Opinion ID: 1665643
Heading Depth: 1
Heading Rank: 6

Heading: whether summary judgment for first national bank was improper

Text: Appellants state that summary judgment for appellee, First National Bank of Louisville, was improper because it aided, abetted, and conspired with Scanlan to breach his fiduciary duties to Steelvest in the formation of Scansteel. They further allege that First National breached its own fiduciary relationship to its customer, appellant, William N. Lucas, the president of Steelvest, who already had a personal, fully secured loan with the bank at the time it agreed to lend money to Scanlan for the formation of Scansteel. Courts traditionally view a relationship between a bank and a depositor to be one of debtor-creditor and do not ordinarily impose a fiduciary duty of disclosure upon the bank. However, services to borrowers and pledgors may support a finding that a bank, in taking a borrower's note and collateral, falls under a fiduciary duty to disclose material facts affecting the loan transaction. In view of changes in the nature of commercial transactions bankers may sometimes be placed in a position of trust with respect to their customer. Henkin, Inc. v. Berea Bank and Trust Co., Ky.App., 566 S.W.2d 420 (1978). It is to be determined whether a fiduciary relationship existed or developed between Lucas and FNB prior to determining if FNB thereafter breached a fiduciary duty. As to the claim of aiding and abetting, it has been held that a person who knowingly joins with or aids and abets a fiduciary in an enterprise constituting a breach of the fiduciary relationship becomes jointly and severally liable with the fiduciary for any profits that may accrue. Jackson v. Smith, 254 U.S. 586, 41 S.Ct. 200, 65 L.Ed. 418 (1921); Irving Trust Co. v. Deutsch, 73 F.2d 121 (2nd Cir.1934); Miller v. Steinbach, 268 F.Supp. 255 (S.D.N.Y. 1967); Lappas v. Barker, Ky., 375 S.W.2d 248 (1964); Fink v. Weisman, 129 Cal.App. 305, 18 P.2d 961 (1933); Lonsdale v. Speyer, 249 A.D. 133, 291 N.Y.S. 495 (1936); Ozark Motor Co. v. Horton, Mo.App., 196 S.W. 395 (1917); and Raines v. Toney, supra . There is at least some evidence to indicate that First National had actual knowledge of Scanlan's plan to incorporate a business that was to be directly competitive with Steelvest and that this new business would, to a certain extent, have a detrimental impact on Steelvest's present business. First National appears to have further understood that by providing financing to Scanlan's venture it would substantially impact upon Steelvest's business situation. Yet, it still agreed to provide financing to Scanlan for the formation of Scansteel, presumably in order to reap a profit from the loan arrangement. First National Bank states that Lucas and his corporation occupied no confidential relationship with the bank and they were merely loan customers. However, because the circumstances which may create a fiduciary relationship are so varied, it is extremely difficult, if not impossible, to formulate a comprehensive definition of it that would fully and adequately embrace all cases. Nevertheless, as a general rule, we can conclude that such a relationship is one founded on trust or confidence reposed by one person in the integrity and fidelity of another and which also necessarily involves an undertaking in which a duty is created in one person to act primarily for another's benefit in matters connected with such undertaking. This Court in the case of Security Trust Co. v. Wilson, 307 Ky. 152, 210 S.W.2d 336 (1948), quoted with approval the following definition of a fiduciary relationship: The relation[ship] may exist under a variety of circumstances; it exists in all cases where there has been a special confidence reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence. 307 Ky. at 157, 210 S.W.2d at 338. The information that FNB possessed placed them in a position of having knowledge that Scanlan was a fiduciary and, therefore, by not taking some action, the bank may have become a party to the acts of Scanlan. Peoples National Bank v. Guier, 284 Ky. 702, 145 S.W.2d 1042 (1940), held that a bank acted in bad faith by remaining passive and not taking any action to prevent a fiduciary from breaching his duties. Thus, where a person in a fiduciary relationship to another violates his duty as a fiduciary, a third person who participates in the violation of duty may be liable to the beneficiary. Whitney v. Citibank, N.A., 782 F.2d 1106 (2nd Cir.1986). Appellee's fear that the imposition of fiducial responsibilities upon a lending institution would preclude the making of commercial loans to competitors paints the special circumstances of this case with too broad a brush and as to preclude competitors from obtaining financing from the same institution. 70 A.L.R.3d 1344. We have held that a confidential relationship creates a fiduciary relationship. See, Lappas v. Barker, supra . There is some evidence demonstrating the existence of a fiduciary relationship here when Lucas apparently furnished First National with certain confidential information about his corporate business plans, as well as reposing a certain degree of trust and confidence in it, in order to obtain his personal loan from the bank. The bank may have breached this fiduciary relationship by agreeing to lend money to Scanlan to help him form Scansteel with the knowledge that such formation could have an adverse effect on Steelvest. There is also a legitimate factual question concerning whether First National improperly used and relied upon certain information concerning Steelvest obtained from Lucas in processing his loan when it proceeded to finance Scansteel. There are material factual issues with respect to appellants' claims against First National Bank. Summary judgment granted in the bank's favor was improper.