Harby v. Wachovia Bank, N.A.

ADKINS, J. “No acceptance” and “no consideration” are the twin defenses asserted by appellant Shawn R. Harby, substitute guardian of the property of Donavan Marqúese Brooks, to the arbitra ⁴¹⁷ tion clause in appellee Wachovia Bank, N.A.’s depositary agreement. Like the Circuit Court for Baltimore City, we find no merit in either defense. FACTS AND LEGAL PROCEEDINGS On July 22, 2004, Candace Edwards opened an account at a Wachovia branch office in Baltimore. Acting as the court-appointed guardian of the property of her minor son Donavan Marqúese Brooks, Edwards presented a check for $100,000, which represented the proceeds of an insurance policy on the life of Brooks’ father.

At the bank, Wachovia employee Ralph Thomas, Jr. assisted Edwards in opening this account. Thomas reports that Edwards denied that the court had issued any order regarding the account, despite the court’s order directing that Edwards “shall deposit the inheritance proceeds and any other case assets in an insured financial institution as defined in Md.Code Ann. Estates and Trusts Section 13 — 301(h)(1991), with withdrawals only upon Court Order[.]” Edwards made a number of withdrawals from the account, without court approval. 1 To open the account, Edwards signed a Customer Access Agreement (the Access Agreement). Next to her signature was the following: Acceptance of Terms and Conditions: I agree to be bound by the terms and conditions, including, but not limited to Wachovia’s Deposit Agreement and Disclosures, applicable to each product or service which I ⁴¹⁸ obtain from Wachovia now or in the future, which terms and conditions will be provided to me. I also agree to pay all fees associated with such products, accounts and services in accordance with the fee schedules which will be provided to me by Wachovia.

At the time she opened the account Edwards also received the Deposit Agreement and Disclosures for Personal Accounts (the Deposit Agreement), effective January 1, 2004. This contains the following arbitration clause: 25. Arbitration of Disputes/Waiver of Jury Trial and Participation in Class Actions. If either you or we request, any irresolvable dispute or claim concerning your account or your relationship to us will be decided by the binding arbitration under the expedited procedures of the Commercial Financial Disputes Arbitration Rules of the American Arbitration Association (AAA), and Title 9 of the U.S.Code.

Arbitration hearings will be held in the city where the dispute occurred or where mutually agreed. A single arbitrator will be appointed by the AAA and will be a retired judge or attorney with experience or knowledge in banking transactions. A court may enter a judgment on the award. To the extent permitted by law, a judge without a jury will decide any dispute or claim that is not submitted to binding arbitration that results in a lawsuit.

The arbitration or trial will be brought individually and not as part of a class action. If it is brought as a class action, it must proceed on an individual (non-class, non-representative) basis. YOU UNDERSTAND AND AGREE THAT YOU AND WE ARE WAIVING THE RIGHT TO A TRIAL BY JURY AND THE RIGHT TO PARTICIPATE OR BE REPRESENTED IN ANY CLASS ACTION LAWSUIT. Edwards was removed as guardian on November 5, 2004.

Appellant Harby was appointed as Substitute Guardian. Harby filed suit against both Edwards, alleging tortious conver ⁴¹⁹ sion, breach of fiduciary duty, and unjust enrichment, as well as appellee Wachovia, alleging negligence and breach of contract. In addition, Harby sought an accounting by both Edwards and Wachovia. Wachovia filed a motion to enforce the arbitration agreement, seeking dismissal or, alternatively, a stay pending arbitration.

After a hearing, the Circuit Court for Baltimore City granted the motion and stayed the lawsuit. In a written opinion, the court ruled: As to the argument that the agreement did not contain an agreement to arbitrate, the court concludes that this is not a correct interpretation of the agreement.... [I]t is the court’s conclusion that Wachovia did not retain the unilateral power to amend or revoke the agreement without the consent of the depositor. See Holloman v. Circuit City Stores, 162 Md.App. 332 , 873 A.2d 1261 (2005). Accordingly, the agreement did not lack mutuality and is not invalid for failure of consideration....

There being no impediment to the enforcement of the agreement to arbitrate, the court concludes that it must be enforced. Harby noted this appeal, raising a single issue for our review: Did the trial court err in finding that a valid agreement to arbitrate existed between the parties? DISCUSSION Harby argues that neither the Access Agreement nor the Deposit Agreement “creates a validly enforceable agreement to submit to binding arbitration” because “there was no consideration for the agreement to arbitrate, and ... no acceptance of the agreement to arbitrate either by the appellant or by the appellant’s predecessor guardian.” We reject both defenses. Principles Governing Judicial Enforcement Of Arbitration Agreements The Court of Appeals has ⁴²⁰ described arbitration as “the process whereby parties voluntarily agree to substitute a private tribunal for the public tribunal otherwise available to them.” The Maryland Uniform Arbitration Act (hereinafter, “Arbitration Act”), found in Maryland Code, §§ 3-201 through 3-234 of the Courts and Judicial Proceedings Article (1974, 2002 Repl.Vol.), “expresses the legislative policy favoring enforcement of agreements to arbitrate.” Section 3-206(a) of the Arbitration Act provides that: A written agreement to submit any existing controversy to arbitration or a provision in a -written contract to submit to arbitration any controversy arising between the parties in the future is valid and enforceable, and is irrevocable, except upon grounds that exist at law or in equity for the revocation of a contract.

Section 3-207 allows parties to petition a court to compel arbitration and states: (a) Refusal to arbitrate.-If a party to an arbitration agreement described in § 3-202 refuses to arbitrate, the other party may file a petition with a court to order arbitration. (b) Denial of existence of arbitration agreement.-If the opposing party denies existence of an arbitration agreement, the court shall proceed expeditiously to determine if the agreement exists. (c) Determination by court.-If the court determines that the agreement exists, it shall order arbitration. Otherwise it shall deny the petition.

The determination of whether there is an agreement to arbitrate, of course, depends on contract principles since arbitration is a matter of contract. As such, “a party cannot be required to submit any dispute to arbitration that it has not agreed to submit.” Cheek v. United Healthcare of Mid-Atlantic, Inc., 378 Md. 139, 146-47 , 835 A.2d 656 (2003) (citations omitted). “Our focus in reviewing the trial court’s order to compel arbitration extends only to a determination of the ⁴²¹ existence of an arbitration agreement.” Holloman v. Circuit City Stores, Inc., 391 Md. 580, 588 , 894 A.2d 547 (2006)(inter-nal quotation marks and citations omitted). Acceptance According to Harby, neither he nor Edwards accepted the arbitration clause because, although Edwards signed the Access Agreement, (1) that document does not refer to arbitration, and (2) neither guardian signed the Deposit Agreement in which the arbitration clause appears. We agree with the circuit court that this is not a bar to enforcement of the arbitration clause.

Maryland courts have recognized that a bank customer’s signature on what is commonly known as a “signature card” may constitute acceptance of terms and conditions in a separate depositary agreement. In Kiley v. First Nat'l Bank of Md., 102 Md.App. 317, 326-27 , 649 A.2d 1145 (1994), cert. denied, 338 Md. 116 , 656 A.2d 772 , cert. denied, 516 U.S. 866 , 116 S.Ct. 181 , 133 L.Ed.2d 120 (1995), this Court held that, by executing signature cards stating that “ ‘[t]he applicant(s), whose signature(s) appears below, hereby acknowledges receipt of the Demand Deposit Disclosure Statement and the Rules and Regulations Governing Personal Deposit Accounts[,]’ ” bank depositors accepted rules and regulations set forth in that separate document: The Kileys’ relationship with the Bank was contractual in nature. As the Court said in University Nat'l Bank v. Wolfe, 279 Md. 512, 514 , 369 A.2d 570 (1977), “[t]he relationship [between a bank and its customer] ... is that of debtor and creditor, with the rights between the parties considered as contractual, and derived by implication from the banking relationship unless modified by the parties.” (Citation omitted). After the Kileys married in August, 1991, they executed new signature cards with the Bank.

A signature card may constitute a contract between a bank and its customer. In this case, the signature cards specifically referred to the ⁴²² Bank’s Rules and Regulations and, in executing the signature cards, appellants accepted those Rules and Regulations. Collectively, the signature cards and the Rules and Regulations constituted the contract between the Bank and the Kileys. Id. at 326-27, 649 A.2d 1145 (citations and footnote omitted).

In Lema v. Bank of Am., N.A., 375 Md. 625, 628, 638-39 , 826 A.2d 504 (2003), the Court of Appeals similarly recognized that the depositor accepts the terms of a separate deposit agreement by executing signature cards stating that the accounts “shall be governed by the terms and conditions set forth in ... the Deposit Agreement.” Citing Kiley , the Court held that “the signature cards, along with the Deposit Agreement, constitute the contract between” the depositor and the bank. See id. at 639, 826 A.2d 504 . Moreover, the Court of Appeals affirmed our holding in Hartford Acc. & Indemnity Co. v. Scarlett Harbor Assocs. Ltd. P’ship, 109 Md.App. 217, 292 , 674 A.2d 106 (1996), aff'd, 346 Md. 122, 129 , 695 A.2d 153 (1997), that the successful incorporation of an executed contract containing an arbitration clause between two parties could require arbitration between those same parties.

Applying these principles, we agree with the circuit court that this arbitration agreement is enforceable. In a substantively similar arbitration dispute, a federal appellate court reached the same conclusion. The court rejected the bank depositors’ contention that they were not bound to arbitrate according to Account Rules set forth in a separate document, even though they executed signature cards stating that they agreed to be bound by these Account Rules. The [depositors] do not dispute that they signed a signature card when they opened their deposit account with Bank One.

It is clear that by signing the card they entered into a binding contract. The [depositors] do, however, argue that they did not agree to the Account Rules referenced on the signature card because they never received the Account Rules. This argument is in direct contradiction to language ⁴²³ on the signature card which clearly states that the signators have received the Account Rules and agree to be bound by the agreements and terms therein. Jureczki v. Bank One Texas, N.A., 75 Fed.Appx. 272, 274 (5th Cir.2003) (citation omitted).

See also Herrington v. Union Planters Bank, N.A., 113 F.Supp.2d 1026, 1032 (D.Miss.2000), aff'd by unpublished op., 265 F.3d 1059 (5th Cir.2001)(bank depositors accepted arbitration agreement by executing signature card containing agreement to be bound by changes to deposit agreement, receiving notice, and continuing to use account). See generally R.J. O’Brien & Assocs., Inc. v. Pipkin, 64 F.3d 257, 260 (7th Cir.1995)(collecting cases for the proposition that “[a] contract ... need not contain an explicit arbitration clause if it validly incorporates by reference an arbitration clause in another document”); Jones v. Genus Credit Mgmt. Corp., 353 F.Supp.2d 598, 601 (D.Md.2005)(enforcing arbitration clause in document setting forth terms of debt management services provided by defendant, which was incorporated by reference into separate agreement executed by party seeking to avoid arbitration); Isp.com, LLC v. Theising, 805 N.E.2d 767, 776 (Ind.2004)(“There is no requirement that an arbitration clause be included in all potentially relevant documents to be binding”); Bartley, Inc. v. Jefferson Parish Sch. Bd., 302 So.2d 280, 282 (La.1974)(because executed construction subcontract incorporated by reference terms of general contract that contained arbitration clause, the parties “intended to be governed by its arbitration provisions”).

We have no trouble applying the contract rules illustrated in