Ubs Fin. Servs., Inc. v. Thompson, 0352

CourtCourt of Special Appeals of Maryland
Citation217 Md.App. 500,94 A.3d 176
Docket NumberNo. 0352,Sept. Term, 2013.,0352
PartiesUBS FINANCIAL SERVICES, INC., et al v. Nancy Lee Kathryn THOMPSON, et al.
Decision Date25 June 2014

217 Md.App. 500
94 A.3d 176

Nancy Lee Kathryn THOMPSON, et al.

No. 0352, Sept. Term, 2013.

Court of Special Appeals of Maryland.

June 25, 2014.

[94 A.3d 179]

Timothy C. Bass (David S. Panzer, Joshua Sanderlin, Greenberg Traurig, LLP, Washington, D.C.) Mitchell Y. Mirviss (Venable, LLP, Baltimore, MD) (Steven B. Gould, Brown & Gould, LLP, Bethesda, MD) (Matthew E. Kiely, Baltimore, MD), for appellant.

Alex J. Brown (Andrew G. Slutkin, Edward P. Parent, Silverman, Thompson, Slutkin & White, on the brief) Baltimore, MD, for appellee.



This case arises from a significant jury award for compensatory and punitive damages by a jury, sitting in the Circuit Court for Baltimore City, in favor of appellees, sisters Nancy Lee Katherine Thompson (“Kathy”) and Barbara Clements (“Barbara”) 1 against appellants, UBS Financial Services, Inc., UBS Financial Services Insurance Agency, Inc., UBS Insurance Agency, Inc., Paine Webber, Inc., and UBS Paine Webber, Inc. (collectively, “UBS”) and Gordon Witherspoon (“Mr. Witherspoon”). Appellees alleged in their complaint that appellants' tortious conduct denied them the full value of a life insurance policy purchased by appellees' parents, Nancy (“Ms. Thompson”) and Albert Thompson (“Mr. Thompson” and, together, “the parents”). Appellants filed various post-trial motions challenging the jury's award, all of which were denied by the circuit court.

UBS filed a timely appeal and presents four questions for our review,2 while Mr.

[94 A.3d 180]

Witherspoon appealed and presented six.3 We consolidate these questions into a single inquiry:

Did appellees suffer legally recoverable injuries as a result of UBS' and/or Mr. Witherspoon's conduct?
For the following reasons, we determine that (1) appellees did not establish a sufficient claim for conversion; (2) appellees did not establish a sufficient claim for constructive fraud; (3) the circuit court erred by excluding appellants from introducing certain evidence regarding the parents' financial gifts to their children; (4) the circuit court erred by improperly instructing the jury on duty, and (5) the circuit court erred by entering a speculative and flawed jury award.
We therefore reverse the judgments against appellants, and remand for a new trial on appellees' claims for negligence, negligent supervision, negligent misrepresentation, and deceit.


This case stems from an insurance policy purchased by the parents on September 28, 1990. The policy was a “second to die” life insurance policy from The Manufacturers Life Insurance Company (“Manulife”). It listed “the owner” as the beneficiary and listed the children, Kathy, Karen, Susan Witherspoon (“Susan”), Carol Lareuse (“Carol”), and Barbara as the owners. The premium schedule indicated that premiums were “payable at annual intervals to second death, or to age 99 of the younger of the surviving lives, as follows [.]” Under a section marked “PAYMENT OF PREMIUMS[,]” the policy explained that:

If a premium is not paid by the end of the grace period, your policy terminates, unless it has a value called a cash value. What happens then is explained in the “Automatic Premium Loan” and “Guaranteed Options” provisions. The “Surrender for Cash” provision describes the cash value.

The “GUARANTEED OPTIONS” section referenced above stated the following:

If a premium is not paid and your policy has a cash value, you can chose a “guaranteed option” instead of resuming premium payments. The guaranteed options are (a) and (b) below.

If you do not choose a guaranteed option before the end of the grace period (or such other time as may be required by the law of the state in which this policy was delivered), and had not asked for the automatic premium

[94 A.3d 181]

loan option, we will apply option (a).

(a) Paid-up life insurance. You can continue the policy as paid-up life insurance payable on the second death. We will use the cash value, less any policy debt, as a net single premium on the due date to compute the amount of insurance.

(b) Surrender for Cash. You can surrender the policy for cash according to the “Surrender for Cash” provision.

The policy also contained a section entitled “AUTOMATIC PREMIUM LOAN” which stated the following:

We automatically will grant a loan to pay all or part of an unpaid premium if:

(a) the premium is still unpaid at the end of the grace period; and

(b) you asked for this loan option in the application, or we receive your signed request for it before the end of the grace period; and

(c) the loan value exceeds the policy debt.

We will loan the whole premium if at the end of the premium period the policy debt will not exceed the loan value. Where required by the law of the state in which this policy was delivered, we will advise you of the initial interest rate within the stipulated period of time.

If loaning the whole premium would make the policy debt at the end of the premium period greater than the loan value, we will loan only a part of the premium. The amount we loan will keep your policy in force from the due date of the premium until the policy debt equals the loan value. Then, if the balance of the premium is still unpaid, the policy will terminate.

You can write to us and cancel your request for the automatic premium loan. This cancellation will apply from the date when we receive your notice.

Other pertinent provisions of the policy read as follows:


Your whole contract is in the policy and the application. A copy of the application is attached to the policy and deemed a part of it. We will not be bound by any statement that is not in the application or the policy. Only our President or one of our Vice–Presidents can amend or modify the policy, and only in writing.

Statements by you or either of the lives insured are representations, not warranties, unless fraud is involved. We will not use any statement by you or either of the lives insured to deny a claim, unless it is written in the application.

* * *


The table of values on page 3 shows the basic values and the amount of paid-up whole life participating insurance. The basic value at any time is equal to the then present value of the paid-up insurance, and is calculated by the standard nonforfeiture method. The table assumes premiums are paid to the end of the policy year shown. It does not take into account any dividends, paid-up additions or policy debt.

The table shows values for a number of consecutive anniversaries. For each of the values shown and beyond the last of those anniversaries we compute all values and benefits by the standard nonforfeiture method.

All these values and benefits are at least as much as those required by the State in which this policy is delivered. We have filed a detailed statement of our method of computing them with your State's insurance department.

[94 A.3d 182]

On your request we will state values and benefits for dates not shown. For a specific date in a policy year, we will allow for the time elapsed in that year and the date to which premiums have been paid.

Basic values and net single premiums are based on the Commissioners 1980 Standard Ordinary Smoker or Non–Smoker Mortality Table, without select factors. We assume interest at 6.25% per year in calculating basic values, paid-up values and paid-up additions; and that deaths occur at the end of the policy year of death.

The policy was signed by the parents, as well as Susan, Kathy, Karen, Carol, and Barbara. The parents, in order to avoid estate taxes, constructed a complex process involving cash gifts to the children/owners that would subsequently be used to pay the premiums on the policy. This process was managed by Mr. Witherspoon, Susan's husband, an insurance broker and the parents' financial advisor. Mr. Witherspoon arranged for the premiums to be paid out of the children's bank accounts after a cash gift was deposited. 4 For many of the years that the premiums were not paid, Mr. Witherspoon arranged for the premium notices to be sent to an address “in care of” him. It was never envisioned that the children would pay the premiums with their own funds, and they never did.

The parents, through cash gifts to their children, paid premiums on the policy until 1996. However, the premium due that year was not paid, and payments were also neglected in 1998, 1999, 2000, 2001, 2002, and 2003. During these years, Manulife borrowed approximately $900,000 against the policy to cover the premiums. Appellees discovered that the policy had been devalued by these loans after Mr. Thompson's death in 2005. They, along with some of their fellow siblings, placed the blame on Mr. Witherspoon, UBS, and other financial companies associated with the policy.

Appellees filed their original complaint with a demand for a jury trial on August 29, 2008. Appellees filed an amended complaint on October 1, 2008, alleging counts of negligent misrepresentation (Count One), deceit (Count Two), conversion (Count Three), negligence (Count Four), and constructive fraud (Count Six) against Mr. Witherspoon and negligence pursuant to a theory of respondeat superior (Count Nine), negligence (Count Ten), and deceit (Count Thirteen) against UBS. The following chart illustrates the relationship between the relevant parties in the instant case:


[94 A.3d 183]

UBS filed a petition to compel arbitration and motion to stay all proceedings on November 26, 2008, arguing that the insurance policy at issue was part of an agreement subjecting the case to arbitration. It subsequently filed an answer to appellees' amended complaint on December 15, 2008. The circuit court conducted a hearing regarding UBS' petition to compel arbitration on January 23, 2009. It entered an order granting appellants' motion and stayed the case that same day. Appellees appealed from that order to this Court. Appellants' arguments on that appeal were...

To continue reading

Request your trial
29 cases
  • Roman v. Sage Title Grp., LLC, 40
    • United States
    • Court of Special Appeals of Maryland
    • September 27, 2016
    ...the grant of a JNOV motion under Rule 2–532 : we review the grant of both motions de novo . UBS Fin. Servs., Inc. v. Thompson , 217 Md.App. 500, 514, 94 A.3d 176 (2014), aff'd , 443 Md. 47, 115 A.3d 125 (2015). In doing so, we view the evidence and the reasonable inferences to be drawn from......
  • Bel Air Carpet, Inc. v. Korey Homes Bldg. Grp., LLC, 1006, Sept. Term, 2019
    • United States
    • Court of Special Appeals of Maryland
    • January 28, 2021
    ...required an intimate nexus between the parties as a condition to the imposition of tort liability." UBS Fin. Servs., Inc. v. Thompson , 217 Md. App. 500, 525, 94 A.3d 176 (2014) (quoting 100 Inv. Ltd. P'ship , 430 Md. at 214, 60 A.3d 1 ). "This intimate nexus is satisfied by contractual pri......
  • Mayor v. Stokes, 0333
    • United States
    • Court of Special Appeals of Maryland
    • June 25, 2014
    ...and Ms. Maynor's motion for judgment and remand back to that court for a new trial. JUDGMENTS OF THE CIRCUIT COURT FOR BALTIMORE CITY ARE [94 A.3d 176]REVERSED. COSTS TO BE PAID BY APPELLEES/CROSS–APPELLANTS.--------Notes: * Judge Kevin F. Arthur did not participate in the Court's decision ......
  • Chassels v. Krepps, 954, Sept. Term, 2016
    • United States
    • Court of Special Appeals of Maryland
    • December 4, 2017
    ...also "interject [himself]" into a prior agreement, thereby "assum [ing] a duty" through his actions. UBS Fin. Servs., Inc. v. Thompson , 217 Md.App. 500, 518, 530, 94 A.3d 176 (2014), aff'd , Thompson v. UBS Financial Services, Inc. , 443 Md. 47, 115 A.3d 125 (2015). In UBS Financial Servic......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT