Michael v. Worthy

• Decision Date: 01 June 2011
• Docket Number: No. 40141–0–II.,40141–0–II.
• Citation: 162 Wash.App. 138,252 P.3d 415
• Parties: Michael and Theresa ANNECHINO, husband and wife, Appellants,v.Michael C. WORTHY and Susan Worthy, husband and wife and the marital community composed thereof; Joan Cooper; Kelli Reynolds; Umpqua Bank, successor in interest to Bank of Clark County; and Clark County Bancorporation, Respondents.
• Court: Washington Court of Appeals

162 Wash.App. 138

252 P.3d 415

Michael and Theresa ANNECHINO, husband and wife, Appellants,

v.Michael C. WORTHY and Susan Worthy, husband and wife and the marital community composed thereof; Joan Cooper; Kelli Reynolds; Umpqua Bank, successor in interest to Bank of Clark County; and Clark County Bancorporation, Respondents.

No. 40141–0–II.

Court of Appeals of Washington, Division 2.

June 1, 2011.

Michael E. Withey, Law Offices of Michael Withey, Seattle, WA, Derek Jay Vanderwood, Attorney at Law, Vancouver, WA, for Appellant.Stephen Garrett Leatham, Heurlin Potter Jahn Leatham & Holtmann, Vancouver, WA, for Respondent.ARMSTRONG, P.J.

[162 Wash.App. 140] ¶ 1 When the State closed the Bank of Clark County (Bank), Michael and Theresa Annechino discovered that approximately $500,000 of their deposits was not insured by the Federal Deposit Insurance Corporation (FDIC). The Annechinos sued the Bank and several individual officers and employees for breach of a fiduciary duty. The Clark County Superior Court dismissed the claims against the individual defendants on summary judgment. On appeal, the Annechinos argue that the Bank's officers and employees established a quasi-fiduciary relationship with them and are personally liable for breaching that duty. Because the Annechinos have failed to establish that the individual defendants entered into a fiduciary relationship with them, we affirm the summary judgment order.

FACTS

¶ 2 In October 2008, the Annechinos ¹ decided to transfer their savings from Charles Schwab to the Bank because they had learned that their Schwab deposits would not be fully insured if Schwab failed. Before transferring the funds, the Annechinos wanted to ensure that their deposits would be fully FDIC insured. Michael spoke to Michael Worthy, the chief executive officer of the Bank, and exchanged several e-mails with Kelli Reynolds, a financial services officer at the Bank, expressing this concern.

¶ 3 Reynolds prepared a chart recommending that the Annechinos spread their deposits over seven accounts to provide $3 million in FDIC coverage. She copied Worthy and Joan Cooper, her supervisor, on her e-mail communications with Michael. Michael reviewed the chart and suggested putting one of the accounts in the name of the family trust. He also negotiated a higher interest rate on his deposits. The Annechinos then transferred $1.85 million to the Bank, bringing their total deposits to $3 million.

[162 Wash.App. 141] ¶ 4 Reynolds asserts that she never personally assured Michael that his deposits would be fully FDIC insured; rather, she claims that she recommended he review the FDIC rules to verify for himself, or have his accountant verify, that his deposits would be fully insured. Michael counters that Reynolds never told him to review the FDIC rules or to independently verify that his deposits would be fully insured.

¶ 5 In January 2009, the State closed the Bank and appointed the FDIC as receiver. The FDIC determined that approximately $500,000 of the Annechinos' deposits were uninsured and issued receivership certificates for the uninsured amount. After learning that the FDIC was withholding a portion of the Annechinos' deposits, Reynolds reviewed her recommendation chart and found no errors. Assuming, therefore, that she must have misinterpreted the FDIC rules, she wrote a letter to the chief financial officer of the Bank explaining the Annechinos' situation and stating:

It is unfortunate that my interpretation of coverage was not accurate and I am regretful that my expertise was not sufficient to protect our client who trusted us to protect their interests, and seek any options we make [sic] have at our disposal to right this wrong.

Clerk's Papers at 76, 179.

¶ 6 Worthy and Reynolds later learned that, due to an error, the Annechinos' funds were not deposited according to Reynolds's recommendations. When Michael requested that one of the accounts be put in the name of the family trust, Reynolds had suggested changing account 12009528 to a trust account, but the Bank accidentally changed account 12009536 instead. Consequently, funds in excess of FDIC insurance were deposited into the 528 account. Although the Annechinos received monthly statements showing which funds were deposited into which accounts, neither they nor the Bank noticed the error. The parties dispute whether the Annechinos' funds would have been fully FDIC insured but for the Bank's error in changing the wrong account to a trust account.

¶ 7 The Annechinos sued Worthy, Reynolds, Cooper, Umpqua Bank (the successor in interest to the Bank), and the Clark County Bancorporation. The individual defendants moved for summary judgment, arguing they could not be held personally liable for the Annechinos' loss. The trial court granted their motion and dismissed the claims against Worthy, Reynolds, and Cooper.

ANALYSIS

I. Standard of Review

¶ 8 We review summary judgment orders de novo. Ranger Ins. Co. v. Pierce County, 164 Wash.2d 545, 552, 192 P.3d 886 (2008). We will affirm an order granting summary judgment if, viewing the evidence in the light most favorable to the nonmoving party, there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c); Ranger, 164 Wash.2d at 552, 192 P.3d 886.

II. Fiduciary Duty

¶ 9 The Annechinos argue that the critical issue before us is whether Worthy and Reynolds established a quasi-fiduciary relationship with them when they sought assurances that their deposits would be fully FDIC insured and relied on Worthy and Reynolds' superior knowledge to structure their accounts accordingly.² They rely primarily on Liebergesell v. Evans, 93 Wash.2d 881, 613 P.2d 1170 (1980), Tokarz v. Frontier Savings & Loan Ass'n, 33 Wash.App. 456, 656 P.2d 1089 (1982), and Hutson v. Wenatchee Federal Savings & Loan Ass'n, 22 Wash.App. 91, 588 P.2d 1192 (1978). Worthy and Reynolds counter that none of the Annechinos' authorities supports holding bank officers and employees personally liable for breaching a fiduciary duty to a bank customer. We agree.

¶ 10 As a general rule, participants in a business transaction deal at arm's length and do not enter into a fiduciary relationship. Liebergesell, 93 Wash.2d at 889, 613 P.2d 1170. The rule applies to transactions between a bank and a depositor. Tokarz, 33 Wash.App. at 458–59, 656 P.2d 1089. But special circumstances may establish a quasi-fiduciary relationship in fact where one would not normally arise in law. Liebergesell, 93 Wash.2d at 890, 613 P.2d 1170; Tokarz, 33 Wash.App. at 459, 656 P.2d 1089; Hutson, 22 Wash.App. at 102–03, 588 P.2d 1192.

¶ 11 For example, in Liebergesell, our Supreme Court considered whether special circumstances established a fiduciary relationship between a borrower and a lender where a businessman induced a widowed school teacher to lend him money at a 20 percent interest rate, even though he knew that interest rates over 12 percent were illegal. Liebergesell, 93 Wash.2d at 884–85, 613 P.2d 1170. The lender, in contrast, had no business expertise, considered the borrower a friend, and relied on him for financial advice. Liebergesell, 93 Wash.2d at 884–85, 613 P.2d 1170. But when she attempted to collect the unpaid interest, the borrower raised usury as an affirmative defense. Liebergesell, 93 Wash.2d at 885–86, 613 P.2d 1170. In considering whether the lender could estop the borrower from raising the usury defense, based on a fiduciary relationship between the parties, the Liebergesell court reviewed the relevant case law and listed several factors that may establish a fiduciary relationship in fact where one would not normally arise in law:

For instance, in Salter v. Heiser, [36 Wash.2d 536, 550–55, 219 P.2d 574 (1950)], lack of business expertise on the part of one party and a friendship between the contracting parties were important in establishing the right to rely. Graff v. Geisel, 39 Wash.2d 131, 141–42, 234 P.2d 884 (1951). Superior knowledge and assumption of the role of adviser may contribute to the establishment of a fiduciary relationship. Friendship seemed a determinative element under the facts of Gray v. Reeves, 69 Wash. 374, 376–77, 125 P. 162, 163 (1912).

Liebergesell, 93 Wash.2d at 891, 613 P.2d 1170. The Liebergesell court then concluded that the lender had submitted sufficient evidence to establish a fiduciary relationship and overcome summary judgment. Liebergesell, 93 Wash.2d at 891, 613 P.2d 1170.

¶ 12 Similarly, in Tokarz, Division Three of our court considered whether a savings and loan association had a duty to disclose to a borrower that his builder was having financial problems and was unable to perform other contracts in which the savings and loan was the lender. Tokarz, 33 Wash.App. at 458, 656 P.2d 1089. The Tokarz court first observed that a bank generally does not enter into a fiduciary relationship with a depositor or customer, but it acknowledged that modern banking practices, involve complexities that “often thrust a bank into the role of an adviser, thereby creating a relationship of trust and confidence which may result in a fiduciary duty upon the bank to disclose facts when dealing with the customer.” Tokarz, 33 Wash.App. at 458–59, 656 P.2d 1089 (citing Stewart v. Phoenix Nat'l Bank, 49 Ariz. 34, 64 P.2d 101, 106 (1937)). But the Tokarz court concluded that no special circumstances established a fiduciary duty in that case, because there was no evidence that the savings and loan: (1) took on any extra service for the borrower, other than furnishing the money for constructing a home; (2) received any greater economic benefit from the transaction, other than the normal mortgage; (3) exercised extensive control over the borrower's construction project; or (4) was asked by the borrower if there were any lien actions pending against the builder. Tokarz, 33 Wash.App. at 462–63, 656 P.2d 1089.

¶ 13 Finally, in Hutson, Division Three of this...