The opinion of the court was delivered by: WOODS
Henry Woods, U.S. District Judge.
On April 8, 1988, the court heard oral argument on the defendant's motions to dismiss and for summary judgment. For the reasons that follow the defendant's motions are granted and the plaintiffs' complaint is dismissed.
On April 24, 1984, a loan agreement was made by and between Taggart & Taggart Seed, Inc., an Arkansas corporation with its principal place of business at Augusta, Arkansas, and First Tennessee Bank National Association, a nationally chartered bank with its principal place of business at Memphis, Tennessee. Pursuant to the agreement the bank agreed to provide Taggart Seed with an $ 18 million line of credit, with the express understanding and agreement that any advances under or extensions of the line of credit were to be made "solely at [the] bank's option and discretion." Repayment of funds advanced were separately guaranteed by Taggart Seed's principal shareholders, Tommy Taggart, Charles Taggart and their respective spouses, and by Taggart & Taggart, Inc. and Taggart & Taggart Transportation, Inc., related corporations also principally owned by the Taggart brothers. The loan was secured by Taggart Seed's equipment, facilities and inventory consisting primarily of grain held in Taggart Seed's storage facilities under United States Department of Agriculture receipts.
In early May, 1984, the bank conducted a regular field examination of Taggart Seed's facilities. From this examination the bank concluded that Taggart Seed had moved 100,000 bushels of milo from its storage facilities which were loaded onto barges and shipped downriver. According to the bank, the grain which had been shipped had not yet been sold and was, at the time of shipping, still subject to warehouse receipts securing the loan. The bank considered Taggart Seed's actions an "event of default" under the loan agreement and, in late May or early June, 1984, notified Taggart Seed that it would advance no more funds under the line of credit and that it expected repayment of the outstanding balance at the earliest possible date.
It is undisputed that, despite its decision to terminate the agreement, the bank continued to advance some funds in order to let Taggart Seed complete the wheat season that was underway. In addition, the termination date of the loan agreement was extended by amendment three times between August, 1985 and January, 1986. The note was eventually repaid in full prior to April, 1986, as was required by the third amendment. At no time did the bank institute judicial proceedings against Taggart Seed or the guarantors to collect the indebtedness. Taggart Seed obtained a replacement line of credit from another lending institution in November, 1986.
On February 7, 1987, Taggart & Taggart Seed, Inc., Taggart & Taggart, Inc., Taggart & Taggart Transportation, Inc., Tommy Taggart, Charles Taggart and Charles Wright filed a complaint against the bank in an Arkansas state court alleging: (1) intentional breach of the April, 1984, loan agreement; (2) breach of the April, 1984, loan agreement; (3) negligent failure to perform or comply with the April, 1984, loan agreement; (4) "bad faith" misrepresentation; and (5) deceit. The plaintiffs claimed that they suffered severe emotional distress and economic loss as the result of the defendant bank's actions. On March 11, 1987, the defendant bank caused the action to be removed to this court under the provisions of 28 U.S.C. § 1441, jurisdiction being proper under 28 U.S.C. § 1332. On April 8, 1988, at oral argument on the summary judgment motion, the court granted leave for the plaintiffs to file an amended complaint alleging in addition to these claims set forth above: (6) "bad faith" in the context of a fiduciary relationship; (7) constructive fraud; (8) interference with contractual relations; and (9) prima facie tort.
The defendant bank has moved to dismiss or to be granted summary judgment on all claims other than those brought by Taggart & Taggart Seed, Inc., arguing that nonparties to the loan agreement have no standing to sue. The bank has also moved for summary judgment on the remaining claims arguing that it cannot be in breach for its unilateral termination of a "demand" note, that the plaintiffs executed comprehensive releases in its favor which bar this action and that the plaintiffs' tort claims were not pled with the requisite specificity under the Federal Rules of Civil Procedure.
This is a diversity action between citizens of different states and, as a federal court sitting in Arkansas, this court is required to apply the law of the State of Arkansas--including its conflicts of law rules. Klaxon v. Stentor Mfg. Co., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). This court concludes that an Arkansas court hearing this case would apply the law of Tennessee because all of the plaintiffs' claims, including those sounding in tort, arise from the defendant's alleged breach of the April, 1984, loan agreement. That agreement was executed by the defendant bank at its principal place of business in Memphis, Tennessee, and payments on the note were to be made there. Moreover, the parties expressly agreed that the law of Tennessee would govern the loan agreement's interpretation and, because there is a sufficient nexus with Tennessee, the parties expressed intent that the law of that state be applied should be upheld. See Tiffany Industries, Inc. v. Commercial Grain Bin Co., 714 F.2d 799 (8th Cir. 1983) (applying Arkansas' conflicts of law rules); Olin Water Services. Midland Research Laboratories, 596 F. Supp. 412 (E.D. Ark. 1984), appeal dismissed, 774 F.2d 303 (8th Cir. 1985) (applying Arkansas' conflicts of law rules).
The defendant bank has moved to dismiss the claims of all parties, except Taggart & Taggart Seed, Inc., alleging lack of standing to sue because they were not parties to the April, 1984, loan agreement. The plaintiffs admit that, "strictly speaking, the borrower, as defined by the bank throughout this litigation, is Taggart & Taggart Seed, Inc.," and that "the other plaintiffs, Taggart & Taggart, Inc., Taggart & Taggart Transportation, Inc., Charles Taggart, Tommy Taggart, and Charles Wright were not 'borrowers' under the strict definition of the loan agreement." But they take the position, as stated in paragraph four (4) of their complaint, that the bank provided a line of credit to Taggart & Taggart Seed, Inc., "for the benefit of all the plaintiffs in this litigation." They also rely on the fact that the Taggarts and their companies guaranteed the note and they attempt to characterize Charles Wright, an employee of Taggart Seed, as a third-party beneficiary to the loan agreement. It is the opinion of the court that only Taggart & Taggart Seed, Inc. has properly stated a claim, and that the other plaintiffs should be, and are hereby dismissed.
The April, 1984, loan agreement recites that it was made by and between First Tennessee Bank National Association and Taggart & Taggart Seed, Inc. It was executed by Charles Taggart and Tommy Taggart in their capacity as officers of Taggart Seed. Taggart & Taggart Transportation, Inc. and Taggart & Taggart, Inc. are defined in the agreement as "related companies" and anyone controlling 5% or more of the capital stock of Taggart & Taggart Seed, Inc. is defined as a "related person." The agreement requires that Taggart Seed deal only at "arms length" with related persons and it prohibits Taggart Seed from making loans or investments with proceeds of the line of credit, except for the purchase of certain government securities or certificates of deposit. It is abundantly clear from these terms of the agreement that there was no intent to benefit any of the plaintiffs other than Taggart Seed.
Under Tennessee law, as well as the law of most other jurisdictions including Arkansas, an action to redress injuries to a corporation cannot be maintained by a shareholder in his own name, but must be brought in the name of the corporation. Media General, Inc. v. Tanner, 625 F. Supp. 237 (W.D. Tenn. 1985); Robertson v. White, 633 F. Supp. 954 (W.D. Ark. 1986). The allegation of Tommy Taggart and Charles Taggart that they were damaged by the defendant's intentional, negligent bad faith or fraudulent breach of its commitment to lend money to Taggart Seed is but an attempt to piggyback their claims on top of Taggart Seed's. The injuries alleged by Tommy Taggart and Charles Taggart are incidental to and derivative of the injury alleged to the corporate entity. They state no cause of action separate and apart from that which belongs to Taggart Seed. Because the Taggart brothers are the principal shareholders of Taggart Seed, any recovery on its behalf will, of course, inure to their benefit. ...