Country Corner Food and Drug, Inc. v. First State Bank and Trust Co. of Conway, Arkansas

• Decision Date: 23 April 1998
• Docket Number: No. 97-608,97-608
• Citation: 332 Ark. 645,966 S.W.2d 894
• Parties: COUNTRY CORNER FOOD AND DRUG, INC., Appellant, v. FIRST STATE BANK AND TRUST COMPANY OF CONWAY, ARKANSAS, Tommy Watson and Virgil C. Shannon, Appellees.
• Court: Arkansas Supreme Court

Page 894

966 S.W.2d 894

332 Ark. 645

COUNTRY CORNER FOOD AND DRUG, INC., Appellant, v. FIRST STATE BANK AND TRUST COMPANY OF CONWAY, ARKANSAS Tommy Watson and Virgil C. Shannon, Appellees.

No. 97-608.

Supreme Court of Arkansas.

April 23, 1998.

Alex G. Streett, James V. Coutts, Russellville, for Appellant.

William C. Adkisson, Matthew W. Adlong, Conway, for Appellee.

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. ¹ 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 Corner's 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 complaint, and appellees again moved to dismiss. By order dated October 1, 1992, the circuit court granted the Bank's 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. Bank's 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 Corner's 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, 873 S.W.2d 552 (1994); Gordon v. Planters & Merchants Bancshares, Inc., 310 Ark. 11, 832 S.W.2d 492 (1992); Battle v. Harris, 298 Ark. 241, 766 S.W.2d 431 (1989). In deciding dismissal motions, the trial court must look only to the allegations in the complaint. Neal v. Wilson, supra; Wiseman v. Batchelor, 315 Ark. 85, 864 S.W.2d 248 (1993); Deitsch v. Tillery, 309 Ark. 401, 833 S.W.2d 760 (1992). In order to state a cause of action, the complaint must allege facts and not mere conclusions. Ark. R. Civ. P. 8; see also Hollingsworth v. First Nat'l Bank & Trust Co., 311 Ark. 637, 846 S.W.2d 176 (1993); Rabalaias v. Barnett, 284 Ark. 527, 683 S.W.2d 919 (1985). When a complaint is dismissed without prejudice, the plaintiff has the option of pleading further or appealing. Hollingsworth v. First Nat'l Bank & Trust Co., supra. If the plaintiff appeals, the option to plead further is waived in the event of an affirmance by the appellate court. Id.

Hunt v. Riley, 322 Ark. 453, 457, 909 S.W.2d 329, 331-32 (1995).

Arkansas is a fact-pleading state, and this court looks to the underlying facts supporting an alleged cause of action to determine whether the matter has been sufficiently pled. Brown v. Tucker, 330 Ark. 435, 954 S.W.2d 262 (1997). Country Corner contends that its amended complaint included sufficient facts to support six causes of action in tort against the Bank: fraud, tortious interference with the contractual relationship or business expectancy, breach of fiduciary duty, duty to act in good faith, duress, and punitive damages. We will consider the claims seriatim.

a. Fraud

Country Corner first urges that it properly pled fraud by the Bank. We have stated that 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. Wiseman v. Batchelor, 315 Ark. 85, 864 S.W.2d 248 (1993). In order to prevail over a Rule 12(b)(6) motion, Country Corner must plead sufficient facts to support all five elements.

In paragraphs 27 through 31 of its amended complaint, Country Corner alleges that Bank representatives made false representations by stating that the 1988 promissory note in the amount of $194,734 would be renewed. In paragraph 22 of the complaint, Country Corner further alleges that the Bank informed it that the renewal note was being prepared in 1989 and that Country Corner should only pay interest on the note until the renewal note was executed.

Assuming that these allegations are true, the statements by the Bank representatives do not support an action for fraud. First, there are no facts alleged supporting an allegation that these statements by the Bank were false at the time they were made. The Bank could well have been in the process of renewing the note but decided that additional security in the form of a Watson/Shannon guaranty on the new note was warranted. Secondly, even assuming that the Bank knew the statements were false, there are no facts pled by Country Corner to show justifiable reliance on its part. In fact, there was no reason for Country Corner to rely on these statements to its detriment. The statements allegedly made by the Bank merely lessened Country Corner's immediate financial burden in the interim by requiring it only to pay interest. And, again, Country Corner had to be aware that the Bank could require additional security.

Finally, even if the Bank made these statements with the intent that Country Corner rely on it, the Bank had the right to refuse to renew the loan. Country Corner pled no facts which would show that the Bank was obligated to renew the loan without the guarantee of Watson and Shannon on the new note.

b. Tortious Interference

Country Corner also claims that it has sufficiently pled a claim for tortious interference with contractual relationship or business expectancy against the Bank. Paragraphs 32 and 33 of Country Corner's amended complaint relate to its allegations of tortious interference. Paragraph 32 incorporates the previous paragraphs of the complaint, and paragraph 33 merely states that the Bank interfered with Country Corner's "contract advantage" by giving "assurances" and then refusing to renew the loan. Reference to the "assurances" apparently refers back to the allegations that the Bank representatives stated that the note would be renewed. Neither this section nor the previous incorporated sections indicates with what contract or with what business expectancy the Bank intended to interfere. It is elementary that some precise business expectancy or contractual relationship be obstructed by the Bank's actions. See United Bilt Homes, Inc. v. Sampson, 310 Ark. 47, 832 S.W.2d 502 (1992). That lapse is fatal to this cause of action.

c. Breach of Fiduciary Duty

Next, Country Corner claims breach of fiduciary duty by the Bank. In paragraph 38 of the amended complaint, Country Corner alleges that a fiduciary duty was created by...