Thompson v. UBS Fin. Servs., Inc.

• Decision Date: 22 May 2015
• Docket Number: No. 76, Sept. Term, 2014.,76, Sept. Term, 2014.
• Citation: 115 A.3d 125,443 Md. 47
• Parties: Nancy Lee Kathryn THOMPSON, et al. v. UBS FINANCIAL SERVICES, INC., et al.
• Court: Court of Special Appeals of Maryland

443 Md. 47

115 A.3d 125

Nancy Lee Kathryn THOMPSON, et al.

v.UBS FINANCIAL SERVICES, INC., et al.

No. 76, Sept. Term, 2014.

Court of Appeals of Maryland.

May 22, 2015.

Edward P. Parent (Andrew G. Slutkin, William N. Sinclair, Silverman, Thompson, Slutkin, White LLC, Baltimore, MD), on brief, for petitioners.

Mitchell Y. Mirviss (Venable LLP, Baltimore, MD; Steven B. Gould, Ian G. Thomas, Brown & Gould, LLP, Bethesda, MD), on brief, for respondent.

Argued before BARBERA, C.J. HARRELL, BATTAGLIA, GREENE, ADKINS, McDONALD, WATTS, JJ.

Opinion

WATTS, J.

A defendant converts a plaintiff's personal property where the defendant intentionally exerts “ownership or dominion over [the plaintiff]' s personal property in denial of or inconsistent with the [plaintiff]'s right to [the plaintiff's personal] property.” Nickens v. Mount Vernon Realty Grp., LLC, 429 Md. 53, 77, 54 A.3d 742, 756 (2012) (citations omitted). In Allied Inv. Corp. v. Jasen, 354 Md. 547, 562, 731 A.2d 957, 965 (1999), this Court unanimously held that a defendant does not convert a plaintiff's intangible property where the defendant does not convert a document that embodies the plaintiff's right to the plaintiff's intangible property; in other words, under Jasen, id. at 562, 731 A.2d at 965, one element of conversion of a plaintiff's intangible property is conversion of a document that embodies the plaintiff's right to the plaintiff's intangible property.

In this case, we decide: (I) whether to overrule Jasen, id. at 562, 731 A.2d at 965, and hold that a defendant can convert a plaintiff's intangible property even where the defendant does not convert a document that embodies the plaintiff's right to the plaintiff's intangible property; and (II) whether, here, the plaintiffs established a claim for constructive fraud.

(I) We reaffirm Jasen, id. at 562, 731 A.2d at 965, and again hold that a defendant does not convert a plaintiff's intangible property where the defendant does not convert a document that embodies the plaintiff's right to the plaintiff's intangible property; and (II) we hold that, here, the plaintiffs failed to establish a claim for constructive fraud, as the plaintiffs failed to establish that the parties were in a confidential relationship.

BACKGROUND

In the Circuit Court for Baltimore City (“the circuit court”), Nancy Lee Kathryn Thompson (“Kathy”), Barbara Ann Clements (together, “Petitioners”), and Karen Lee Kirlin (“Karen”), “for the benefit of” Susan Witherspoon (“Susan”), Carol Lareuse (“Carol”), and the Estate of Albert E. Thompson, III (“Albert”),¹ sued Susan's husband, Gordon H. Witherspoon (“Witherspoon”), Respondent; The Manufacturers Life Insurance Company; John Hancock Life Insurance Company USA; and UBS Financial Services, Inc., UBS Financial Services Insurance Agency, Inc., and UBS Insurance Agency, Inc. (together, “UBS”) for multiple causes of action, including conversion and constructive fraud as to Witherspoon.²

Gradually, the number of parties dwindled. No lawyer entered an appearance on behalf of Albert's estate. Susan filed a motion to strike herself and Carol as parties, which the circuit court granted. Petitioners and Karen filed a stipulation of dismissal of their claims against The Manufacturers Life Insurance Company and John Hancock Life Insurance Company USA. Karen filed a stipulation of dismissal of her claims against Witherspoon and UBS. Thus, by the time of trial, Petitioners, Witherspoon, and UBS were the only parties.

At trial, the circuit court admitted evidence of the following facts, which we summarize. Albert E. Thompson, Jr. and Nancy Schenuit Thompson (together, “the Thompson Parents”) were the parents of Petitioners, Karen, Susan, Carol, and Albert (together, “the Thompson Children”). The Thompson Children purchased a life insurance policy as to which they were the owners and beneficiaries, the Thompson Parents were the insureds, and Witherspoon was the broker. The Thompson Children signed the application for the life insurance policy, which listed Witherspoon's address under “Send Premium Notices To:”; from 1990 through 1998, the life insurance company mailed all policy-related documents to Witherspoon's address.

Each year from 1990 through 1995, the Thompson Parents paid each of the Thompson Children the amount of his or her share ($17,500) of the annual life insurance premium ($105,000.01). Because Kathy disliked Witherspoon, the Thompson Parents paid Kathy's share directly to her, and Kathy transferred her share directly to the life insurance company. The Thompson Parents deposited the shares of the rest of the Thompson Children into their respective accounts with UBS, where Witherspoon worked as a financial advisor from 1995 through 2005; the shares were then automatically transferred to the life insurance company.

Each year from 1996 through 2003 (except for 1997), the Thompson Parents did not pay each of the Thompson Children the amount of his or her share of the annual life insurance premium. Thus, in each of those seven years, the life insurance company automatically issued a loan to the Thompson Children from the life insurance policy's cash value to cover the amount of the unpaid annual life insurance premium. The loans' principal totaled $735,000.07, and the interest on the loans totaled $165,457.12 as of October 2007; thus, in all, the life insurance company deducted $900,457.19 from the life insurance policy's cash value. The Thompson Children never consented to the loans, which could have been avoided by paying the annual life insurance premium, surrendering the life insurance policy for its cash value less any policy debt, or continuing the life insurance policy as “paid-up” life insurance, for which the premium would have been the life insurance policy's cash value less any policy debt. The life insurance company mailed to Witherspoon policy statements and policy notices that mentioned the loans. Witherspoon knew about the loans, but never told Petitioners about them.

Around the years in which the Thompson Parents did not pay each of the Thompson Children the amount of his or her share of the annual life insurance premium, the Thompson Parents provided Witherspoon and Susan (together, “the Witherspoons”) with various gifts and loans. In 1995, the Thompson Parents began paying approximately $18,000 each year for the school tuition of one of the Witherspoons' children. In 1995, the Thompson Parents loaned the Witherspoons $89,000. Each year from approximately 1995 through 2003, the Thompson Parents gifted $20,000 to the Witherspoons. Sometime after 1995, the Thompson Parents began paying approximately $18,000 each year for the school tuition of another one of the Witherspoons' children. In 2004, the Thompson parents loaned the Witherspoons $585,000.

At the conclusion of the trial, a jury found Witherspoon liable for negligence, negligent misrepresentation, deceit, conversion, and constructive fraud, and found UBS liable for negligent supervision. Witherspoon and UBS separately moved for judgment notwithstanding the verdict; Witherspoon contended that Petitioners failed to establish a claim for conversion or constructive fraud. The circuit court denied the motions for judgment notwithstanding the verdict. Witherspoon and UBS appealed, and the Court of Special Appeals reversed and remanded, holding that Petitioners failed to establish claims for conversion and constructive fraud, and that the trial court made other errors that necessitated a new trial as to the claims other than conversion and constructive fraud. See UBS Fin. Servs., Inc. v. Thompson, 217 Md.App. 500, 536, 507, 94 A.3d 176, 197, 180 (2014). Petitioners filed a petition for a writ of certiorari, which this Court granted only as to the issues regarding conversion and constructive fraud.³ See Thompson v. UBS Fin. Servs., 440 Md. 225, 101 A.3d 1063 (2014).

Later, Petitioners filed in this Court a notice of dismissal of their claims against UBS; thus, Witherspoon is now the only Respondent. Nonetheless, because this case was docketed in this Court under the name Thompson v. UBS Fin. Servs., this case will retain that name for this opinion's purposes.

DISCUSSION

I.

Petitioners contend that the circuit court was correct in denying Witherspoon's motion for judgment notwithstanding the verdict as to conversion, as Petitioners established a claim against Witherspoon for conversion of the life insurance policy. Specifically, Petitioners argue that Witherspoon converted the life insurance policy by interfering with Petitioners' right to the life insurance policy, even if Witherspoon did not convert a document that embodied Petitioners' right to the life insurance policy. More broadly, Petitioners assert that a defendant converts a plaintiff's intangible property by interfering with the plaintiff's right to the plaintiff's intangible property, even if the defendant does not convert a document that embodies the plaintiff's right to the plaintiff's intangible property. Accordingly, Petitioners urge us to overrule Jasen, 354 Md. at 562, 731 A.2d at 965, in which this Court expressly declined to adopt Restatement (Second) of Torts § 242(2) (1965) (“One who effectively prevents the exercise of intangible [property] rights of the kind customarily merged in a document is subject to a liability similar to that for conversion, even though the document is not itself converted.”). Petitioners assert that Jasen, 354 Md. at 562, 731 A.2d at 965, is archaic in light of the modern increase in digital media (as opposed to paper documents).

Witherspoon responds that the circuit court erred in denying his motion for judgment notwithstanding the verdict as to conversion, as Petitioners failed to establish a claim against him for conversion of the life insurance policy. Specifically, Witherspoon contends that, because he did not convert a document that embodied Petitioners' right to the life insurance policy, he did not convert the life insurance policy. More broadly,...