Steele v. Victory Sav. Bank, 1147

• Citation: 368 S.E.2d 91,295 S.C. 290
• Decision Date: 23 March 1988
• Docket Number: No. 1147,1147
• Court: Court of Appeals of South Carolina
• Parties: Harriet STEELE, Respondent, v. VICTORY SAVINGS BANK, Appellant. . Heard

Page 91

368 S.E.2d 91

295 S.C. 290

Harriet STEELE, Respondent, v. VICTORY SAVINGS BANK, Appellant.

No. 1147.

Court of Appeals of South Carolina.

Heard March 23, 1988.

Decided April 25, 1988.

H. Ronald Stanley of Brown & Stanley, Columbia, for appellant.

Jerrold M. Hillard of Belser, Baker, Barwick, Ravenel, Toal & Bender, Columbia, for respondent.

CURETON, Judge:

Harriet Steele sued Victory Savings Bank for negligence, breach of a fiduciary duty, conversion, fraud, and unfair trade practices resulting from the bank's handling of a cashier's check. The trial court directed a verdict for Steele on her breach of fiduciary duty and conversion causes of actions. The jury returned a verdict for $8,000.00 actual and $4,000.00 punitive damages. The bank appeals. We reverse and remand.

In ruling on Steele's directed verdict motions, the trial court and this court on appeal are required to view the evidence and all reasonable inferences that can be drawn from it in the light most favorable to the bank. Holmes v. Black River Electric Co-operative, Inc., 274 S.C. 252, 262 S.E.2d 875 (1980). Viewed in this light, the facts are as follows.

Steele, who lives in Georgia, was approached by James Felder (James), a close social acquaintance, to invest in a certificate of deposit. James, who claimed to be a "solicitor" of business for the bank, convinced Steele he could procure for her a $10,000 certificate of deposit (CD) from the bank that would yield 14 per cent interest over a 6 month term. Steele went to her bank in Georgia and purchased a $10,000 cashier's check payable to Victory Savings Bank (the bank). She gave it to James. The check indicated on its face that the remitter was "Harriet Steele Savings # 04 082093." According to Steele she instructed James to purchase a CD in her name with the money. Instead, James purchased the CD in his own name and listed her as beneficiary.

A few days after the transaction between James and the bank, Steele called James to inquire about the CD. He indicated there was probably a delay in her receiving the CD. After another elapse of time she called James again. Eventually, James sent her a xerox copy of a CD. The typeface used to type Steele's name, address, and the rate of interest was different from the rest of the type on the xerox of the CD. Additionally, the xeroxed CD did not reflect Steele's social security number.

Steele waited until the CD's maturity date before she contacted the bank. She then learned the CD had been issued in James Felder's name. Steele apparently contacted the U.S. Attorney's office and James was convicted and sentenced to prison for fraud. Steele received $2,000 from James Felder as part restitution.

The bank's president, Thomas Felder, who is unrelated to James Felder, testified James was a regular customer of the bank. He had known James since 1979 or 1980. He knew James had been disbarred from the practice of law in South Carolina for misappropriation of funds. The bank had in the past sold several CDs to James under similar circumstances. Thomas further testified that when James presented the cashier's check to the bank, he represented the proceeds were his. He further testified that at the time the CD was issued by the bank, James borrowed $10,000 utilizing the CD as collateral for the loan. Finally, Thomas testified there was nothing to indicate to the bank the transaction was unusual so as to put the bank on notice the proceeds of the cashier's check were not owned by James or he was without authority to direct their disposition.

After directing a verdict for Steele on her causes of action for breach of a fiduciary duty and conversion, the trial judge charged the jury only on the law of actual and punitive damages. The bank took exception to the punitive damages charge. Following the jury verdict, the bank moved for: (1) remittitur of the punitive damages; (2) a new trial based on the trial judge's refusal to consider the bank's defenses of contributory negligence and assumption of risk; and (3) a new trial on damages only because the evidence did not support an award of punitive damages. All motions were denied.

In directing a verdict for Steele, the trial judge stated:

When the bank got the money in the form that it got it in, it had a duty to handle that money in accordance and at the direction of the person who sent them that money and that was Mrs. Steele. And once it breached that duty, it became a fiduciary in effect, when it received that money in that form, it owed Mrs. Steele a duty to only do something with that money that she wanted done with it and when they didn't do that then they breached that duty, and further by doing what they did with it, by giving it to Mr. Felder in the form of a certificate of deposit, at that time they committed a conversion of that money.

We disagree with the trial judge that Steele was entitled to a directed verdict on her breach of fiduciary duty and conversion causes of actions. A "cashier's check" is a bill of exchange or draft drawn by a bank upon itself. The bank is both the drawer and drawee and accepts the check for payment in advance by the very act of issuance. See 6 Words and Phrases, "Cashier's Check" (1966); Bankers Trust v. South Carolina National Bank, 284 S.C. 238, 325 S.E.2d 81 (Ct.App.1985). "The purchaser is not a party to the cashier's check itself unless named as payee or unless the purchaser adds his own signature or indorsement to the instrument." H.J. Bailey, Brady on Bank Checks Section 1.17 at 1-20 (6th ed. 1987). After issuance, a cashier's check becomes the primary obligation of the bank rather than the purchaser, and the purchaser ordinarily has no authority to countermand payment of the check. State ex rel. Chan Siew Lai v. Powell, 536 S.W.2d 14 (Mo.1976).

As pertains to the trial court's finding of a fiduciary relationship, we have been unable to locate any authority which indicates the language Steele placed on the instant check created such a relationship. A "fiduciary relationship" is founded on trust and confidence reposed by one person in the integrity and fidelity of another. It "exists when one imposes a special confidence in another, so that the latter, in equity and good conscience, is bound to act in good faith and with due regard to the interests of the one imposing the confidence." Island Car Wash, Inc. v. Norris, 292 S.C. 595, 599, 358 S.E.2d 150, 152 (Ct.App.1987). Courts of equity have been careful to not define fiduciary relationships so as to exclude new cases that may give rise to the relationship. Id. at 599, 358 S.E.2d at 152. To constitute a fiduciary relationship, the relationship must be more than a casual relationship.

By way of illustration, the appellate courts of this state have found fiduciary relationships to exist in the following cases: Loftis v. Eck, 288 S.C. 154, 341 S.E.2d 641 (Ct.App.1986) (agent holding power of attorney in fiduciary relationship with his principal); Lengel v. Tom Jenkins Realty, Inc., 286 S.C. 515, 334 S.E.2d 834 (Ct.App.1985) (broker was a fiduciary of his client); Matter of Moore, 280 S.C. 178, 312 S.E.2d 1 (1984) (attorney in fiduciary relationship with his client); Landvest Assoc. v. Owens, 276 S.C. 22, 274 S.E.2d 433 (1981) (partners were fiduciaries to each other); Duncan v. Brookview House, Inc., 262 S.C. 449, 205 S.E.2d 707 (1974) (promoters of a corporation are fiduciaries to each other and to corporation); Talbot v. James, 259 S.C. 73, 190 S.E.2d 759 (1972) (officers and directors of a corporation stand in fiduciary relationship to shareholders); cf. Rush v. South Carolina National Bank, 288 S.C. 560, 343 S.E.2d 667 (Ct.App.1986) (bank and depositor may stand in a fiduciary relationship where bank undertakes to advise depositor as part of services bank offers). On the other hand, no fiduciary relationship between a bank and its depositor has been found where the bank officer was unaware of any special trust reposed in him. Burwell v. South Carolina National Bank, 288 S.C. 34, 340 S.E.2d 786 (1986).

In the case of Rush v. South Carolina National Bank, supra, Wright lived on land owned by Rush and customarily relied on Rush for financial advice. Wright had a savings account at South Carolina National. He asked Rush for advice in managing his savings. Wright and Rush went to SCN. Wright wanted to preserve the account for "major contingency" purposes. This purpose was communicated by Rush to SCN. Thereafter, the account was amended to require both the signatures of Wright and Rush for withdrawal of funds. After the...