G&D Furniture Holdings, Inc. v. SunTrust Bank

Filing 59

MEMORANDUM OPINION. Signed by Judge Theodore D. Chuang on 7/11/2017. (aos, Deputy Clerk)

UNITED STATES DISTRICT COURT
DISTRICT OF MARYLAND

G&D FURNITURE HOLDINGS, INC.,
Plaintiff,
v.

Civil Action No. TDC-16-2020

SUNTRUST BANK,
Defendant.

MEMORANDUM OPINION
Plaintiff G&D Furniture Holdings, Inc. ("G&D") filed this civil action against Defendant
SunTrust Bank ("SunTrust"),

seeking the return of funds that G&D alleges were wrongfully

withdrawn from its account to satisfy a writ of garnishment against a third party. Now pending
before the Court is SunTrust's second Motion to Dismiss, which seeks to dismiss Count II of the
Second Amended Complaint.

The Motion is fully briefed and ripe for disposition, and no

hearing is necessary to resolve the issues.

See D. Md. Local R. 105.6. For the reasons that

follow, the Motion is GRANTED.
BACKGROUND
G&D opened an account with SunTrust in March 2011.

The Rules and Regulations

governing the deposit account ("Rules and Regulations") explicitly provide that the opening of
the account created a debtor-creditor relationship between the parties.
In March 2013, SunTrust was served with a writ of garnishment against Deutsch &
Gilden Incorporated ("Deutsch"), another SunTrust accountholder.

The writ of garnishment

sought to attach $718,805.28 owed by Deutsch and held at SunTrust in order to satisfy a

judgment on behalf of PS Business Parks, L.P. The writ directed SunTrust to deposit with the
Clerk of the Circuit Court for Fairfax County, Virginia "all accounts" owned by Deutsch,
"including an account ending in 61663."

Second Am. Compl. ("SAC") ,-r 5, ECF No. 54. In

response to the writ of garnishment, SunTrust withdrew funds from an account owned by G&D
that ended in 61663 and deposited them with the Clerk. SunTrust did not seek permission from
G&D to transfer the funds and did not advise G&D of its actions.

G&D learned of the

withdrawal the following May when it received a monthly account statement showing a negative
balance. In total, SunTrust removed $133,656.69 from G&D's account.
G&D, which owed no debts to PS Business Parks, successfully moved to quash the writ
of garnishment, which had not named G&D or its assets. On October 30,2014, the Circuit Court
for Fairfax County ordered the Clerk to return G&D's funds to SunTrust. The funds were duly
transferred to SunTrust. However, SunTrust replaced only $49,151.54 into G&D's account and
failed to return $84,405 of the withdrawn funds.
G&D originally filed this lawsuit on April 26, 2016 in the Circuit Court for Prince
George's County, Maryland.

After SunTrust removed the action to this Court, G&D filed an

Amended Complaint alleging breach of contract based on the Rules and Regulations (Count I),
breach of contract based on the debtor-creditor relationship between a bank and its depositor
(Count II), a violation of public banking laws and regulations (Count III), breach of a bailment
relationship (Count IV), breach of fiduciary duty (Count V), and conversion (Count VI). After
SunTrust filed a Motion to Dismiss, G&D agreed voluntarily to dismiss the claim that SunTrust
had violated public banking laws (Count III) and the claim for breach of fiduciary duty (Count
V). On December 22,2016, the Court granted SunTrust's Motion to Dismiss in part, dismissing
Count IV (bailment) with prejudice and Count I (breach of contract based on the Rules and

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Regulations) and Count VI (conversion) without prejudice.

The Court denied the Motion as to

Count II (breach of contract based on the debtor-creditor relationship).
On January

5, 2017,

SunTrust

filed a Notice

of Intent to File a Motion

for

Reconsideration pursuant to the Court's Case Management Order, asking the Court to revisit its
ruling as to Count II. Ultimately, the Court entered an Order directing G&D to file a revised
Second Amended Complaint including three counts: (l) breach of express contract based on the
debtor-creditor

relationship provision in the Rules and Regulations and any other specified

relevant provision; (2) breach of implied contract; and (3) conversion.

ECF No. 52. G&D filed

its Second Amended Complaint on January 25, 2017.
DISCUSSION
In its Motion, SunTrust asserts that Count II, which alleges breach of implied contractual
duties between G&D and SunTrust, fails to state a claim because G&D's relationship with
SunTrust is governed by an express contract that supersedes any implied duties. G&D contends
that all contracts between a bank and its customer contain implied provisions, and that those
provisions form the basis for a separate cause of action.
I.

Legal Standard
To defeat a motion to dismiss under Federal Rule of Civil Procedure

12(b)(6), the

complaint must allege enough facts to state a plausible claim for relief. Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). A claim is plausible when the facts pleaded allow "the court to draw the
reasonable

inference that the defendant is liable for the misconduct alleged."

Id.

Legal

conclusions or conclusory statements do not suffice. Id. The Court must examine the complaint
as a. whole, consider the factual allegations in the complaint as true, and construe the factual

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allegations in the light most favorable to the plaintiff.
(1994); Lambeth v. Bd. o/Comm'rs

Albright v. Oliver, 510 U.S. 266, 268

o/Davidson Cty., 407 F.3d 266,268 (4th Cir. 2005).

Courts are permitted to consider a document attached to a motion to dismiss "when the
document is integral to and explicitly relied on in the complaint, and when the plaintiffs do not
challenge the document's authenticity."

Zak v. Chelsea Therapeutics Int'l, Ltd., 780 F.3d 597,

606-07 (4th Cir. 20 15) (quoting Am. Chiropractic Ass 'n v. Trigon Healthcare, Inc., 367 F.3d
212, 234 (4th Cir. 2004»
Regulations

(internal quotation marks omitted).

Although

the Rules and

were not attached to the Second Amended Complaint, counsel for G&D has

assented to the Court's consideration of the copy of the Rules and Regulations provided by
SunTrust as an integral document. Accordingly, the Court considers the Rules and Regulations.
II.

Breach of Contract
The relationship between a bank and its customer is contractual.

America, NA., 826 A.2d 504, 511 (Md. 2003).

Lema v. Bank of

SunTrust does not challenge Count I, which

alleges that SunTrust breached the Rules and Regulations by refusing to act in accordance with
the debtor-creditor relationship referenced in that document and by failing to handle G&D's
funds with ordinary care. Count II, in contrast, alleges that Maryland common law "implies a
debtor creditor relationship between the depository bank (SunTrust) and the depositor (G&D),"
and that when G&D opened its SunTrust account, SunTrust "impliedly agreed" to handle the
account in good faith, deal fairly with the deposited funds, act honestly in handling the account,
and handle the account for G&D's benefit. SAC ~ 19. G&D asserts that SunTrust violated these
implied duties by withdrawing funds from G&D's account in response to the writ of garnishment
against Deutsch then failing to return all of those funds. SunTrust argues that Count II fails to

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state a claim because the existence of an express contract such as the Rules and Regulations
precludes a claim for breach of an implied contract.
Maryland law has long recognized that there is a "contract that is implied in a banking
relationship"
depositor."

that can be breached by "a wrongful disbursement

of funds belonging to a

Taylor v. Equitable Trust Co., 304 A.2d 838, 842 (Md. 1973); see also Bank o/So.

Md. v. Robertson's Crab House, Inc., 389 A.2d 388, 391-95 (Md. Ct. Spec. App. 1978). This
contract "implied in banking relations" includes an "obligation to pay the funds only as
authorized."

Univ. Nat'l Bank v. Wolfe, 369 A.2d 570, 571, 575 (Md. 1977); Dunlop Sand &

Gravel Corp. v. Hospelhorn,

191 A. 701, 706 (Md. 1937) (stating that a "general deposit of

money in a commercial bank" creates a "relation of debtor and creditor, the depositor having in
addition to his rights as creditor certain contract rights against the bank"). The Maryland Court
of Appeals has stated that a "depositor may sue in an action for breach of contract to enforce the
bank's contractual obligation to use ordinary care" in disbursing the depositor's funds. Gillen v.
Md. Nat. Bank, 333 A.2d 329, 333 (Md. 1975); accord Schultz v. Bank of America, NA., 990
A.2d 1078, 1092 (Md. 2010) (stating that "bank customers may enforce the duty of ordinary care
... through an action for breach of contract").
SunTrust relies on the general rule under Maryland law "that no quasi-contractual claim
can arise when a contract exists between the parties concerning the same subject matter on which
the quasi-contractual claim rests." Cty. Comm'rs of Caroline Cty. v. J Roland Dashiell & Sons,
Inc., 747 A.2d 600, 607 (Md. 2000) (quoting Mass Transit Admin. v. Granit Constr. Co., 471
A.2d 1121, 1126 (Md. Ct. Spec. App. 1984)); see Ver Brycke v. Ver Brycke, 843 A.2d 758, 772
n.9 (Md. 2004); see also FLD, Inc. v. World Publications, Inc. 999 F. Supp. 640, 643-44 (D. Md.
1998) (holding that an unjust enrichment claim is not viable when there is an express contract

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between the parties).

Exceptions to this rule include "when the express contract does not fully

address a subject matter." County Comm 'rs, 747 A.2d at 607. SunTrust thus invites the Court to
conclude that under this line of quasi-contract cases, an implied contract claim may not proceed
whenever a bank establishes a contractual relationship with its customer through a signature card
and a standard set of Rules and Regulations governing the banking relationship.
This line of cases, however, addressed general quasi-contract

claims of promissory

estoppel, unjust enrichment, or quantum meruit and did not address whether the traditional
implied contract in a banking relationship is superseded by a contract in the form of a bank
signature card and Rules and Regulations document. See, e.g., Ver Brycke, 843 A.2d at 772 n.9;
County Comm'rs, 747 A.2d at 610.

Notably, the Maryland Court of Appeals has recently

distinguished the implied contract in a banking relationship, which is an implied-in-fact contract
derived from "the facts surrounding the relationship between the customer and the bank," from
quasi-contracts,

sometimes

referred

to as implied-in-Iaw

"obligations created by law for reasons of justice."

contracts,

which

derive

from

Schultz, 990 A.2d at 1092 n.20. "None of

our cases have suggested that the implied contract between a bank and its customers is based on
a quasi-contract theory."

ld. Thus, the rule established by County Commissioners, that quasi-

contract claims are unavailable when an actual contract claim exists, appears not to apply to the
implied contract in the banking context.
The Maryland Court of Appeals explained the interplay of express contract claims
pursuant to a bank's Rules and Regulations and implied contract claims inherent in the banking
relationship in Gillen v. Maryland Nat 'I Bank, 333 A.2d 329 (Md. 1975). In Gillen, the court
stated that "[t]he relationship between a savings bank and a depositor is a contractual one, of
which the rules and regulations of the passbook are a part. Implicit in the contract is the duty of

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the bank to use ordinary care in disbursing the depositor's funds." Id. at 333 (internal citations
omitted) (emphasis added); see also Hileman v, Hulver, 221 A.2d 693, 696 (Md. 1966) ("A
savings bank deposit generally creates the relationship of debtor and creditor between a bank and
its depositor.

The by-laws printed in the pass book ...

become part of a contract between

them."). Thus"in this instance, there is a single contract between SunTrust and G&D, consisting
of the underlying implied contract and the written Rules and Regulations, which may modify, but
do not completely supersede, the implied contract between a bank and its customer. See Gillen,
333 A.2d at 333; see also Univ. Nat'l Bank, 369 A.2d at 575 (stating that a bank's obligation to
its depositor "was not only that implied in banking relationships ... but also that evidenced by"
the contract between the parties).
Because SunTrust is correct that, under Maryland law, there is only a single contract
between G&D and SunTrust, the Court will grant the motion to dismiss Count II as duplicative
of Count 1. But SunTrust is incorrect to the extent that it argues that the Rules and Regulations
represent the entirety of the contract and supersede all implied contractual duties inherent in the
banking relationship.

See Gillen, 333 A.3d at 333.

Such duties continue to be part of the

contract unless modified by the Rules and Regulations in a manner consistent with Maryland
law. See Schultz, 990 A.3d at 1092 ("The contract between a bank and its customers is derived
by implication from the banking relationship, unless the parties modify that relationship.").
Pursuant to Maryland statutory and case law, any modifications resulting from the Rules and
Regulations may not eliminate the bank's implied contractual duty to act in good faith and to use
ordinary care. See Md. Code Ann., Com. Law

S 4-103

(West 2013) (stating that "the parties to

[an] agreement cannot disclaim a bank's responsibility for its lack of good faith or failure to
exercise ordinary care or limit the measures of damages for the lack or failure"); Schultz, 990

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A.2d at 1092 ("The Commercial Code and our cases establish that the parties to a banking
contract may, to some extent, determine the standards by which the duty of ordinary care will be
measured, but neither party can disclaim this duty."); Gillen, 333 A.2d at 333 (stating that the
"duty of the bank to use ordinary care in disbursing the depositor's funds" may not be "abrogated
by agreement" (citing Md. Code Ann., Com. Law

S 4-103));

Bank of So. Md, 389 A.2d at 392-

93 n.S (stating that section 4-103 "prevent(s] a bank from contracting away its obligation to use
ordinary care in the handling of depositors' funds"). Here, the Rules and Regulations document
does not seek to eliminate the implied contractual duty of ordinary care, because it expressly
states that a debtor-creditor relationship governs the duties and obligations of the parties, and that
relationship is defined in part by the existence of a duty of ordinary care. See, e.g., Gillen, 333
A.2d at 333; Bank o/So. Md, 389 A.2d at 391-92. Thus, whether under the express terms of the
Rules and Regulations or under the implied contractual obligations between the bank and its
customer, the contract between SunTrust and G&D includes a duty of ordinary care.
Because the remaining breach of contract claim in Count I, as amended at the suggestion
of the Court, is currently focused on only the Rules and Regulations aspect of the contract, the
Court will grant G&D leave to amend Count I to be entitled "Breach of Contract" generally and
to include paragraphs 12-16 of the Second Amended Complaint so as to incorporate the implied
provisions of the contract between SunTrust and G&D.
III.

Additional Claims
G&D's other arguments to preclude dismissal of Count II are unavailing. Although G&D

references the implied covenant of good faith and fair dealing, Maryland law provides that
implied covenants associated with a contract are merely derivative claims that should be raised in
a breach of contract claim. See, e.g., Blondell v. Littlepage, 991 A.2d 80, 90 (Md. 2010) ("While

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it is true that a contract in Maryland gives rise to an implied duty of good faith and fair dealing ..
. that duty concerns the performance and enforcement of the contract itself." (quoting 2 Corbin
on Contracts, ~ 5.27 at 139 (rev. ed. 1995)); Magnetti v. Univ of Md., 909 A.2d 1101, 1105 n.3
(Md. Ct. Spec. App. 2006) ("Maryland does not recognize a separate cause of action for breach
of the implied covenant of good faith and fair dealing; the allegations making up such a claim
should be pursued under a plaintiffs breach of contract claim."). Such covenants do not provide
a basis for a second breach of contract claim.
Although section 4-103 of the Maryland Commercial Law Article, cited by G&D in its
Opposition to the Motion and discussed above, could impact the interpretation of the contract at
issue in Count I, nowhere does the Second Amended Complaint reference that statute as the basis
for a freestanding claim, and G&D may not amend its pleadings through its brief in opposition to
a motion to dismiss. Zachair, Ltd. v. Driggs, 965 F. Supp. 741, 748 n.4 (D. Md. 1997) (stating
that the plaintiff is "bound by the allegations contained in its complaint and cannot, through the
use of motion briefs, amend the complaint"), aff'd, 141 F.3d 1162 (4th Cir. 1998). Accordingly,
these arguments provide no basis to preclude dismissal of Count II.

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CONCLUSION
For the foregoing reasons, SunTrust's

Motion to Dismiss is GRANTED.

(breach of implied duties in a contract) is DISMISSED WITH PREJUDICE.

Count II

The Court will

grant G&D leave to amend Count I to be entitled "Breach of Contract" and to include paragraphs
12-16 of the Second Amended Complaint.

The Third Amended Complaint may also include

G&D's conversion claim, which SunTrust has not challenged.
permitted.

No further amendments will be

With such amendments, the Court will consider this Third Amended Complaint to

state a plausible claim for relief and will direct SunTrust to file an Answer.

Date: July 11,2017
THEODORE D. CHUA
United States District Ju

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