Geiger v. Crestar Bank

• Decision Date: 23 August 2001
• Docket Number: No. 00-CV-265.,00-CV-265.
• Citation: 778 A.2d 1085
• Parties: Herbert G. GEIGER, Appellant, v. CRESTAR BANK, et al., Appellees.
• Court: D.C. Court of Appeals

778 A.2d 1085

Herbert G. GEIGER, Appellant, v. CRESTAR BANK, et al., Appellees.

No. 00-CV-265.

District of Columbia Court of Appeals.

Argued February 14, 2001.

Decided August 23, 2001.

St. John Barrett, Washington, DC, for appellant.

Robert W. Hawkins, Washington, DC, with whom Virginia W. Powell and Richard A. Rice, Jr., were on the brief, for appellees.

Before STEADMAN, FARRELL and REID, Associate Judges.

REID, Associate Judge:

In this case, the conservator of the estate of a person suffering from a mental disability seeks to hold a commercial bank liable for electronic debits against a bank account, approved by the disabled person without the required authorization of the conservator. The bank acknowledged that the disabled person, not the conservator, had authorized the electronic debits, and agreed to recredit the account upon receipt of an appropriate affidavit, as provided for in the account agreement. The conservator declined to submit the affidavit, contending primarily that the debits were unauthorized and that the bank breached the account agreement, as well as its fiduciary obligation. The trial court granted summary judgment in behalf of the bank. We affirm, concluding that the relationship between the bank and the conservator was contractual in nature, not fiduciary, and that the conservator failed to comply with the error resolution procedures of the account agreement.

FACTUAL SUMMARY

The record before us shows that, after Donald Hinton suffered a serious brain injury in an automobile accident, appellant Herbert G. Geiger was appointed conservator of his estate. Sometime around 1985, Mr. Geiger opened a trust account¹ at the Perpetual American Bank, F.S.B., whose assets later were acquired by appellees Crestar Bank and Crestar Financial Corporation ("Crestar").² Mr. Hinton receives a $50.00 weekly allowance from Mr. Geiger, and pays for his own telephone service with cash, but is not authorized to make any charges against the Crestar account; only Mr. Geiger may authorize such charges.

During his deposition, taken in this matter, Mr. Geiger could not recall any discussions he had with the bank at the time he established the account for Mr. Hinton. Nor did he recall whether he alerted the bank to any "restrictions or special safeguards" that should be imposed on Mr. Hinton's account; or whether he received any information about the account. However, Mr. Geiger did remember "a little printed booklet" sent to him after Crestar began handling Mr. Hinton's account around 1990; and he acknowledged that he "probably" was sent any changes in the rules and regulations applicable to the account. When shown a copy of Crestar's Rules and Regulations for Deposit Accounts, and asked whether he ever received it, Mr. Geiger replied: "Yes, I'm quite sure." Mr. Geiger claimed that he informed Crestar of his conservatorship, but could not remember whether he presented the bank with papers appointing him as conservator. Pertinent language in Crestar's rules and regulations concerning incompetents specifies:

Accounts established and maintained for... incompetents ... must be supported by appropriate legal court documents as we may require for opening or transacting business on such accounts. We assume no duties to beneficiaries of such accounts.

In addition, language in Crestar's rules and regulations which pertains to electronic fund transfers states:

If you authorize any electronic fund transfer (EFT) into or out of your Account, then each EFT transaction is also subject to our Electronic Fund Transfer Rules, a copy of which you will receive when you open your Account. In the event of any conflict between those EFT Rules and these Rules and Regulations, the Electronic Fund Transfer Rules will govern with respect to any EFT transaction. Any transfer made via a local Automated Clearing House (ACH) or other wire or automated payment system shall be additionally subject to the specific rules of that system....

We have the right to make payments on the basis of the beneficiary's stated account number, without assuming any duty to detect or advise you of any inconsistency in the stated beneficiary and the name of the account owner for the specified account number.

Thus, the contractual documents applicable to this matter are: Crestar's Rules and Regulations for Deposit Accounts, the Electronic Fund Transfers ("EFT") regulations (Regulation E), and the National Automated Clearing House Association ("NACHA") operating rules governing Automated Clearing House ("ACH") transactions (collectively, "the account agreement").³ Around Spring 1998, years after the bank account was opened, Mr. Hinton received an advertisement for a Quintel Cellular telephone. Mr. Hinton called the toll-free telephone number listed on the advertisement, ordered the cellular telephone, and gave the Crestar account number for billing purposes. Without authorization from Mr. Geiger, and in response to an electronic communication, Crestar began to debit Mr. Hinton's account for "Deduction Services Quintel Cellular."⁴

After discovering the Quintel deductions, Mr. Geiger instructed Mr. Hinton to return the cellular telephone, which he did; advised Crestar, through counsel, of the unauthorized deductions; and requested that the bank restore the funds paid over to Quintel Cellular. On September 11, 1998, Crestar sent a letter to counsel for Mr. Geiger, explaining that: (1) Mr. Hinton had provided accurate account information to Quintel Cellular, and thus had authorized the deductions; (2) to preclude similar future incidents, the account, on which the Quintel deductions were made, should be closed; (3) the bank would credit Mr. Hinton's account, in the amount of the debited sums, upon receipt of an affidavit showing that Mr. Hinton "received no benefit from the `unauthorized' transactions"; and provided that Mr. Geiger assisted in the recovery of the funds. Counsel for Mr. Geiger declined to take the action requested by Crestar.<sup>5</sup> Crestar repeated its position in a letter dated December 4, 1998, and also informed counsel for Mr. Geiger that: "The transactions in question involve the automatic clearing house process ["ACH"].<sup>6</sup> On an ACH transaction, there is no way to verify an `authorized signer' beforehand. This has nothing to do with `disability' and the same rules apply to all other account holders."

Approximately one month later, Mr. Geiger filed a complaint against Crestar in the Superior Court of the District of Columbia, Civil Division, seeking to recover the electronic debits relating to Mr. Hinton's Quintel transaction. He alleged "misappropriation of personal property and breach of trust." He also alleged that he filed the complaint "on behalf of a class consisting of all conservators of estates having trust accounts with Crestar Bank for funds of persons legally disabled from managing their own funds." He demanded injunctive relief, as well as compensatory and punitive damages.

Subsequently, Crestar filed a motion for summary judgment on all counts of the complaint.⁷ Mr. Geiger countered with a motion for partial summary judgment, arguing that "there are special circumstances... that impose on the defendants the obligations of a fiduciary in debiting plaintiff's account through ACH"; and that "[t]he [b]ank clearly breached its deposit agreement when it permitted withdrawals from the plaintiff's account without his authorization." On February 3, 2000, Judge Bartnoff filed an order granting Crestar's motion for summary judgment, denying Mr. Geiger's motion for partial summary judgment, and dismissing Mr. Geiger's complaint. She stated, in part:

The account included both Mr. Geiger's name as conservator and Mr. Hinton's name as beneficiary, but the account terms did not include any particular restrictions or special safeguards. The account rules provide that if an account-holder establishes and maintains an account for the benefit of an incompetent, Crestar assumes no duties to the beneficiary.

The account terms further provide that only the authorized signatory — in this case, Mr. Geiger — could draw on the account. But [Mr. Geiger] chose to conduct the majority of transactions involving the account through electronic funds transfers....

There does not appear to be any basis in the record for [Mr. Geiger's] breach of fiduciary duty claim. The bank does not take on fiduciary responsibilities simply because the bank established an account on behalf of a customer who is acting as a fiduciary. Instead, the relationship of the bank and its depositor is purely contractual. Not only is there nothing in the contract that created a fiduciary responsibility of the bank to Mr. Geiger in this instance, but the account terms specifically provide to the contrary.

Of more concern is that the Bank permitted a withdrawal that was authorized by Mr. Hinton, and not by Mr. Geiger — indeed, it appears that Mr. Geiger initially was not even aware of the electronic withdrawal to Quintel. But this transaction was expressly permitted, under the terms of the account. The account rules expressly provide that funds can be credited to or debited from the account because of ACH entries or other funds transfer entries, which may be subject to additional rules of the funds transfer system that processes those entries. It is undisputed that [Mr. Geiger] received several copies of the account rules and of the electronic funds transfer disclosure. Not only did he not object to the applicability of those rules to the account, but he himself voluntarily made use of ACH transactions relating to the account over a period of several years.

It is undisputed that the debit entries from Quintel to the account complied with the applicable rules governing ACH transactions. Nothing in those rules (the National Automated Clearing House Association Operating Rules) requires Crestar to obtain written authorization from the plaintiff to approve those transactions or to verify

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