus, there was no requirement or need for them to sign one;
     however, appellee bank was perfectly within its rights to
     request their guarantee on the renewal note as additional
     security and to refuse to renew the note in the absence of a
     new guaranty agreement.

18.  Judgment -- summary judgment properly granted -- evidence
     presented by appellant to show appellee guarantors had
     obligation to sign renewal note insufficient. -- The only
     evidence presented by appellant to show that appellee
     guarantors had an obligation to sign the renewal note was
     deposition testimony of two bank officers who testified in
     accordance with the original agreement, which only served to
     underscore the fact that appellee bank required a new
     guarantee of appellee guarantors in order to extend the note;
     it did not prove that the guarantors had a duty or an
     obligation to sign a renewal note under any written agreement
     with appellant.


19.  Judgment -- summary judgment properly granted -- allegations
     of fraud and intentional interference with loan without merit.
     -- Appellant's argument that the appellee guarantors' failure
     to guarantee the renewal note was motivated by an effort to
     force appellant to pay a debt to a third party and that this
     constituted fraud and intentional interference with the loan
     was without merit; if the guarantors had no duty or obligation
     by agreement with appellant to sign the new note as
     guarantors, their motives for refusing to do so were
     irrelevant.  

20.  Judgment -- summary judgment properly granted -- case
     affirmed. -- There was no written document or other proof that
     the guarantors ever agreed with appellant to guarantee a
     renewal note; the circuit court did not err in its order of
     summary judgment; the case was affirmed.


     Appeal from Faulkner Circuit Court; Karen R. Baker, Judge;
affirmed.
     Streett & Coutts, by:  Alex G. Streett, for appellant.
     Graddy & Adkisson, P.A., by:  William C. Adkisson, for
appellee First State Bank & Trust Co.
     Brazil, Adlong, Murphy & Osment, by:  Matthew W. Adlong, for
appellees Watson and Shannon.

     Robert L. Brown, Justice.
     This case arises out of a business loan for operating capital
made by appellee First State Bank and Trust Company of Conway,
Arkansas (Bank) to appellant Country Corner Food and Drug, Inc.
(Country Corner).  In 1987, Charles Pitman and Douglas Horton and
appellees Tommy Watson and Virgil C. Shannon were all shareholders
in two corporations.  The corporations owned and operated two
grocery stores named Perry County Food & Drug and Country Corner
Food & Drug.  The corporations were named Perry County Food & Drug,
Inc., and Country Corner Food & Drug, Inc.  A swap agreement was
made among the shareholders to divide the shares of the two
corporations, where Watson and Shannon would become sole
shareholders in Perry County Food & Drug, Inc., while Pitman and
Horton would be the sole shareholders of Country Corner Food &
Drug, Inc.  Country Corner would lease the property for its grocery
store from Watson and Shannon.
     In furtherance of the swap agreement, on March 17, 1988,
Country Corner obtained a loan from the Bank for one year in the
amount of $194,734 for the purpose of financing inventory.  Because
Country Corner and Pitman and Horton were unable to obtain this
financing on their own, Watson and Shannon and their spouses signed
the promissory note as guarantors.  When the promissory note came
due on March 17, 1989, Watson and Shannon refused to sign the new
note as guarantors, and the Bank declined to renew the note. 
Country Corner failed to satisfy the debt in accordance with the
terms of the note, and the Bank foreclosed on the note and
collateral.
     On July 18, 1989, Watson and Shannon filed a suit in chancery
court against Country Corner and prayed that the court appoint a
receiver to prevent Pitman and Horton from selling off the
inventory of Country Corner and, thus, depleting the collateral for
the Bank loan.  The Bank intervened claiming an interest in the
same property.  Country Corner then filed an action in circuit
court against the Bank and Watson and Shannon and asserted several
causes of action in tort.  On August 17, 1989, the chancery court
appointed a receiver who ultimately sold the Country Corner store
and its assets.  Watson and Shannon next paid the balance due under
the note pursuant to their guaranty agreement.  What remained to be
litigated in circuit court were the causes of action in tort filed
by Country Corner against the Bank and Watson and Shannon.
     On August 6, 1992, the circuit court granted a motion to
dismiss Country Cornerþs complaint against all appellees on the
grounds that Country Corner had failed to plead sufficient facts to
state a claim under Ark. R. Civ. P. 12(b)(6).  On August 20, 1992,
Country Corner filed an amended compliant, and appellees again moved
to dismiss.  By order dated October 1, 1992, the circuit court
granted the Bankþs motion to dismiss but denied the motion with
respect to Watson and Shannon.  Following more than a year of
discovery, Watson and Shannon filed a motion for summary judgment. 
On December 4, 1996, the circuit court entered its order granting
summary judgment.  Country Corner now appeals from the two orders.

              I. Bankþs Dismissal Under Rule 12(b)(6)
     For its first point, Country Corner argues that its amended
complaint sufficiently alleged facts to state claims against the
Bank.  The Bank counters that the amended complaint against it was
properly dismissed because it was not timely filed, and even if it
was, Country Corner failed to plead sufficient facts under Ark. R.
Civ. P. 12(b)(6).
     We conclude that Country Cornerþs amended complaint was timely
filed within the ten days allowed by the circuit court.  Rule 6 of
the Arkansas Rules of Civil Procedure states that "[w]hen the period
of time prescribed or allowed is less than eleven (11) days,
intermediate Saturdays, Sundays, or legal holidays shall be excluded
in the computation."  The order of dismissal was filed on August 6,
1992, and the amended complaint was filed on August 20, 1992,
exactly 10 days later, excluding weekend days.  We will, as a
result, review the appeal on the merits.
     This court has often stated the standards to be applied in
reviewing a dismissal order under Rule 12(b)(6):
          In reviewing a trial court's decision on a motion to
     dismiss under Rule 12(b)(6), we treat the facts alleged
     in the complaint as true and view them in the light most
     favorable to the party who filed the complaint.  Neal v.
     Wilson, 316 Ark. 588,