Donnelly et al v. Branch Banking and Trust Company

Filing 106

MEMORANDUM OPINION AND ORDER Denying 93 Plaintiff's Motion for a Continuance of Trial; Denying 86 Plaintiff's Motion to Reinstate Their Negligence Claim. Signed by Judge Paul W. Grimm on 6/28/2016. (jf3s, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Southern Division
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V. CHARLES DONNELLY, et al.,
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Plaintiffs,
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v.

Case No.: PWG-13-852
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BRANCH BANKING AND TRUST CO.,
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Defendant.
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MEMORANDUM OPINION AND ORDER
This action arises out of a mortgage loan from Defendant Branch Banking and Trust
Company (“BB&T”) on a failed real estate investment, secured by a deed of trust on the
investment property and guaranteed by Plaintiffs V. Charles Donnelly and Deborah A. Steffen
and their co-investors. After continuing the previously scheduled trial and re-opening limited
discovery, the case is currently set for trial to begin on Monday, July 11, 2016. See ECF No. 87.
Donnelly has filed a letter requesting permission to file a motion to continue the trial yet again,
Pl.’s Cont. Mot., ECF No. 93, which I have treated as a motion for a continuance of the trial, see
ECF No. 94.1 Because I have already continued the trial once and Donnelly has failed to provide
sufficient justification for why I should continue the trial yet again, Donnelly’s motion for a
continuance of the trial is denied. At my direction, Plaintiffs have also filed supplemental
briefing requesting that I reinstate their negligence claim against BB&T, which I previously
dismissed on BB&T’s motion for summary judgment, in light of documents that BB&T failed to

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BB&T has filed an opposition, Cont. Opp’n, ECF No. 101, and Donnelly has filed a
reply, Cont. Reply, ECF No. 103. A hearing is unnecessary. See Loc. R. 105.6.

produce initially and only produced after my summary judgment ruling. Pls.’ Neg. Mot., ECF
No. 86.2

Because Plaintiffs have failed to demonstrate how the production of these new

documents creates a tort duty after the execution of the February 2012 extension, Plaintiffs’
motion to reinstate their negligence claim is denied.3
I.

BACKGROUND

I incorporate by reference the factual background discussed in my March 3, 2015,
memorandum opinion, Summary Judg. Mem., ECF No. 62. This case was previously set for trial
to begin on Tuesday, January 19, 2016. See Dec. 10, 2015, Letter Order, ECF No. 75. On
January 14, 2016, Donnelly filed a motion to compel discovery, for sanctions, to re-open
discovery, and to continue the trial and request a hearing. See ECF No. 79. On January 15,
2016, I held a conference call with the parties regarding Donnelly’s motion. See Jan. 15, 2016,
Letter Order, ECF No. 81. I granted Donnelly’s motion for a continuance and ordered BB&T
“to produce by February 1, 2016, any documents not already produced to Plaintiffs relating to (1)
the draft loan extension and forbearance agreement produced by BB&T on January 6, 2016, and
(2) the February 2012 extension agreement and Donnelly’s execution of a deed of trust regarding
his 10% ownership of Solomons Two with respect thereto.” Id. I also permitted Plaintiffs to
provide supplemental briefing on whether my dismissal of the negligence claim, see Summary
Judg. Mem., ECF No. 62, “should be revisited in light of (i) the recent document productions, (ii)

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Although stylized as a brief, I will treat Plaintiffs’ filing as a motion for the reinstatement
of his negligence claim. BB&T has filed an opposition, Neg. Opp’n, ECF No. 88, and Plaintiffs
have filed a reply, Neg. Reply, ECF No. 91. A hearing in this matter is also unnecessary. See
Loc. R. 105.6.
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In Plaintiffs’ reply regarding the reinstatement of the negligence claim, they also alleged
instances of discovery fraud perpetrated by BB&T and requested relief from this Court. See
Neg. Reply 6–9. I ordered BB&T to respond to these allegations, see ECF No. 92, which it did,
see ECF No. 104. I will address this matter during the pre-trial conference scheduled for Friday,
July 8, 2016, at 2:30 p.m. See ECF No. 105.
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any future documents produced pursuant to this letter order, and (iii) the deposition(s) taken
pursuant to this letter order.” Id.
II.

DISCUSSION
A. Motion for a Continuance of Trial

Donnelly has filed a motion for a continuance of trial on the basis of a Maryland Court of
Special Appeals order remanding a related case to the Circuit Court for Calvert County to hear
Donnelly’s motion to revise judgment on the basis of alleged discovery wrongdoing on the part
of BB&T. See Pl.’s Cont. Mot. Donnelly admits that this state court action is based on my
January 15, 2016, Letter Order, which directed BB&T to produce additional documents relating
to Plaintiffs’ claims. BB&T now has produced these documents, its former employee, Carol
Taylor, was deposed regarding the recently produced documents, and I have ordered separate
briefing in response to Donnelly’s discovery fraud allegations.4 But these allegations do not
relate to the substance of Donnelly’s negligent misrepresentation claim, which is scheduled for
trial starting on July 11, 2016. Further, because I find that there is no basis to reinstate Plaintiffs’
negligence claims based upon the belatedly produced documents, there is no need to postpone
the trial a second time, particularly because Plaintiffs can use the produced documents and the
deposition of Carol Taylor in presenting their negligent misrepresentation claim.

The

postponement request therefore is denied.
B. Motion for Reinstatement of the Negligence Claim
1. March 3, 2015, Memorandum Opinion

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I note that Donnelly did not raise discovery issues relating to BB&T’s production of
documents in a timely matter originally. See June 27, 2014, Letter Order, ECF No. 53.
Accordingly, I denied Donnelly’s request for an extension of the discovery deadlines. Id.
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Because Plaintiffs seek reinstatement of their negligence claim, which I previously
dismissed, I will reproduce my reasoning from my March 3, 2015, memorandum opinion below:
It is “a longstanding principle of Maryland law that the relationship of a
bank to its customer in a loan transaction is ordinarily a contractual relationship
between a debtor and a creditor and is not fiduciary in nature.” Parker v.
Columbia Bank, 604 A.2d 521, 532 (Md. Ct. Spec. App. 1992). “‘The mere
negligent breach of a contract, absent a duty or obligation imposed by law
independent of that arising out of the contract itself, is not enough to sustain an
action sounding in tort.’” Jacques v. First Nat’l Bank of Md., 515 A.2d 756, 759
(Md. 1986) (quoting Heckrotte v. Riddle, 168 A.2d 879, 882 (Md. 1961)). Where,
as here, “the failure to exercise due care creates a risk of economic loss only,
courts have generally required an intimate nexus between the parties as a
condition to the imposition of tort liability. This intimate nexus is satisfied by
contractual privity or its equivalent.” Id. at 759–60.
The Maryland Court of Special Appeals has recognized four “special
circumstances” that can give rise to a tort duty between a bank and its customer
where
the lender “(1) took on any extra services on behalf of [the
borrowers] other than furnishing the money for construction of a
home; (2) received any greater economic benefit from the
transaction other than the normal mortgage; (3) exercised extensive
control over the construction; or (4) was asked by [the borrowers]
if there were any lien actions pending.”
Parker, 604 A.2d at 533 (quoting Tokarz v. Frontier Fed. Sav. & Loan Ass’n, 656
P.2d 1089, 1094 (Wash. Ct. App. 1982) (alterations in original)).
In considering BB&T’s motion to dismiss (in the absence of any facts
other than the allegations in the complaint), Judge Williams found that “it is
conceivable that the transaction involving Plaintiffs’ 10% interest in the Property
could have imposed a duty of care on BB & T in subsequent refinancing
negotiations.” Donnelly, 971 F. Supp. 2d at 508–09. Indeed, obtaining additional
security for the Loan by extracting a deed of trust on Donnelly’s personal 10%
interest in the Property constituted “greater economic benefit from the
transaction” than was represented by the mortgage itself. And to the extent that
executing the Donnelly Deed of Trust created a tort duty on the part of BB&T,
that duty ran to Donnelly himself because it was Donnelly who provided the
additional consideration. However, additional facts have been produced as a
result of discovery and cited in the summary judgment filings that belie Plaintiffs’
claims that the Donnelly Deed of Trust was extracted in the context of
negotiations over the refinancing Plaintiffs sought.
Plaintiffs’ complaint was unclear about when BB&T had required
Donnelly to execute the Donnelly Deed of Trust. Paragraph 10 of the Complaint
contains allegations about the extension signed in February 2012, including that

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the parties anticipated reassessing where the property stood when the Note
matured in May 2012. Compl. ¶ 10. The next paragraph alleged that “[i]n late
early February, 2012,” Donnelly was told that he would need to execute a deed of
trust on his personal interest as a precondition to BB&T “extending the current
deed of trust and any subsequent extensions or modifications of the note when it
matured.” Id. ¶ 11. And in the following paragraph, Donnelly began detailing the
chain of events leading up to the Modification Proposal in Spring of 2012. Id. ¶
12. The implication of these allegations was that BB&T had required Donnelly to
execute the Donnelly Deed of Trust after the February 2012 Extension but before
negotiating any further extensions.
The record now makes clear that Donnelly executed the Donnelly Deed of
Trust as a precondition to the February 2012 Extension—which then was granted
by BB&T. Plaintiffs expressly acknowledge this in their memorandum. Pls.’
Summ. J. Opp’n 22 (“[Donnelly] was told that it was a condition for the extension
of the Note set for signing on February 17, 2012 and that its execution was
required for any future note modifications.”). To the extent that the Donnelly
Deed of Trust constituted additional consideration on par with the payment of an
application fee in Jacques, BB&T fulfilled their obligations when they gave fair
consideration to—and granted—an extension of the Note in February 2012.
Donnelly has not identified any further commitments by BB&T to provide any
additional extensions of the Loan, nor has he shown that BB&T did not exercise
reasonable care in considering his proposal to curtail the Loan and reduce the
monthly payments. The mere fact that BB&T did not grant Donnelly an
extension cannot establish the breach of a duty where there was no obligation to
do so. Cf. Jacques, 515 A.2d at 562 (“[O]rdinarily a proprietor may refuse to do
business with a person for any reason except race, color, creed, or national
origin.”).
Implicit in Plaintiffs’ claims is the premise that having executed the
Donnelly Deed of Trust as a condition for any subsequent modifications created a
tort duty that lasted indefinitely into the future life of the Loan—a duty without
any apparent limitation, as Plaintiffs conceive it. But “[c]ourts have been
exceedingly reluctant to find special circumstances sufficient to transform an
ordinary contractual relationship between a bank and its customer into a fiduciary
relationship or to impose any duties on the bank not found in the loan agreement.”
Parker, 604 A.2d at 532; see also Spaulding v. Wells Fargo Bank, N.A., 714 F.3d
769, 778 (4th Cir. 2013) (same). Even crediting Steffen’s claim that Taylor stated
that BB&T was “in for the long haul” (whatever that means), Steffen Dep. (Pls.’
Excerpts) 100:9, Pls.’ Summ. J. Opp’n Ex. 11, ECF No. 54-3, that ambiguous
statement was no more than an expression of desire that the parties continue to
have future dealings, and therefore cannot form a basis for liability, see Miller v.
Fairchild Indus., Inc., 629 A.2d 1293, 1304 (Md. Ct. Spec. App. 1993). Plaintiffs
cannot point to any application fee or other additional consideration demanded by
BB&T and provided by them with respect to the proposed modification
agreement, and Taylor’s vague statement does not provide a sufficient basis to
obligate BB&T to continue approving loan modifications indefinitely absent any
consideration from Plaintiffs.

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Plaintiffs also argue that, by having Donnelly deal with Taylor as “the key
person who dealt with troubled loans and borrowers under ‘financial stress’”
instead of Sucher, with whom he had a longstanding relationship, imposed upon
BB&T on an obligation “beyond simply processing the underlying loan
documents.” Pls.’ Summ. J. Opp’n 21. Yet Plaintiffs do not offer any
explanation or legal authority for this position and I cannot see how BB&T’s
decision as to who would be Plaintiffs’ point of contact possibly can affect their
duties to Plaintiffs under the Note. Whatever the grounds for this argument, it
does not support a tort duty for negligence. BB&T was subject to the same
obligations irrespective of who was acting as its agent with respect to Plaintiffs.
Although BB&T may have had a tort duty to consider the February 2012
Modification in good faith, there is nothing in the record to show that they did not
do so and, in fact, BB&T granted the modification at that time. Having done so,
the Donnelly Deed of Trust does not create a perpetual tort duty, nor is there any
basis to find that BB&T did not give proper consideration to the modification
proposal in the spring of 2012 in any event. Accordingly, BB&T owed no general
negligence duty with respect to the Modification Proposal and is entitled to
summary judgment with respect to Plaintiffs’ negligence claim.
Summary Judg. Mem. 17–21 (footnotes omitted).
2. Current Analysis
Plaintiffs’ supplemental briefing regarding the discovery subsequent to my March 3,
2015, memorandum opinion—document production and the deposition of Carol Taylor—fails to
support reinstatement of their negligence claim.

Although the documents and deposition

testimony that Plaintiffs cite may be relevant to their negligent misrepresentation claim, they fail
to address adequately the central aspect of my reasoning for dismissing their negligence claim:
that even if there existed a fiduciary relationship due to Donnelly’s execution of the Donnelly
Deed of Trust, “BB&T fulfilled their obligations when they gave fair consideration to—and
granted—an extension of the Note in February 2012.” Summary Judg. Mem. 19.
Plaintiffs argue that
BB&T’s “recently produced documents” not only show a larger treatment and
recognition of the effect of that Deed of Trust on Donnelly’s relationship with
BB&T, but shows the heightened responsibility owed Donnelly by BB&T
regarding the direct relationship created by that Donnelly Deed of Trust and
subsequent events surrounding the curtailment offer by Donnelly and BB&T’s

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actions in the immediate period following the breach of the agreement regarding
the curtailment offer.
Neg. Reply 3. However, Plaintiffs fail to explain adequately how these “recently produced
documents” create a tort duty that extended beyond the February 2012 Modification. Plaintiffs
suggest without citing to any specific documents that the purpose of the February 2012
Modification was “to allow for new investors or a refinancing with another lender to take place.”
See Pls.’ Neg. Mot. 12. Yet, even if it was true that BB&T agreed to the February 2012
Modification to allow Plaintiffs an opportunity to find new investors or a new lender during the
period of time covered by the modification, it did not create a tort duty of perpetual duration as
Plaintiffs seem to contend. In addition to failing to provide proper documentary support for this
argument, the perpetual tort liability theory is one that I already rejected when I ruled that “the
Donnelly Deed of Trust does not create a perpetual tort duty.” Summary Judg. Mem. 21.
Plaintiffs also argue that the newly produced documents provide support for “Donnelly’s change
in status from a mere guarantor to primarily liability [sic] on the Solomons Two loan” and as
such “fits the class of ‘special circumstances’ wrestled with by the Court in Jacques.” Pls.’ Neg.
Mot. 13. However, Plaintiffs fail to support these conclusory statements with any citations to the
recently produced documents.5
The reasoning in my March 3, 2015, memorandum opinion continues to apply subsequent
to the recent document production and deposition of Taylor:
Donnelly has not identified any further commitments by BB&T to provide any
additional extensions of the Loan, nor has he shown that BB&T did not exercise
reasonable care in considering his proposal to curtail the Loan and reduce the
monthly payments. The mere fact that BB&T did not grant Donnelly an

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Plaintiffs also suggest that a tort duty exists because certain of the newly produced draft
forbearance agreements refer to Donnelly and Steffen as “Borrowers.” See Neg. Reply 5–6;
Agr., Neg. Opp’n, Ex. 1, ECF No. 88-1. However, these references reflect Plaintiffs’ status
under the draft agreement if it had been executed, not Plaintiffs’ status vis-à-vis BB&T as it
existed in May and June 2012 during the negotiations.
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extension cannot establish the breach of a duty where there was no obligation to
do so.
Summary Judg. Mem. 19. Instead of explaining how the recently produced documents change
my original analysis, Plaintiffs mostly rehash arguments that I previously rejected. Accordingly,
Plaintiffs’ motion to reinstate their negligence claim against BB&T is denied.
III.

CONCLUSION

For the reasons stated above, Donnelly’s motion for a continuance of trial is denied, and
Plaintiffs’ motion to reinstate their negligence claim against BB&T is also denied.
ORDER
Accordingly, it is this 28th day of June, 2016, hereby ORDERED that Donnelly’s motion
for a continuance of trial, ECF No. 93, IS DENIED, and Plaintiffs’ motion to reinstate their
negligence claim against BB&T, ECF No. 86, IS DENIED.
So ordered.

/S/
Paul W. Grimm
United States District Judge
dpb

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