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Case 27.3
Md.,2010.
Schultz v. Bank of America, N.A.
413 Md. 15, 990 A.2d 1078
Court of Appeals of Maryland.
Stephen W. SCHULTZ, Personal Representative of the Estate of Melvin Ray Schultz
v.
BANK OF AMERICA, N.A.
No. 28 Sept.Term, 2009.
March 12, 2010.
GREENE, Judge.
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.
the trial court.FN1
FN1. 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.
I.
FN2. Petitioner also presented several claims against Holbrook, but she did not participate at trial. A default
judgment was entered against her.
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 considered the two counts and found in favor of Petitioner on both, awarding him $23,475
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
FN3. 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
FN4. 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.
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.
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
FN5. 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.
FN6. 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.
FN7. 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
CHAPTER 27: CHECKS AND BANKING IN THE DIGITAL AGE 459
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 burden of proving the bank’s failure
to exercise ordinary care is on [Petitioner].” FN8 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.FN9 Over the objection of the Bank, which argued that the two amounts were for a single injury and
FN8. Both parties were given an opportunity to except to the jury instructions. Neither party did so.
FN9. The record provides no explanation for why the jury awarded these particular dollar amounts.
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.
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[?]
460 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
(explaining that “banks come under the general obligations of the use of good faith and the exercise of ordinary
care”). The Commercial Code defines “ ordinary care” as the “1) observance of reasonable commercial standards, 2)
which prevail in the area in which the person is located, 3) with respect to the business in which the person is
engaged.”
State Security v. American General,
409 Md. 81, 117, 972 A.2d 882, 903 (2009) (quoting § 3-103(a)(7) of
the Commercial Law Article). A bank customer may bring a negligence suit against a bank for a violation of this duty
of ordinary care.
Taylor,
269 Md. at 155-56, 304 A.2d at 841-42.
[5][6] Where the plaintiff alleges negligence by a professional, expert testimony is generally necessary to establish the
requisite standard of care owed by the professional.
Rodriguez v. Clarke,
400 Md. 39, 71, 926 A.2d 736, 755 (2007).
This is because professional standards are often “beyond the ken of the average layman,” such that the expert’s
testimony is necessary to elucidate the relevant standard for the trier of fact.
Bean v. Dept. of Health,
406 Md. 419,
432, 959 A.2d 778, 786 (2008) (quoting
CIGNA v. Zeitler,
126 Md.App. 444, 463, 730 A.2d 248, 259-60 (1999));
see
also
Md. Rule 5-702 (allowing the admission of expert testimony if it will assist the trier of fact to understand the
evidence or to determine a fact in issue). In a case of alleged negligence by a professional, “the plaintiff bears the
burden of overcoming the presumption that due skill and care were used.”
Crockett v. Crothers,
264 Md. 222, 224,
285 A.2d 612, 614 (1972). If the plaintiff presents no such evidence, the trial “court may rule, in its general power to
CHAPTER 27: CHECKS AND BANKING IN THE DIGITAL AGE 461
guidelines.FN10
Saxon,
186 Md.App. at 290, 973 A.2d at 877. The Court of Special Appeals held that the issue of
FN10. We acknowledge that the Bank, in the present case, may have violated its own internal training
guidelines, like the bank in
Saxon v. Harrison,
186 Md.App. 228, 290, 973 A.2d 841, 877 (2009). Petitioner
has alleged that the Bank failed to obtain identification from Holbrook and Schultz when Holbrook was added
to Schultz’s account, which would have violated the Bank’s training documents that Petitioner submitted into
evidence. We do not, however, consider this determinative. First, even if Petitioner had proven that the Bank
876–77 (quoting
Ellis,
45 Md.App. at 163-64, 411 A.2d at 1092-93).
FN11. Petitioner has cited another case, involving an insurance company, that similarly involved actions that
were so obviously negligent that no expert testimony was necessary.
CIGNA v. Zeitler,
126 Md.App. 444,
394-95 (1978) (affirming summary judgment against a bank that allowed the plaintiff’s employee to divert the
plaintiff’s funds to his own account despite his complete lack of actual or apparent authority).
The conclusion that expert testimony may be necessary to establish a bank’s standard of care is also consistent with
our past cases. In
Taylor,
the defendant bank transferred funds from a customer’s account to a third party at the third
FN12. Expert testimony may not have even been necessary in
Taylor v. Equitable Trust Co.,
269 Md. 149,
304 A.2d 838 (1973), due to the seemingly obvious nature of the bank’s negligence. We explained that there
was “no doubt” the bank was negligent when it transferred funds without determining whether the transfer
229. While these cases do not affirmatively state that expert testimony is necessary to establish a bank’s standard of
care, they do demonstrate the practice of using expert testimony to establish the standard.FN13
FN13.
Commonwealth Bank v. Goodman,
128 Md. 452, 97 A. 1005 (1916), does not support Petitioner’s
argument. In
Goodman,
we had no reason to consider whether expert testimony was necessary to establish
the bank’s standard of care. Like the present case,
Goodman
involved allegedly improper withdrawals from a
bank account. 128 Md. at 453, 97 A. at 1006. We identified a number of errors by the trial judge and
remanded the case for a new trial.
Goodman,
128 Md. at 464, 97 A. at 1010–11. An expert witness did testify
FN14. In his complaint, Petitioner based his negligence claim on more than just the addition of Holbrook to
Schultz’s account. Petitioner alleged that the Bank “owed a duty of reasonable care …, which included a duty
FN15. Even if we were to assume that Schultz’s signature on the signature card was a forgery, that fact in
and of itself would not establish the Bank’s liability. The Bank would have been liable if it had failed to
exercise ordinary care when it added Holbrook’s name to Schultz’s account, thereby allowing Holbrook to
make unauthorized withdrawals from the account. As this opinion explains, however, Petitioner never
established the applicable standard of ordinary care, so he could not have proven that the Bank failed to
exercise ordinary care.
The Bank argues that expert testimony was necessary to establish the Bank’s standard of care, while Petitioner
contends that “a bank seeking to assist a customer to add a name to a checking account is an experience universally
shared.” Accordingly, Petitioner argues, no expert testimony was necessary to explain the Bank’s standard of care to
the jury. We disagree with Petitioner’s contention for a number of reasons. First, we cannot say with any certainty that
most people have added someone’s name to their bank accounts. Petitioner supports this contention by asserting that
“[l]ay people are frequently called upon in today’s society to prove their identifications.” We disagree that these
experiences provide a sufficient basis to conclude what the trier of fact would know because such experiences may
vary widely from the reasonable standards in the banking industry.FN16 Furthermore, the relevant activity in this case
was by the bank itself, not a bank customer. Even if most people have added a name to their bank accounts, most
FN16. Petitioner compares adding a name to one’s bank account to identity verification at airports or during
traffic stops. There may be many reasons why banks might verify identification differently than airport security
agents or police officers. For example, banks may ordinarily request identification on a random basis when
FN17. Explaining the geographic component of the identical “ordinary care” standard in the Uniform
FN18. Professors White and Summers have noted the effect of technology on banking standards in their
464 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
FN19. The comments to the Maryland Uniform Commercial Code acknowledge the complicated nature of
banking procedures, noting “the technical complexity of the field of bank collections, the enormous number of
items handled by banks, the certainty that there will be variations from the normal in each day’s work in each
bank, the certainty of changing conditions and the possibility of developing improved methods of collection to
speed the process.” Md.Code (1975, 2002 Repl.Vol.), § 4-103 of the Commercial Law Article, cmt. 1.
established that standard.
When negligence is alleged against a bank, as in other cases of alleged negligence in a professional context, expert
testimony is ordinarily necessary to establish the applicable standard of care. Such testimony is not necessary when
the bank’s alleged negligence, if proven, so obviously deviated from the applicable standard of care that the trier of
fact could appreciate the deviation without an expert’s assistance. The alleged negligence in this case, however,
[9][10] The third question presented in this case concerns a bank’s implied contractual duty of ordinary care in regard
to adding a name to a customer’s bank account and verifying the identities of the signatories. We have been asked to
determine if the trier of fact may consider whether a bank has breached this duty if the plaintiff has provided no
evidence establishing either the specific terms of the underlying contract or the standard to which the bank must
adhere. We shall hold that the trier of fact may consider whether a bank has breached the implied contractual duty of
FN20. We have frequently stated that a contract may be “implied” between a Bank and its customers, but we
have never stated whether that contract is implied in fact or implied in law. Such a contract, however, is
clearly implied in fact. Implied-in-law contracts, often referred to as quasi-contracts, “are not based on the
FN21. There is no contradiction in allowing a party to enforce the duty of ordinary care through a contract
claim, a tort claim, or both. We noted in
Jacques v. First Nat’l Bank,
307 Md. 527, 545, 515 A.2d 756, 765
(1986), that “[a]lthough the proof required and the measure of compensatory damages allowable may be
essentially the same under either cause of action, there are other considerations … that make it desirable to
provide a choice of actions.”
Petitioner has alleged that the Bank in this case breached a contract with Schultz when it violated the duty of ordinary
care he claims the Bank owed to Schultz. In support of this claim, Petitioner provided the signature card for Schultz’s
submitted into evidence, with no objection from the Bank, a copy of the signature card that Schultz apparently signed
when he originally opened his account with the Bank on September 11, 2000. The bank statements that Petitioner
submitted into evidence, with no objection from the Bank, reflected deposits and withdrawals from the account that
Schultz apparently had with the Bank, and the checks Petitioner submitted into evidence, with no objection from the
Bank, were apparently drawn from, and honored by, the Bank. The Bank has not denied that Schultz was one of its
‘otherwise properly payable’ against the depositor’s account only on the order of the depositor or of someone
authorized by him.”
Taylor,
269 Md. at 157, 304 A.2d at 842–43. The duty of ordinary care is one of the terms codified
by the Commercial Code, and, as we have explained, neither party can disclaim this duty. § 4-103(a) of the
Commercial Law Article;
Lema,
375 Md. at 642, 826 A.2d at 514. There was therefore no need for Petitioner to
establish all the terms of the alleged contract between Schultz and the Bank because the Commercial Code provided
to the jury. We therefore affirm the Court of Special Appeals’ judgment that the trial court should have granted the
Bank’s motion for judgment in regard to Petitioner’s breach of contract claim.
III.
Conclusion
Banking is frequently a complex business. When a bank has allegedly violated its duty of ordinary care, ordinarily it