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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

NATIONAL GRANGE MUTUAL INSURANCE COMPANY Plaintiff v. VERIZON'S BENEFITS CENTER, et al. Defendants

* * * * CIVIL NO. L-06-543

******* MEMORANDUM Now pending are the Cross-Motions for Summary Judgment filed by Plaintiff National Grange Mutual Insurance Company ("National Grange") and Defendant Atlantic Financial Federal Credit Union ("Atlantic"). Because the issues are adequately addressed in the briefs, no hearing is necessary. See Local Rule 105.6 (D. Md. 2008). For the following reasons, the Court will, by separate Order, DENY National Grange's Motion (Docket No. 34) and GRANT Atlantic's Motion (Docket No. 35). This is a bank negligence case. National Grange, as assignee of the rights of Stacie Norris, a minor, claims that Atlantic should have prevented Defendant Saundra Norris, Stacie's guardian, from misappropriating funds in Saundra's bank accounts that were part of Stacie's guardianship estate. The resolution of this case is dictated by the general rule that a bank, with certain narrow exceptions, owes no duty to a non-customer with whom it has no direct relationship. Stacie was not a customer of the bank and the narrow exceptions do not apply to the facts of this case. Moreover, as will be discussed, Atlantic neither knew nor had reason to know the nature of the funds in Saundra's accounts, and Atlantic acted in accordance with acceptable banking practices. Accordingly, Atlantic owed Stacie no duty of care and is not liable to National Grange, the assignee of Stacie's rights. 1


I.

Background The facts of this case are largely undisputed. When Frank Norris died, a death benefit of

$32,000 became payable to his daughter, Stacie Norris, under his pension with Verizon Communications Inc. On December 26, 2001, the Orphans' Court appointed Saundra Norris as guardian of Stacie's property. The Orphans' Court required Saundra (i) to post a bond in the value of the death benefit, and (ii) to deposit the benefit at a FDIC insured bank in an account titled "Saundra Norris, Guardian of the Property of Stacie Norris, a minor, subject to the Order of the Orphans' Court of Baltimore County." Saundra posted a bond, naming National Grange as the surety. Verizon paid out Stacie's benefit by issuing a check for $29,331.72 payable to "Saundra Norris bene of Frank E. Norris."1 On August 14, 2002, contrary to the Orphans' Court's order, Saundra deposited the $29,331.72 into three separate accounts she held at Atlantic in her name. She deposited $2,000 into her personal checking account, $15,331.72 into an unrestricted money market account, and $12,000 into a one-year share certificate (the "Share Certificate"). The Share Certificate was titled in Saundra's name, with Stacie as the beneficiary.2 Almost immediately after depositing the check from Verizon, Saundra began withdrawing funds from the money market account. On August 30, 2002, Saundra asked Bonnie Mascaro, the manager of Atlantic's Hunt Valley, Maryland, branch, to write a letter to the Orphans' Court. The letter stated that Saundra held the Share Certificate in her name with Stacie as the beneficiary.
                                                            
1

Verizon claims that the check was properly payable to Saundra because she was a "relative or other proper person," under its benefits plan and could be paid Stacie's benefits. The amount of $29,331.72 represented the full $32,000 benefit owed to Stacie, less taxes.

2

The term "beneficiary" meant only that the balance of the Share Certificate would be paid out to Stacie if Saundra were to die before the Share Certificate became due. 2



On September 17, 2002, a person named Billie Zimmer wrote a memorandum to the Orphans' Court discussing Saundra's guardianship. The memorandum explains that the accounts that held the guardianship funds were neither properly titled nor properly insured. Zimmer also informed the Orphans' Court that, just that day, she called Mascaro to inquire about Saundra's account. According to the memorandum, Mascaro told Zimmer: (i) that Saundra had a one year Share Certificate in Saundra's name with Stacie named as the beneficiary, (ii) that the Share Certificate was insured but not by the FDIC, and (iii) that the Share Certificate could not be re-titled without a penalty before it matured on August 14, 2003. Zimmer concluded the memorandum by asking the Orphans' Court how it wished to proceed. By October 21, 2002, Saundra had withdrawn all $15,331.72 from the money market account. On January 15, 2003, the Orphans' Court terminated Saundra's guardianship because she had failed to properly account for the guardianship funds. On January 29, 2003 the Orphans' Court appointed a successor guardian, Charles H. Hobbs IV. On January 31, 2003 Hobbs wrote a letter to Mascaro, stating that the Orphans' Court had named him substitute guardian. Hobbs's letter went on to request that he be allowed to withdraw funds from the Share Certificate. Hobbs attached the Orphans' Court's order appointing him substitute guardian but did not attach the Orphans' Court's original order that appointed Saundra as Stacie's guardian. Mascaro and Hobbs met in February 2003 at Atlantic's Hunt Valley Branch. Mascaro refused to allow Hobbs to remove the funds from the Share Certificate, stating that she had no proof that those funds were related to Stacie's guardianship. On August 14, 2003, the Share Certificate matured. Saundra began withdrawing funds from the Share Certificate on August 15, 2003. By October 25, 2003, Saundra had withdrawn all $12,000.

3


On July 14, 2004, Hobbs petitioned a Maryland State Court to order National Grange to pay him $24,584.72 under the surety bond it had issued to Saundra.3 National Grange agreed to pay out the bond, and in exchange, Hobbs assigned to National Grange the guardianship's causes of action. National Grange brought this suit against Saundra, Verizon, and Atlantic in the Circuit Court for Baltimore County, Maryland. National Grange's complaint alleged three counts: (i) negligence (against Verizon and Atlantic), (ii) breach of contract (against Verizon and Atlantic), and (iii) conversion (against Saundra). On March 1, 2006, Verizon removed the action to this Court.4 On April 3, 2006, Atlantic filed an answer, which included a cross-claim against Saundra. On July 18, 2006, Saundra was served with process. On August 4, 2006, Atlantic filed a crossclaim against Verizon. On August 14, 2006, National Grange moved for an entry of default and a default judgment against Saundra. On August 18, 2006, Verizon moved for judgment on Atlantic's cross-claim. On March 5, 2007, the Court held a teleconference. The Court concluded it would be most efficient to first resolve National Grange's claim against Atlantic. Accordingly, the Court denied the motions of Verizon and National Grange without prejudice and ordered limited discovery regarding National Grange's claim against Atlantic, to be followed by the filing of dispositive motions. Following discovery, both Atlantic and National Grange moved for Summary Judgment.

                                                            

Hobbs concluded that Saundra had used $4,747.00 of the $29,331.72 for the benefit of Stacie. Accordingly, Hobbs determined the loss to Stacie's estate to be $24,584.72. Verizon removed the case based on federal question jurisdiction, claiming that the Employee Retirement Income Security Act, 29 U.S.C.

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