                             No.    90-124
           IN THE SUPREME COURT OF THE STATE OF MONTANA
                                   1990


                                                                  <-
MANN FARMS INCORPORATED, a Montana Corporation,              ':


JOHN J. MANN, FRANCIS MANN, WILBUR MANN and
EDNA MANN,
                     Plaintiff and Appellants,
     -v-
TRADERS STATE BANK OF POPLAR, MONTANA, and
NORTHEAST MONTANA BANK SHARES, INC.,
                     Defendants and Respondents.



APPEAL FROM:   District Court of the Fifteenth Judicial District,
               In and for the County of Roosevelt,
               The Honorable M. James Sorte, Judge presiding.


COUNSEL OF RECORD:
           For Appellant:
               James G. Edmiston, 111, Billings, Montana
               Richard A. Ramler & Belinda D. Rinker, Belgrade,
               Montana
           For Respondent:
               Bruce A. Fredrickson & Charles R. Cashmore; Crowley,
               Haughey, Hanson, Toole & Dietrich; Billings, Montana


                                   Submitted on Briefs:   June 28, 1990
                                               Decided: August 21, 1990
Filed:



                                   Clerk
Justice Fred J. Weber delivered the opinion of the Court.

     In what has come to be called a bad faith action, the District
Court of the Fifteenth Judicial District, Roosevelt County, granted
summary judgment to defendants.       Plaintiffs appeal.   We affirm.
     The sole issue for our consideration is whether the District
Court erred in granting summary judgment in favor of defendants?
     The Mann family formed Mann Farms, Inc. (Mann Farms) in 1976.
In the beginning, Traders State Bank (the Bank) carried the Mann
Farms1 credit in an unsecured status. Over the years, Mann Farms1
debt with the Bank continued to increase.        As a result of that
increase, in 1983 the Bank took its first security on the Mann
Farms1 line of credit.
     Mann Farms had difficulty reducing the principal balance.      In
an effort to work out some kind of an agreement, John Mann met
several times with Richard Loegering         (Loegering), the Bank's
Executive Vice President. John Mann informed him that he was going
to apply for a Small ~usinessAdministration (SBA) disaster loan.
He also desired to rework his loan with the Bank. The Bank planned
to take a second mortgage and requested Mann Farms to provide it
with projections for Mann Farms1 1985 credit needs.         Mann Farms
failed to comply.
     Finally on May 1, 1985, Mann Farms executed a renewal note,
second mortgages, and new security agreements. Loegering informed
the Manns that he would present a request for $50,000 to the loan
committee for approval based on Mann Farmst projected operating
loss for 1985 of $51,000.
                                  2
        The loan committee approved two loans for $25,000 each; the
first on the condition that Mann Farms provide the Bank with
additional collateral in the form of the corporations titled
vehicles, and the second on the condition that Mann Farms receive
the SBA disaster loan. Mann went to the bank and signed the first
note for $25,000 on May 10, 1985. However, no funds were advanced
because the additional collateral had not been provided.         No note
was ever signed representing the second $25,000.
        Subsequently, Mann Farms bargained with Moe Motors, a farm
implement dealer, to purchase a Caterpillar laser scraper, a Wagner
four wheel drive tractor and a White two wheel drive tractor.         He
listed the Bank as a credit reference in his application for
financing.
        Mann Farms had not disclosed those purchase agreements to the
Bank.     The purchase agreements with Moe Motors showed that Mann
Farms was trading in a 1973 Steiger tractor with a trade-in value
of $24,400. Mann Farms did not own a 1973 Steiger tractor.         There
were     also   other   discrepancies   on   the   purchase   agreements.
Loegering received a phone call for a credit reference. Loegering
informed the caller that Mann Farms was "heavily indebted" and had
been "past due since December of '84" with its payments to the
Bank.
        Because he knew that Moe Motors used Citizens First as its
bank on purchase contracts, Loegering telephoned Richard Uithoven
(Uithoven), President of Citizens First National Bank of Wolf Point
(Citizens First).       Uithoven informed Loegering that Mann Farms
listed the Caterpillar Scraper as collateral for a loan, owed
$28,000 to a third party on the Scraper, and that Mann Farms
attempted to obtain financing from Citizens First to pay off the
balance owed on the third party loan. Loegering informed Uithoven
of the Bank's experience with Mann Farms, including loan balances,
current financial condition, and past delinquencies.        Uithoven
testified that his conversations with Loegering did not affect his
bank's decision regarding the Mann Farmst credit application at
that bank. The Bank decided it would not loan Mann Farms the first
$25,000 unless the equipment purportedly purchased from Moe Motors
was returned.
     Mann Farms was unable to return the White tractor to Moe
Motors because Moe Motors had already sold the contract.     However
the other purchases were returned and the purchase contracts
rescinded.     The Bank then decided that it would proceed with the
first $25,000 conditional loan at Mann Farms' request. Mann Farms
never requested that the funds be advanced and the note eventually
expired.
     In the fall of 1985, the SBA approved a conditional disaster
loan to Mann Farms.     The Bank decided that it would agree to the
SBA proposal conditioned upon the Bank's receipt and approval of
a reasonable cash flow/budget from Mann Farms projecting its 1986
expense needs.    Loegering and John Witte, the Bank president, met
with the Manns to attempt to work out the cash flows. No agreement
was reached.     Mann Farms filed Chapter 12 Bankruptcy.   The final
decision on that matter is pending.
       On March 28, 1988, Mann Farms filed its complaint against
Trader State Bank and Northeast Montana Bank Shares (the Holding
Company) alleging breach of the implied covenant of good faith and
fair    dealing;    breach   of   fiduciary   obligations;   negligent
misrepresentation; interference with contract; and breach           of
implied contract of customer privacy.          On December 1, 1989,
defendants filed a motion for summary judgment pursuant to Rule
56, M.R.Civ.P.     The District Court granted the motion against all
claims and dismissed the complaint with prejudice.           From that
decision Mann Farms appeal.
       Did the District Court err in granting summary judgment in
favor of defendants?
       The District Court condensed the material components giving
rise to     each of Mann     Farms'   separate allegations   into the
following:
       1.   The Bank's exercise of its business judgment
            in temporarily withdrawing a $25,000 line of
            conditional operating credit from Mann Farms
            during the spring of 1985, after becoming
            aware of undisclosed equipment purchases by
            Mann Farms from Moe Motors Co., which, in the
            Bank's judgment, impaired Mann Farms' ability
            to service its debt at the Bank.
       2.   The Bank's discussions with Citizens First
            National Bank of Wolf Point, a potential
            purchaser of the Moe Motors equipment
            contracts, regarding Mann Farms' financial
            situation.
       3.   The Bank's refusal to loan operating funds to
            Mann Farms during the Spring of 1986.
       4.   The SBA1s refusal to loan disaster relief
            funds unless certain conditions were met.
       5.   Plaintiffs also contend that the actions of
            John Witte give rise to potential liability
            against the Holding Company.
     The District Court concluded that the totality of the record
established that there were no genuine issues of material fact and
that both defendants are entitled to judgment as a matter of law
on all counts of plaintiffsf amended complaint.        See Tucker v.
Trotter Treadmills, Inc. (Mont. 1989), 779 P.2d 524, 46 St.Rep.
1646.   Following is a review of Mann Farmsf claims.
          Implied Covenant of Good Faith and Fair Dealing

     Mann Farms maintains that the Bank acted dishonestly and
outside of any acceptable commercial practices in the banking
industry.    It maintains that the Bank breached its agreement to
loan Mann Farms operating expenses of $50,000 after Mann Farms had
agreed to renew the existing security agreements.
     The Bank maintains that if the covenant of good faith and fair
dealing existed in the instant case, and if there was a breach,
that breach occurred on the part of Mann Farms and not the Bank.
The Bank urges that all it did was make a good business decision
after learning of the purported equipment purchase from Moe Motors.
It maintains that the conditional agreement to loan was based in
large part upon Mann Farmsf representations to the Bank on its
March 15, 1985, financial statement and that Mann Farms never
informed the Bank of its plans to undertake any additional
obligations.   We agree.
     The financial statement required that Mann Farms provide a
tftrue, complete, and      accurate statementff of their    financial
condition and that "if any changes occur that materially reduce
the means or ability of the undersigned to pay all claims and
demands against us, the undersigned will immediately notify the
Bank in writing.It    The Moe Motorst contracts resulted in an
undisclosed debt of $74,000.
     Relying largely on Montana Bank of Circle v. Ralph Meyers    &

Sons, Inc. (1989), 236 Mont. 236, 769 P.2d 1208, the District Court
concluded that since Mann Farms committed the initial breach, it
cannot complain of an alleged subsequent breach by the Bank.     We
agree. Mann Farms failed to disclose its equipment purchases with
Moe Motors to the Bank.   It was reasonable for the Bank to revoke
its conditional offer to loan money when Mann Farms failed to
provide a Ittrue,complete and accurate statementw to the Bank.
     For the assistance of the reader we point out that subsequent
to the District Courttsdecision, this Court decided Story v. City
of Bozeman (Mont. 1990), 791 P.2d 767, 47 St.Rep. 850, which
clarified the standard imposed by the covenant of good faith and
fair dealing as it applies in contract and as it applies in tort.
     Shiplet v. First Sec. Bank of Livingston (1988), 234 Mont.
166, 173, 762 P.2d 242, 246, sets the standard to be met in a tort
claim.
     [Tlhe minimal requirement for breach of the covenant is
     action by the defendant that is arbitrary, capricious or
     unreasonable, and exceeded plaintiffst justifiable
     expectation that the defendant act           reasonably.
     (citations omitted)  .
Story sets the standard        met in a contract action.
     For every contract not covered by a more specific
     statutory provision, the standard of compliance is that
     contained in 5 28-1-211, MCA:
           The conduct required by the implied covenant
           of good faith and fair dealing is honesty in
           fact and the observance of reasonable
           commercial standards of fair dealing in the
           trade.


We conclude that the District Court correctly held that the Bank
acted reasonably and did not breach the covenant of good faith and
fair dealing.   We further conclude that a review of the record
establishes that the Bank acted with honesty in fact and observed
reasonable commercial standards.
                          Fiduciary Duty
     Mann Farms maintains that a fiduciary relationship existed
based upon its fourteen year relationship with the Bank.
     The Bank maintains, and the District Court agreed that the
relationship between a bank and its customer usually does not give
rise to fiduciary duty.   See Simmons v. Jenkins (1988), 230 Mont.
429, 750 P.2d 1067. Rather, a fiduciary relationship exists when:
     special circumstances indicate exclusive and repeated
     dealings with the Bank.       This Court has recently
     [required] a bank to act as a financial advisor in some
     capacity, other than that common in the usual arms-
     length debtor/creditor relationship, in addition to
     requiring a long history of dealings with the bank, to
     establish a fiduciary relationship. (citations omitted).


See First Bank (N.A.)-Billings v. Clark (1989), 236 Mont. 195, 771
P.2d 84.   A review of the record confirms the District Court's
conclusion that the Bank and Mann Farms never acted beyond the
usual arms-length debtor-creditor relationship. We agree with the
District Court and conclude that such a relationship does not
establish a fiduciary relationship.
    Interference with Contract, Negligent Misrepresentation,
        and Implied Contractual ~ i g h tof Customer Privacy
        Mann Farms alleged that l1the Bank failed to use reasonable
care in evaluating the benefits which would have resulted to
PlaintiffsI1.       It further maintains that Loegering had no
authorization from Mann Farms to contact Uithoven at Citizens First
to discuss confidential financial matters.
        The Bank justifies Loegering's phone call to Citizens First
as an important business decision to protect its interests after
becoming aware of the material undisclosed facts relating to Mann
Farms1 purchase agreements with Moe Motors. Furthermore, it points
out that in his deposition, Uithoven testified that his discussion
with Loegering did not interfere with First Citizen's decisions
regarding the Mann Farms1 credit with that institution.
     We first point out that there is no legal duty requiring a
bank to loan money to a customer absent a clear contractual
commitment.      Furthermore, there is no duty      for a bank to
renegotiate a defaulted loan. Montana Bank of Circle, 769 P.2d at
1213.    Testimony showed it was Bank policy to always conduct credit
checks of potential borrowers, and to always inform them of that
fact.     Such a credit check serves a legitimate business purpose.
We conclude it was appropriate for the Bank to make credit checks
as was done here.
    We conclude that Mann Farms has failed to set forth any
evidence that any material issues of fact existed which made
summary judgment improper.     We hold that the District Court did
n o t e r r i n g r a n t i n g summary judgment i n f a v o r of d e f e n d a n t s .
       Affirmed.
W Concur:
 e




f         Chief J u s t i c e




y             Justices
