No. 89-053
IN THE SUPREME COURTOF THE STATEOF MONTANA 1989

JULIUSR. TRESCH and JOANTRESCH, Husband andWife, Plaintiffsand Appellants,-vsNORWEST BANK OF LEWISTOWN,N.A., JOHN DOECORPORATION, I throughV, and JOHNDOE 1 through 10, Defendantsand Respondents.

APPEAL FROM: District Court of the Tenth JudicialDistrict, In and for theCounty of Fergus, TheHonorable PeterRapkoch, Judgepresiding.
COUNSELOF RECORD:
ForAppellant: Torger S. Oaas,Lewistown,Montana
For Respondent: Donald C. Robinson andMark W. Mattioli; Poore,Roth and Robinson, Butte,Montana

Filed: :-- c..., -4
-. Submitted onBriefs: Aug. 3, 1989 Decided: August 25, 1989Justice R. C. McDonough delivered the Opinion of the Court.

Julius Tresch and Joan Tresch (Tresch) appeal from an order of the Tenth Judicial District, Fergus County,granting summary judgment to respondent Norwest Bank of Lewistown, N.A. (Norwest). We affirm. The issues in this case are: 1. Whether Norwest breached the implied covenant of good faith and fair dealing when it denied a $3,100.00 loan requestedby Tresch. 2. Whether Norwest breached a fiduciary duty owed Treschwhen it denied the $3,100.00 loan. Julius and Joan Tresch have owned and operated a dairy farm near Lewistown, Montana since 1966. For over three decades, they have done their banking businesswith Norwest. In 1983, Tresch increased his operating loan at Norwest to the amount of approximately $147,000.00. This notewas tobe paid inmonthly installments andwas securedby an assignment of proceeds from thedairy,and other collateral. One of the terms of this financing agreementprovided that Tresch could not make any capital purchase in excess of $500.00 without the express consent ofNorwest. Shortly after receiving this loan, Treschused advanced funds to upgrade the equipment in his dairy. This upgrading included the purchase of new milking machines. Tresch quickly became dissatisfied with these machines, because he believed that they were responsible for an outbreak of "mastitis" in his dairy herd. Mastitis is defined as an inflammation of the mammary glands in dairy cattle. It is caused and spread by toxic microorganisms. The disease is endemic to the entire dairy industry and its presence can lead to contaminated milk and the destruction of a dairy herd. Although its cause issubject to debate, it is generally agreed that it can be caused by malfunctioning equipment, unsanitary conditions within the cows' environment,or impropermilking procedures. Because Tresch believed that the new milking machines

were the cause of the mastitis, he approached Norwest in March of 1984, for a three thousand one hundred dollar

($3,100.00) loan which would enable him to replace the machines. Norwest doubted that thispurchase would cure the mastitis problem because, as it noted, the disease had existed in his dairy herd for a number of yearsprior to the acquisition of the new machines. It also doubted that the purchase of newmilkers would generate sufficient additional income to repay the loan. In order to confirm this supposition,Norwest contacted the local implementdealer and the dairy extension service at Montana State University to determine if the new machines

were needed. This investigation supported Norwest's original beliefs. During this inquiry, it was learned that although milking machines can cause mastitis, the primary causes are improper hygiene and sanitation, and improper milking procedures. Moreover, because the disease had been present in theherd prior to the installationof the milking machines itwas doubtful that theywere the cause of Tresch's problem. Consequently, the loanwas denied. Eventually Tresch obtained funds from another source, which allowed him to purchase new milking machines. Unfortunately, the mastitis problem continued and the resulting loss of production nearly forced Tresch into foreclosure in late 1986. Because Tresch believed these problems were caused by Norwest's refusal to advance him the money he filed suit seeking compensatory and punitive damages for breach of the implied covenant of good faith and fair dealing and forbreach of fiduciary duty. Norwest moved for summary judgment. On October 13, 1988, this motion was granted. This appeal followed. I Tresch maintains that Norwest breached the implied covenant of good faith and fair dealing by refusing to loan him the fundsnecessary topurchase newmilking machines. We disagree. At the outset we note that this is an appeal from an order granting summary judgment. Summary judgment should be granted if there isno genuine issueofmaterial fact and the moving party is entitled to judgment as a matter of law. Rule 56(c)

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The party moving for summary judgment has the burden of establishing the absence of any genuine issue ofmaterial fact and then the party opposing the motion must come forward with evidence supporting the existence of a genuine fact issue. Pretty on Top v. City of Hardin (1979),182Mont. 311, 315,597P.2d 58, 60. However,when reviewing such an order,this Courtmust review the evidence in a light which is most favorable to the non-moving party. Nitschkev. Blue Cross ofMontana (1988), 751 P.2d 175, 176, 45 St.Rep. 473, 475. Therefore,we must review the facts of this case in a light most favorable to Tresch in order to determine the propriety of the court's order. Even if this Court was to assume that the implied covenant of good faith and fair dealing applies to a lending arrangement of the nature presented in this case, the facts presented do not indicate that there was any violation of this duty. In making this determination,we look to prior decisions for guidance. InNicholson v. United Pacific Ins. Co. (1985),219 Mont. 32,710 P.2d 1342,weheld that:The nature and extent of an implied covenant of good faith and fair dealing is measured in a particular contractby the justifiable expectations of the parties. Where one party acts arbitrarily, capriciously, or unreasonably, that conductexceeds the justifiable expectations of the second party. The second party then should be compensated for damages resulting from the other's culpable conduct. Nicholson, 710 P.2d at 1348. Therefore, in order to prove that Norwest breached the covenant, Tresch must show that its decision not to advance the $3,100.00 was arbitrary, capricious or unreasonable. Under the agreed upon facts Tresch does notmeet thisburden. Treschmaintains thathe needed the loan in order tobuy
new milking machines. Itwas his theory, upon applying for the loan, that new machines would cure the chronicmastitis that had plagued his herd for years. Norwest doubted that this purchase would cure the problem. Norwest based its conclusion upon inquires made with an agricultural scientist at Montana State University and a local dealer who sold milking machines. Inquiry also led Norwest to believe that the new machines would not generate sufficient additional income to repay the loan. The uncontested facts clearly establish that Norwest's refusal to advance the funds was based upon solid business

reasons. It then became incumbent upon Tresch to come forward with evidence of his own that would tend to dispute this conclusion. Barichv. Ottenstrong (1976),170Mont. 38, 550 P.2d 395; Mayer Bros. v Daniel Richards Jewlers Inc., (1986), 223 Mont. 397, 726 P.2d 815. Tresch did not meet this burden, nor did he come forwardwith any other issue of material fact. In fact,as noted by the trial court,Tresch admitted in his deposition that he did not think thatNorwest acted out ofmotives or for reasons other than those stated.Therefore, the order granting summary judgment must be affirmed. I1 Tresch also maintains that Norwest breached its fiduciary duty by denying the loan. Again, we disagree. With respect to this argument, the following provision in the loan agreement is:

"4. Borrowers shall make no capital purchases in excess of $500.00 without prior consent of the Bank. " Tresch maintains that under this clause,Norwesthad the ability to exercise "absolute managerial" control over the dairy operation by retaining the power to determine which expenditures could be made. He further states because Norwest took "complete charge" over the finances of the Tresch Dairy, it had a duty to place the interests of Tresch
onpar with its own interest. Assuming arguendo that such a clause leads to the creation of a fiduciary duty, we fail to find that Norwest acted unreasonably or unfairly towards Tresch. As stated earlier, Norwest's refusal was based upon solid business grounds and there are no facts to refute it. Accordingly, Norwest's refusal was not a breach of any fiduciary duty which may have been owed to Tresch. We affirm. 

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