Kiley v. First National Bank

HOLLANDER, Judge. Appellants, James and Mary Kiley, sued appellee, First National Bank of Maryland (the “Bank”), in a multi-count complaint filed in the Circuit Court for Montgomery County. The Kileys sought compensatory and punitive damages stemming from the Bank’s alleged breach of contract and tortious misconduct. The gravamen of appellants’ various causes of action centers on their contentions that the Bank improperly attempted to impose service charges with respect to the Kileys’ checking account, unilaterally sought to alter the terms applicable to their checking account, and wrongfully closed their checking account.

The Kileys requested over 25 million dollars in punitive and compensatory damages. They sought recovery, inter alia, for the following: lost interest on their checking account for the duration of their expected lifetimes; the anticipated losses due to the minimum balance requirements and service charges; ³²² emotional distress; and injury to their reputation and credit. The parties filed cross motions for summary judgment; this appeal followed the entry of summary judgment in favor of the Bank. Finding no error, we shall affirm.

The Kileys present two compound questions for consideration: I. Whether the lower court erred in granting summary judgment in favor of First National when there are material questions of fact unresolved; e.g., whether the bank is estopped from denying the terms of its contract, whether the bank waived closing the checking account, whether the bank had sufficient funds on deposit from which it could have paid two checks when it dishonored them, and whether the bank wrongfully deposited a direct-deposit paycheck and refused access to the deposits even after a formal demand.

II

Whether the lower court erred in failing to grant the Kileys’ request for summary judgment on the tort claims, when the evidence regarding these claims was undisputed and appellants’ arguments were unrebutted. Maryland Rule 2-501 permits the entry of summary judgment where “there is no genuine dispute as to any material fact, and the party is entitled to judgment as a matter of law.” In resolving a motion for summary judgment, it is not for the trial judge to decide disputed facts. Moreover, in determining whether there are any material facts in dispute, the trial court must resolve all inferences in the light most favorable to the party opposing the motion. Any inferences drawn by the trial court must be reasonable ones.

Beatty v. Trailmaster Products, Inc., 330 Md. 726, 739 , 625 A.2d 1005 (1993); Clea v. City of Baltimore, 312 Md. 662, 678 , 541 A.2d 1303 (1988). When a motion for summary judgment is filed, the opposing party may not simply claim that there are facts in dispute. In order to controvert such a motion, “the opposing party must proffer material facts which would be admissible in evidence.” Seaboard Surety Co. v. Richard F. Kline, Inc., 91 Md.App. 236, 243 , 603 A.2d 1357 (1992). Mere conclusory denials or ³²³ allegations will not suffice.

Id. As the Court stated in Beatty , “[T]he mere existence of a scintilla of evidence in support of the plaintiffs claim is insufficient to preclude the grant of summary judgment....” Beatty, 330 Md. at 738 , 625 A.2d 1005 . In our view, the trial court correctly granted the Bank’s Motion for Summary Judgment and properly denied the Rileys’ Motion for Summary Judgment. Our analysis follows.

FACTUAL SUMMARY The facts are largely undisputed. In July, 1986, the Bank acquired all checking and savings accounts held by the now-defunct Baltimore Federal Financial (“BFF”) at the Montgomery Mall branch. The Rileys were not married at that time, and only Mr. Riley had an account with BFF at that branch. Mr. Riley’s BFF account had several features that were understandably important to him: it was interest-bearing; it had no minimum balance requirement; and BFF did not charge service fees.

As part of the acquisition of BFF, the Bank maintained those features. Central to the Rileys’ claim is the Bank’s letter to its customers in June, 1986, which stated: “We’re excited about having you as a new First National customer and want to assure you that any changes to your accounts will be to your benefit.” Further, in his deposition, Mr. Riley testified that the Bank’s branch manager promised him “that if [he] left [his] account open with First National Bank of Maryland, no changes would be made to the terms and conditions of the account.” 1 Mr. Riley acknowledged in his deposition that the branch manager never expressly promised that the benefits ³²⁴ would remain the same. He claimed, however, that the assurance was certainly “implied.” In October, 1990, the Bank attempted to change Mr. Kiley’s account from an “Investment Checking” account to a “Bonus Checking” account, and sought to impose a $15.00 monthly service fee if the account fell below a minimum balance requirement. Unhappy with that proposal, Mr. Kiley met with another Bank employee and argued to her that the imposition of a fee would constitute a breach of contract.

When the Bank reversed the charge and reinstated the original BFF terms, Mr. Kiley was at least temporarily appeased. In August, 1991, after the Kileys married, Ms. Kiley was added as a party to Mr. Kiley’s Bank account. At that time, the Kileys executed signature cards that advised them to “See Important Information in Rules and Regulations Governing Personal Deposit Accounts.” The reverse side of each signature card also stated: “The 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.” Another letter was sent on December 31,1991 to the Bank’s former BFF customers, including Mr. Kiley, notifying them of the Bank’s intention to implement changes to the terms of their accounts. The letter advised that, as former BFF customers, their accounts differed from those of other Bank customers and, because of rising business costs, it was necessary to change the pricing of some services, as well as the types of accounts offered. 2 To Mr. Kiley’s dismay, none of the proposed types of accounts included an interest-bearing, no-minimum-balance, no-service-fee program, such as Mr. Kiley had enjoyed.

As a result, Mr. Kiley refused to accept the proposed changes, and demanded that the Bank continue the Kileys’ account on the identical terms. ³²⁵ On February 1, 1992, the Bank implemented the minimum balance requirements and service fees outlined in its letter. The Kileys again objected to the changes in their account. When the Bank and the Kileys were unable to reach a mutually satisfactory resolution, the Bank advised the Kileys of their option to close their account. On April 15, 1992, after unsuccessful attempts to resolve the dispute, the Bank requested the Kileys to close their account.

The Bank’s letter stated: [W]e now would like you to close your account with First National Bank of Maryland by April 24, 1992. If you do not close your account by that date, we will close your account and mail you a cashier’s check for the remaining balance. Please be advised not to write any more checks or they will be returned “Account Closed.” Although the Kileys acknowledged receipt of the notice, they made no attempt to close the account or to open a new one elsewhere. Nor did they ask their employers to stop direct deposits to their bank account.

Moreover, notwithstanding the Bank’s notice, they continued to write checks drawn on their account. On April 29, 1992, the Bank mailed a check to the Kileys in the amount of $1,121.07, representing their remaining balance. The Bank also notified them that the account had been closed. Following issuance of the check on April 29, 1992, the Bank placed a hold on the Kileys’ account in order to afford them an opportunity to cash the check.

The Bank rejected Mr. Kiley’s direct deposit from his employer on April 30,1992. On May 4, 1992, however, Ms. Kiley’s electronic deposit in the amount of $877.06 was inadvertently accepted and credited to the Kileys’ account. From April 30, 1992 until May 8, 1992, the Bank paid two checks written by appellants. One check, in the amount of $636.36, was paid to a creditor on April 30, 1992; the other, in ³²⁶ the sum of $40.00 3 , was paid on May 5, 1992, out of the reserved money.

But the Kileys’ mortgage check in the amount of $1,111.87, written on April 30, 1992, was rejected because, after deducting the funds on hold, the check exceeded the remaining balance in the Kileys’ account. On or about May 15, 1992, eight days after the Kileys cashed the Bank check for $1,121.07, the Bank sent another draft to the Kileys for $198.46, representing the remaining funds in the account, plus a refund for a $2.00 service fee. The Bank actually closed the account on May 18, 1992, when the second cashier’s check was presented for payment. DISCUSSION I. The Operative Contract To support their claims as to breach of contract, promissory estoppel, and waiver, the Kileys rely, primarily, on the Bank’s conduct prior to the time that Ms. Kiley was added to the account.

We conclude that, when Ms. Kiley joined the account, all of the parties agreed to specific contractual terms that superseded any other contract terms. Further, the Bank never breached the operative contract terms. Our holding renders irrelevant the Bank’s conduct prior to August, 1991 with respect to these particular claims. We explain.

The Kileys’ relationship with the Bank was contractual in nature. See Gordon, Feinblatt, Rothman, Hoffberger & Hollander v. Gerhold, 90 Md.App. 360, 376 , 600 A.2d 1194 (1992) 4 (“A bank and its customers enjoy a debtor/creditor relationship in which the rights and liabilities of each are contractual.”). 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], which has been universally recognized, and consistently followed in this State ³²⁷ to the present time, 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. Fleming v. Bank of Va., 231 Va. 299 , 343 S.E.2d 341, 344 (1986) (“The signature card constituted the contract between the parties and, subject to the statutory schemes, regulates their rights and duties.”); Fed. Deposit Ins. Corp. v. West, 244 Ga. 396 , 260 S.E.2d 89, 91 (1979) (“[T]he signature card and the checks drawn against the account are the contract documents between the bank and the customer.”); Chickerneo v. Soc’y Nat’l Bank of Cleveland, 58 Ohio St.2d 315 , 390 N.E.2d 1183, 1185 (1979). In this case, the signature cards specifically referred to the Bank’s Rules and Regulations and, in executing the signature cards, appellants accepted those Rules and Regulations.

Dietrich v. Chem. Bank, 115 Misc.2d 713 , 454 N.Y.S.2d 490, 491 (Sup.Ct.1981), aff'd, 92 A.D.2d 786 , 459 N.Y.S.2d 1016 (1983) (plaintiff may not claim she did not receive Bank’s rules and regulations because she signed signature card acknowledging receipt). Collectively, the signature cards and the Rules and Regulations constituted the contract between the Bank and the Kileys. See 5(a) Michie on Banks & Banking, Ch. 9, § 1, at 30 (1994 Repl.Vol.) (“Michie”) (“A ‘signature card’ is a contract which creates a savings account or checking account.... ”).

Assuming, arguendo, that Mr. Kiley ever had a contract with the Bank to maintain, perpetually, the original BFF terms, once Ms. Kiley was added to the account, the Kileys either created a new contract with the Bank or modified their original contract. In Dahl v. Brunswick Corp., 277 Md. 471 , 356 A.2d 221 (1976), the Court set forth the elements of novation. It said: “A ‘novation’ is a new contractual relation made with intent to extinguish a contract already in existence. It ‘contains four essential requisites: (1) a previous valid obligation; (2) the agreement of all the parties to the new contract; (3) the ³²⁸ validity of such new contract, and (4) the extinguishment of the old contract, by the substitution of the new one.’ ” Id. at 481 , 356 A.2d 221 (quoting I.W. Berman Properties v. Porter Bros., Inc., 276 Md. 1, 7 , 344 A.2d 65 (1975); citations omitted).

Whether the parties here entered into a novation or simply modified the original contract, they nonetheless agreed to be bound by the Bank’s Rules and Regulations. Accordingly, whatever the Bank may have done prior to August, 1991 would have no legal significance. Moreover, the Bank’s conduct after that point in time must be considered in light of the operative contract terms. We are of the view that the Bank’s actions after Ms. Kiley joined the account complied with the Rules and Regulations.

The Rules and Regulations provide, in pertinent part, as follows: General Information 1. Welcome to the First National Bank of Maryland This Agreement has been prepared to explain the terms and conditions of the deposit account(s) you have opened with The First National Bank of Maryland (Bank). The Rules and Regulations set forth in this Agreement, together with any deposit agreements, funds availability statements, policies of the Bank set forth in the Branch Operations Manual, schedules of service charges, and brochure material describing deposit accounts (collectively The “Rules and Regulations”), govern all deposit accounts offered by the Bank. You, as a deposit customer, and the Bank agree to abide by the Rules and Regulations outlined in these various materials.... ****** 4.

Deposits to Accounts Section A—General Deposit Rules In receiving items for deposit or collection, we act as your collecting agent and assume no responsibility beyond the ³²⁹ exercise of due care. For good reason, we can refuse, limit, or return any deposit. í¡í # ♦ * sfc ’ 7. Service Charges We may charge you for the various services provided in connection with your accounts. These prices ... may be changed from time to time, at our option, upon reasonable notice. jjc 11.

Closing the Account You or the Bank can close an account in compliance with whatever restrictions on length of deposit or notice of withdrawal might be imposed by Federal Regulations or by the practice of the Bank for that account. >{: # sfs sfc % Savings and Money Market Deposit Accounts (2) Payment of Interest Interest payments, if not withdrawn, will bear interest the same as a deposit of cash. All interest rates applicable to deposit accounts are annual interest rates unless otherwise specified. Interest on interest-bearing checking, savings and money market accounts is calculated and accrued daily and credited monthly at the end of the monthly cycle, if the account remains open through the last day of the monthly cycle. Accounts closed between interest payment periods will not receive interest for the partial period.

We may establish a minimum balance or a minim,um average balance for your account, below which a lower interest rate or no interest will be accrued, or credited, or below which interest will be credited only at maturity. (Emphasis added). Although the Bank’s regulations did not address the process of closing an account, common law dictates that principles of good faith apply. Nevertheless, the relationship between a bank and its customer ordinarily exists “at will” and may be terminated by either party at any time.

See, e.g., ³³⁰ Groos Nat’l Bank v. Comptroller of Currency, 573 F.2d 889 , 897 (5th Cir.1978) (“It is well established at common law that a bank may decline or terminate a deposit relationship”); Elliot v. Capital City State Bank, 128 Iowa 275 , 103 N.W. 777, 778 (1905) (a bank “may receive a general deposit to-day, and tomorrow, for reasons of its own, it may return the amount deposited, and refuse absolutely to transact business further with such depositor.”); Chicago Marine & Fire Ins. Co. v. Stanford, 28 Ill. 168, 173 (1862) (“If the banker finds the depositor a troublesome customer, so that the account is not a desirable one, he may tender the full amount of the deposit, and refuse to receive more, and thus close the account....”). See also, 5(A) Michie, Ch. 9, § 9 at 55 (“[T]he relationship of banker and depositor may be terminated by the act of either or both parties.”). When the Bank proposed to change the terms of the Kileys’ account, it acted in accordance with its contractual obligations.

Similarly, when the Bank gave notice to close the account, it complied with the contractual terms. Any claim to the contrary must fail.

II

Sufficiency of Notice to Close the Account The Kileys contend that the Bank’s notice to close was legally insufficient. The law is well settled that a bank must give reasonable notice to a customer of its intent to terminate a bank account. Ambruster v. Nat’l Bank of West-field, 116 N.J.L. 122 , 182 A. 613 (1935) (“A bank is not required to keep a customer’s account, but it may close out an account only on reasonable notice.”); 5(a) Michie, Ch. 9, § 9 at 55 (“[I]t [is] well settled that a bank is not justified in closing an account ... without reasonable notice.”). This means that a bank must give enough notice to allow a customer to protect his or her credit by making other banking arrangements.

See C-K Enterprises v. Depositors Trust Co., 438 A.2d 262, 265 (Me.1981) (“[R]easonable notice is such notice as would allow a customer a reasonable opportunity to protect his or her credit____”); Jaselli v. Riggs Nat’l Bank, 36 App.D.C. 159, 169 (1911) (“It is well settled that a bank is not justified in closing ³³¹ an account and dishonoring checks drawn against it without reasonable notice. The reason is obvious. The depositor is entitled to sufficient notice to enable him, in the exercise of reasonable diligence, to protect his credit.”). We observe that the Bank clearly did not furnish much notice to the Kileys to allow them to protect their credit.

But we need not reach the issue of whether the notice was legally insufficient because, to the extent that the Kileys sustained injury, it was self-inflicted. The undisputed facts demonstrate that the Bank informed the Kileys on April 15, 1992 that they were to close their account by April 24, 1992. The Bank also advised appellants that, if they did not close their account by that date, the Bank would close it and mail a cashier’s check to them for the remaining balance. The Bank expressly warned the Kileys not to write any more checks on the account.

The Kileys never asked the Bank for additional time to make other banking arrangements, and wholly failed to make any effort to establish a new account elsewhere or to inform their employers to terminate direct deposit. At their peril, they ignored the Bank and refused by their actions to stop writing checks or to assume any responsibility to protect their own credit. The Bank dishonored a mortgage check written on April 30, 1994, fifteen days after the Bank gave notice and after the Kileys had received a check from the Bank representing their balance in the account. If the dishonored check had been written by the Kileys before, on, or immediately after April 15, 1992—the date the Bank sent notice—and if it had been presented by the payee after the scheduled closing date, we would confront an entirely different situation.

But here, the Kileys voluntarily elected to write checks when they had been informed not to do so. They erroneously argue that the consequences of these actions are the Bank’s fault. The Kileys also argue that, based on the Bank’s actions after it gave notice of termination, it waived any right it had to close their account. They rely on the following facts: The Bank placed a hold on the remaining funds; it mistakenly accepted the direct deposit of Ms. Kiley’s paycheck; it paid ³³² the Kileys’ subsequent drafts.

In order to show waiver, however, there must be evidence of an intentional relinquishment of a known right. Dahl v. Brunswick Corp., 277 Md. at 486 , 356 A.2d 221 ; Canaras, 272 Md. at 360 , 322 A.2d 866 . It is apparent that the Bank placed a hold on the Kileys’ funds as part of the process of closing their account. Although the Bank erroneously accepted one direct deposit, the Kileys actually wanted the Bank to pay the checks they had written after they received notice of the intended closure.

Even in summary judgment posture, the Bank’s action could not reasonably amount to waiver, and we perceive no error.

III

The Kileys’ Contract Contentions As we have observed, much of the Bank’s conduct on which appellants rely preceded the time when Ms. Kiley was added to the account. But even if the Bank’s conduct prior to August, 1991 is relevant to the Kileys’ contract-related claims, those claims cannot prevail. Appellants claim that when the Bank acquired Mr. Kiley’s BFF account in 1986, the Bank’s letter to its prospective customers, as well as the statements of its employees, created an enforceable contract. The Kileys contend that the terms of the contract entitled them to a lifetime interest-bearing, no-minimum-balance, no-service-fee checking account with the Bank.

They further assert that, at the time the Bank acquired Mr. Kiley’s BFF account, he relied on the Bank’s representations and did not establish an account with another bank. To support their contract claim, the Kileys rely on Md.Fin. Inst.Code Ann., § 5-807(a)(l) (1992); it proscribes false or deceptive advertising and misrepresentations by a bank. 5 Because the Bank is barred by law from making misrepresentations, it follows, the Kileys say, that the Bank must have meant what it said in its letter and through its employees. ³³³ The Kileys also argue that the Bank breached its contract by varying the terms of the account. Based on the doctrine of promissory estoppel, they further claim that the Bank was precluded from altering the contract terms.

Alternatively,