Preview:

HEADNOTE: NEGLIGENCE -- EXPERT TESTIMONY -- BANKING -- CONTRACTS -- The plaintiff brought negligence and breach of contract claims against a bank, alleging that the bank breached its duty of ordinary care when it added a name to his deceased father's bank account. These claims should not have been submitted to the trier of fact because the plaintiff did not provide expert testimony establishing the scope of the bank's duty under either claim. In a case of alleged negligence against a bank, expert testimony is ordinarily necessary to establish the scope of the bank's duty unless the alleged negligence so obviously deviated from the applicable standard of care that the trier of fact could appreciate the deviation without an expert's assistance. Expert testimony was necessary in this case, but the plaintiff provided no such testimony. Similarly, expert testimony is ordinarily necessary to establish a bank's duty when the bank has allegedly breached its implied contractual duty of ordinary care. The plaintiff in this case was not required to establish the precise terms of the contract at issue, but he was required to provide expert testimony establishing the scope of the bank's contractual duty of ordinary care. He failed to provide this testimony.

IN THE COURT OF APPEALS OF MARYLAND No. 28 September Term, 2009

STEPHEN W. SCHULTZ, Personal Representative of the Estate of Melvin Ray Schultz v. BANK OF AMERICA, N.A.

Bell, C.J. Harrell Battaglia Greene Murphy Barbera Adkins, JJ.

Opinion by Greene, J. Bell, C.J., Murphy and Adkins, JJ., Dissent.

Filed: March 12, 2010

In this case, Bank of America, N.A. ("the Bank"), added an individual's name to a checking account opened in the name of Melvin Ray Schultz ("Schultz"), the now-deceased father of Stephen Schultz ("Petitioner"). Petitioner sued the Bank, alleging that the Bank acted negligently and breached its contract with Schultz when it added the individual's name to, and allowed her to withdraw funds from, the account. A Baltimore County jury found in Petitioner's favor, but the Court of Special Appeals reversed that judgment. The intermediate appellate court concluded, in an unreported opinion, that expert testimony was necessary to establish the Bank's standard of care when adding an individual's name to a bank account and that Petitioner had produced no evidence on that issue. In addition, the court concluded that Petitioner had not produced sufficient evidence to establish that the Bank breached its contract with Schultz. Upon our own review of the case, we shall affirm the judgment of the Court of Special Appeals. Petitioner could not have succeeded on his negligence claim without producing expert testimony establishing the Bank's standard of care. Adding an individual's name to a bank account involves an understanding of internal bank procedures that the trier of fact cannot be expected to appreciate. Accordingly, expert testimony was necessary to explain to the jury the reasonable commercial standards prevailing in the area with respect to adding names to a customer's checking account and verifying the identities of the signatories. For the same reason, Petitioner could not have succeeded on his breach of contract claim. That claim was based on a breach of the Bank's implied contractual duty to exercise ordinary care; Petitioner, however, produced no expert testimony establishing the

extent of the obligation imposed by that standard of care. Accordingly, we agree with the Court of Special Appeals' decision to reverse the judgment of the trial court. 1 I. Procedural History Petitioner, in his capacity as Personal Representative of the Estate of Melvin Ray Schultz, filed the underlying action in the Circuit Court for Baltimore County, seeking to recover funds that he alleges were wrongfully disbursed from a bank account that Schultz held with the Bank. Petitioner presented two claims that are relevant to this appeal, both concerning the Bank's action in adding the name of Robin Holbrook ("Holbrook") to Schultz's account and in allowing Holbrook to withdraw funds from the account. 2 In Petitioner's first claim, Petitioner argued that the Bank had breached a contract with Schultz. In his second claim, Petitioner argued that the Bank had negligently handled Schultz's account. The trial took place on June 25 and 26, 2007. After Petitioner rested his case, the Bank moved for judgment and the trial court denied the motion. The Bank again moved for judgment after the close of all the evidence, which the trial court also denied. The jury

The Bank has requested that we consider whether the trial court properly aggregated two amounts awarded to Petitioner, should we rule in favor of Petitioner on both claims. As we rule against Petitioner on both claims, and because the Bank presented no cross-petition for certiorari, we need not consider this issue. Petitioner also presented several claims against Holbrook, but she did not participate at trial. A default judgment was entered against her. 3
2

1

considered the two counts and found in favor of Petitioner on both, awarding him $23,475 on the breach of contract claim and $7,600 on the negligence claim. Over the objection of the Bank, the trial court awarded Petitioner an aggregate amount of $31,075. The Bank noted a timely appeal, and the Court of Special Appeals reversed the judgment of the trial court. The intermediate appellate court concluded that the trial court should have granted Petitioner's motion for judgment because Petitioner produced no expert testimony proving the Bank's breach of the standard of care for the negligence claim and produced insufficient evidence to show that the Bank had breached a contract with Schultz. Petitioner subsequently petitioned this Court for a writ of certiorari, which we granted. Schultz v. Bank of America, 408 Md. 149, 968 A.2d 1064 (2009). Facts of the Case Schultz died on July 5, 2005, at the age of 81. There is some dispute about the events leading up to his death, but the parties seem to agree that Schultz's health and well-being were in decline in the months before he died. He had been in a car accident in February 2005, had been drinking heavily, and had neglected himself and his property. Before he died, however, he developed some sort of relationship with Holbrook, who had moved into Schultz's home. Holbrook was apparently acting as Schultz's care giver, but Petitioner alleges that Holbrook also took advantage of Schultz by having her name added to Schultz's account with the Bank. Petitioner has advanced two theories as to how this occurred, one in which Holbrook coerced Schultz into adding her name to his account and another in

4

which Holbrook had her name added through forgery. There is no dispute that Holbrook's name was in fact added to Schultz's account and that she made withdrawals from the account. Petitioner filed suit against the Bank, alleging that the Bank negligently handled Schultz's account and that the Bank breached its contract with Schultz. At trial, Petitioner presented three witnesses. The first witness, a handwriting expert, examined several of Schultz's known signatures and the signature card that was used to add Holbrook's name to Schultz's bank account. He opined that the signature purporting to be Schultz's on the signature card was not the signature that Schultz used in the normal course of business. He also testified that several checks drawn on Schultz's account appeared to have been forged with Schultz's signature. The next witness, a friend of Schultz's, testified to the

deterioration of Schultz's health leading up to his death, specifically his heavy drinking and his lack of attention to his own property. She also testified to her observance of Holbrook at Schultz's home and her understanding of what Schultz intended for his estate. Petitioner's third witness, his former attorney, explained that the week after Schultz's death, on July 11, 2005, she obtained a temporary restraining order directing the Bank to freeze Schultz's account, that she gave a copy of the temporary restraining order to a branch

5

manager of the Bank that day,3 and that the branch manager informed her that the account was then frozen.4 On cross-examination, Petitioner's former attorney admitted that she served the temporary restraining order on a branch manager of the Bank, but that she could not remember if she also served the Bank's resident agent, as required by Maryland Rule 2124(d). The only other evidence regarding the Bank's receipt of the order was the attorney's testimony that the branch manager told her the account was frozen and a letter from the Bank acknowledging that the account was frozen. The letter was dated July 13, 2005, two days after the attorney gave the order to the branch manager. There was no evidence establishing when, or if, the resident agent received a copy of the order or what the branch manager did with the order after receiving it. In his complaint, Petitioner alleged, among other things, that the Bank breached its contract with Schultz and was negligent when it "permitt[ed] the withdrawal of funds from [Schultz's] Account in violation of [the] July 11, 2005 Temporary Restraining Order." This allegation is presumably based on Schultz's bank records, which suggest that the Bank may have disbursed funds from Schultz's account on July 12, 2005, the day after Petitioner's former attorney gave the order to the bank manager. We will not, however, consider the possible impact of the order for a number of reasons. First, the record does not establish that the Bank actually disbursed funds after the bank manager received the order. Schultz's bank statements show that several ATM withdrawals from Schultz's account were "posted" on July 12, but the line items for those withdrawals suggest that the funds were actually disbursed on previous days. One check and one cash withdrawal were also "posted" on July 12, but there was no evidence establishing that this was actually the date when funds were disbursed. Petitioner did not present any testimony or other evidence explaining whether these funds were actually disbursed after the Bank was given the order. Second, Petitioner did not establish when, if ever, the order was properly served on the Bank. As explained supra note 3, Petitioner's former attorney admitted that she did not remember whether she ever served the order on the Bank's resident agent, as required by Maryland law. Petitioner presented no other evidence establishing what the branch manager did with the order after he received it or if the resident agent ever received the order. The Bank acknowledged by a letter dated July 13, 2005, that it received the order and froze Schultz's account, but there is no evidence suggesting that the Bank disbursed funds from Schultz's account after July 12, 2005. Third, any argument regarding the order is not properly before us for review. See Md. Rule 8-131 (explaining that an appellate court will ordinarily not decide a non(continued...) 6
4 3

Petitioner was the final witness. Like Schultz's friend, Petitioner testified to the deterioration in Schultz's health, and, like the handwriting expert, he testified that the signatures on some checks drawn from Schultz's bank account were not authentic. He also explained that there had been activity on Schultz's ATM account after Schultz met Holbrook, even though Schultz never used an ATM. In addition, he explained that he attempted to have the Bank freeze Schultz's account on the evening of, and the day after, Schultz's death, over the phone and in person, but that the Bank would not allow him to do so. He further testified that he had never met Holbrook before Schultz's death, although he admitted that he did not know if Schultz wanted Holbrook to have any money. Petitioner did not present any testimony, expert or otherwise, regarding the standard of care applicable to a bank when adding an individual's name to a customer's account. He did submit into evidence, among other documents, the signature card that Schultz signed when he initially opened his account with the Bank, the signature card adding Holbrook's name to Schultz's account with the Bank, the letter from the Bank indicating that the account had been frozen,

(...continued) jurisdictional issue "unless it plainly appears by the record to have been raised in or decided by the trial court"). Petitioner did not request, and the jury did not receive, instructions about how the order might have impacted their verdict. Petitioner also presented no arguments about the order in the briefs he submitted to the Court of Special Appeals and to this Court. When asked about the order during oral arguments before this Court, Petitioner did not explain its relevance. We are not inclined to consider an argument that was not advanced in the trial court, the intermediate appellate court, or this Court. 7

4

checks paid from the account, the February through July 2005 bank statements for the account, and the Bank's training documents regarding the addition of names to accounts. After Petitioner rested his case, the Bank moved for judgment, arguing that Petitioner had presented no evidence of a contract between Schultz and the Bank and that Petitioner had failed to prove his capacity to sue on Schultz's behalf. The trial court denied the Bank's motion. The Bank and Petitioner then both read into evidence portions of the deposition of one of the Bank's Banking Center Managers, who was unavailable to testify. According to the manager's deposition testimony, Schultz and Holbrook had appeared together at his bank branch to have Holbrook added to his account. The manager also explained the procedure by which he claimed to have received identification from both Schultz and Holbrook and stated that he had witnessed both Schultz and Holbrook signing the signature card.5 After the presentation of this testimony, the Bank closed its case and renewed its motion for judgment. In the motion, the Bank first argued that Petitioner had failed to prove the standard of care for his negligence claim because he had not produced expert testimony establishing the Bank's duty to Schultz. Second, the Bank argued that Petitioner had failed

Petitioner has argued in his briefs submitted to this Court and to the Court of Special Appeals that "an examination of the signature card belied" the testimony of the Banking Center Manager. He notes that Schultz's social security number is printed on the card, but Holbrook's is handwritten. He also notes that Schultz's signature is next to Holbrook's social security number and Holbrook's signature is next to Schultz's social security number. These aspects of the signature card do not affect our conclusion that expert testimony was necessary to establish the applicable standard of care. Petitioner also asserts that the "signature card was printed on a personal computer," but we see no evidence in the record supporting this assertion. 8

5

to provide any evidence supporting the causation element of his negligence claim. Third, the Bank argued that Petitioner had failed to prove his breach of contract claim because he had not presented any evidence of a contract provision that had been breached. Petitioner argued in response that expert testimony was not necessary to show the standard of care, that he had established the elements of his negligence claim, and that the Bank had breached the implicit contractual duty of ordinary care that arose when Schultz opened his account with the Bank.6 The trial court denied the Bank's motion, concluding that expert testimony was unnecessary to establish the standard of care on the facts of this case, that there was sufficient evidence to submit the negligence claim to the jury, and that the signature card could establish that Schultz and the Bank had entered into a contract. 7 At no time at trial did Petitioner offer to provide expert testimony regarding the Bank's standard of care. The issue of expert testimony arose only when the Bank moved for judgment after the close of its case.
7 6

In denying the Bank's motion regarding the contract claim, the trial court stated: On the motion with respect to the contract issue, I'm going to deny the motion with respect to that count. I think the law is pretty clear that a signature card is a contract and creates a contract. I think there's enough evidence to send it to the jury on that.

In regard to expert testimony, the trial court initially opined, during arguments on the Bank's motion, that expert testimony might be necessary because "not everyone is familiar with how banks operate." The following day, however, when the court issued its ruling, the court came to the opposite conclusion. Referring to Free State Bank & Trust v. Ellis , 45 Md. App. 159, 411 A.2d 1090 (1980), which we discuss in this opinion, the trial court stated: Finally, on the issue of expert witnesses, I did read the (continued...) 9

The two counts were submitted to the jury. Among other things, the jury was instructed that "[a] bank must exercise ordinary care with respect to custody of funds belonging to its depositor" and that ordinary care "means observance of the reasonable commercial standards prevailing in the area in which the person is located with respect to the business in which the person is engaged." The jury was also instructed that "[t]he

7

(...continued) [Free State] case last evening, and [Free State] doesn't really come out and say you need an expert. It says, although there may be situations that necessitate expert testimony relative to the standard of care required of a bank in dealing with customers, this case is not of that category. It says, certainly no expert testimony was needed to show that banks do not ordinarily release the collateral of a customer and take a substitution of a paper writing, et cetera, et cetera. Then they conclude by saying, we think, even if expert testimony is ordinarily needed to prove the standard of reasonable care used by banks in the community in its dealing with customers, the case now before us is of the type that the average juror would know without expert testimony that banks do not ordinarily do what the appellate [sic] bank did in this case. There was no expert testimony required in that case. We think, even if expert testimony is ordinarily needed, they don't, even though expert testimony is ordinarily needed so yesterday I thought expert testimony would certainly be helpful, and may be even a prerequisite, but, apparently, it's not the case under the current law of Maryland anyway. You might change that law depending on the outcome of this case.

The trial court did not specifically address the Bank's argument that Petitioner had not provided evidence of causation for his negligence claim, but the court did conclude that Petitioner had "a sufficient claim independent from the contract claim." 10

burden of proving the bank's failure to exercise ordinary care is on [Petitioner]." 8 The jury subsequently found in favor of Petitioner on both the negligence and contract counts, awarding Petitioner $23,475 for the breach of contract claim and $7,600 for the negligence claim. 9 Over the objection of the Bank, which argued that the two amounts were for a single injury and therefore Petitioner was only entitled to the larger amount, the trial court ruled that Petitioner was entitled to the aggregate amount of $31,075. The Bank noted a timely appeal and the Court of Special Appeals reversed the judgment of the trial court. The intermediate appellate court concluded that the trial court should have granted Petitioner's motion for judgment because Petitioner produced no expert testimony establishing the Bank's standard of care for the negligence claim. The court came to this conclusion because, in its view, "the standard of care required for adding someone to a bank . . . account is not `well within the ordinary province of jurors.'" The court further explained that, in its view, jurors "may not be knowledgeable about the internal bank procedures utilized in adding someone to an account" and that the Bank's own operating procedures are "hardly evidence of the standard of care for the entire banking industry." The intermediate appellate court also concluded that Petitioner had produced insufficient evidence to establish the breach of contract claim. The court based this conclusion on the

Both parties were given an opportunity to except to the jury instructions. Neither party did so. The record provides no explanation for why the jury awarded these particular dollar amounts. 11
9

8

fact that Petitioner failed to enter into evidence any of the documents that established the terms of the contract between Schultz and the Bank and on its view that "there was insufficient evidence presented at trial to show that" the Bank breached an implied duty to use ordinary care in disbursing Schultz's funds. Petitioner presented the following question in his petition for writ of certiorari: 1. Is an expert opinion necessary to establish the standard of care for a [b]ank when adding a customer to an account[?] 2. Does this case overrule or cast doubt on prior precedents of this [Court] and the Court of Special Appeals as to the necessity of expert opinion testimony as establishing the standard of care for [b]anks and other industries[?] 3. Does the implied duty of ordinary care implicit in a depositor-[b]ank contractual relationship require proof of any evidence beyond this implied duty[?] Under the facts of this case, we answer the first and third questions in the affirmative and the second question in the negative. II. Negligence The first two questions presented in this case concern the applicable standard of care in a case where negligence has been alleged against a bank. Specifically, we have been asked to determine whether expert testimony is necessary to establish the standard of care for a bank and whether such a requirement would deviate from our prior cases. Under the facts of this case, we conclude that expert testimony was necessary to establish the standard

12

of care. This case involved alleged negligence in regard to internal bank procedures that the trier of fact could not be expected to appreciate without the aid of expert testimony. This conclusion is consistent with our previous decisions, as well as those of the Court of Special Appeals, involving allegations of negligence by a professional. In a negligence case, there are four elements that the plaintiff must prove to prevail: "a duty owed to him [or her] (or to a class of which he [or she] is a part), a breach of that duty, a legally cognizable causal relationship between the breach of duty and the harm suffered, and damages." Jacques v. First Nat'l Bank, 307 Md. 527, 531 515 A.2d 756, 758 (1986). In regard to the duty a bank owes to its customers when disbursing the customers' funds, banks are not to be held strictly liable for every wrongful disbursement. See Commonwealth Bank v. Goodman, 128 Md. 452, 459, 97 A. 1005, 1008-09 (1916) (noting that a bank is not required to take every possible precaution against wrongful disbursements). Instead, our case law and the comments to the Maryland Uniform Commercial Code ("Commercial Code") establish that a duty of "ordinary care" applies. See Taylor v. Equitable Trust Co., 269 Md. 149, 155-56, 304 A.2d 838, 841-42 (1973) (applying the ordinary care standard to a bank's alleged negligence in disbursing a customer's funds); Md. Code (1975, 2002 Repl. Vol.),

Download Schultz v. Bank of America.pdf

Maryland Law