Chicago Title v. Allfirst
Annotate this Case
Download PDF
In the Circu it Court for A nne Aru ndel Cou nty Civil No. C-99-5 9874-CIV IN THE COURT OF APPEALS OF MARYLAND No. 80 September Term, 2005 ______________________________________ CHICAGO TITLE INSU RAN CE CO MPA NY, et al. v. ALLF IRST B ANK , et al. ____________________________________ Bell, C.J. Wilner Cathell Harrell Battaglia Greene Eldridge, John C. (R etired, Spec ially Assigned), JJ. ______________________________________ Opinion by Greene, J. ______________________________________ Filed: August 4, 2006 In this case we must de cide an issue of first impression , whether a depositary ban k is liable in neglig ence to a non-c ustom er draw er of a c heck. The parties and their respective roles, in this declaratory judgment action, are complex and will be detailed infra. For now, we note that the instant case originated with the refinancing of Mark A. Shannahan s home in 1997. Petitioner, First Equity, an agent for petitioner, Chicago Title Insurance Com pany, conducted Shannahan s settlement. 1 Shannahan granted an indemnity deed of trust ( IDOT ) to Farmers Bank of Maryland, where he also maintained several business and personal accou nts. While several checks exchanged hands in order to complete Shannahan s refinancing, the two checks at issue here were Check No. 1 and Check No. 2. Check No. 1 was delivered and made payable to Shannahan by First Equity to represent his cash out from the refinancing. Check N o. 2 was m ade payable to Farmers Bank, and drawn on First Equity s checking account at Allfirst Bank, representing payment for an outstand ing line of c redit. Both checks were delivered to Shannahan, along with a letter instructing F armers B ank to pay off and close out the line of credit. The letter was never delivered to Farmers Bank, and both checks w ere indorse d and dep osited by Sha nnahan in to his person al accoun t. Eve ntua lly, Farmers Bank initiated foreclosure proceedings in connection with the IDOT because the line of credit balance was in default. Apparently, this occurred when First Equity became aware that Farmers Bank still had a lien on Shannahan s property, and that Shannahan did not pay off the line of credit. When First Equity notified Allfirst about Check 1 We sh all refer t o Chic ago T itle and F irst Equ ity collectiv ely as Fir st Equi ty. No. 2, it requested that Allfirst re-credit its account, which Allfirst refused. First Equity filed a d eclaratory judg ment action against Far mers Ba nk and A llfirst in the Circ uit C ourt for A nne Aru ndel County, to which both Farmers and Allfirst banks filed a Counter-Complaint for Interpleader against First E quity. The Circ uit Court su bsequen tly ordered Farmers Bank to release the IDOT lien on the property. It was also determined that Allfirst was not liab le for debiting funds from First Equity's checking account through the processing of Check No. 2. First Equity filed a cross-appeal on that issue. The Court o f Special Appe als affir med th e judgm ent of th e Circu it Cour t. Farmers Bank of Maryland v. Chicago Title Ins. Co., 163 Md. App. 158, 877 A.2d 11 45 (2005). Chicago Title and First Equity filed a Petition for Writ of Certiorari, and Farmers Bank filed a Cross-Petition for Writ of Certiorari, both of which we granted. Chicago Title v. Allfirst, 389 M d. 398, 885 A.2d 823 (20 05). First Equity presents two questions for our review, which we have rephrased:2 2 First Equity s original questions presented were: 1. Did the Court of Special Appeals err in its holding that Farmers [depositary] bank indorsement on Check No. 2 also constituted a payee indorsements by Farmers on Check No. 2? 2. Did the Court of Special Appeals err in its holding the loss incurred by First Equity was caused by events occurring outside the c heck itself, a nd that as such the loss-allocation rules of the UCC do no t apply to this matter? -2- 1. Did the Court of Specia l Appeals err in its holding that Check No. 2 was properly payable? 2. Did the intermediate ap pellate court err in concluding that an action in negligence against Farmers Bank was permitted under Maryland law? We answer b oth question s in the nega tive and affirm the judgment of the Court of Special Appeals. Farmers Bank and Allfirst also presented three issues for our review, 3 which are addressed infra. FACTS On October 27, 2000 , the parties filed a Stipulation to Certain Facts, in addition to a Stipulation to Authenticity and Admissibility of Documents. We set forth the salient portions of the stipulated facts: 3 Farmers Bank and Allfirst ( respondents ) are both represented by the same counsel and prese nted three issu es that addre ssed both p arties positions : 1. 2. 3. Whether, as a matte r of Maryland law, Farmers, as the [dep osita ry] bank, owed a tort duty of care to Chicago Title and First Equity, neither of which were custome rs of the bank nor had an intimate nexus with the bank? Whether a cause of action for common law negligence had been displaced by the statutory scheme of the Maryland Uniform Commercial Cod e as to act ions by a drawer of a check again st a [depositary] bank alleging improper negotiation of a check? Whethe r the lower c ourts correc tly found that the Check bore the indorsement of the payee, was effectively negotiated to Allfirst, and was therefore properly paid by Allfirst? Respondents questions will be addressed in our analysis below. -3- On Nove mber 2 5, 1997 , [Shannahan] refinanced his home located at 735 Conley Drive, Annapolis, Maryland 21401, through Aramada Mortgage Corporation. First Equity . . . conducted the settleme nt. A title examination . . . revealed the existence of a mortgage in the original face amount of $110,000.00 granted by Shannahan unto and for the benefit of Chase Home Mortgage Corporation . . . and recorded among the Land Records of Anne Arundel County[.] (DS-1)4 Said property was also subject to an [IDOT] granted by Shannahan . . . for the benefit of [Farmers] Bank . . . in November 26, 199 6, and re corded amon g the L and R ecords . . . . Prior to conducting the settlement, First Equity received from Armada Financial, two (2) payoff statements dated October 23, 1997, which had been completed by Jud y O M alley, Loan Assista nt for [F armers ] Bank . One payoff statement indicated the existence of a loan dated November 21, 1996 in the original high credit amount of $50,000.00. (DS-3) The remaining balance as of October 23, 1997, was $45,104.47. On this payoff statement, Ms. O Malley made the circled notation 2nd DOT above the high credit amount of $50,00 0.00. A payoff state men t was also furn ished by Ju dy O Malley, indicating the exis tence o f anoth er loan d ated M arch 25 , 1970, with a high credit amount of $40,000.00. On this statement, Ms. O Malley made a circled notation 3 rd DOT above the high credit amount of $40,000.00. (DS-4). The balance reflected the reon wa s $40,760 .83. This obligation was a line of cred it, the balance of which ca n fluctuate f rom time to time. The current balance of this obligation is $59,699.98. When comparin g the title examination with the payoff statements, Shannon Eub anks, Vi ce Presid ent o f Fir st Eq uity, initiated an inq uiry with the title examiner to determine the existence of the 3rd DOT. A review of the Land R ecords did not reveal th e existence of a third de ed of trust. Following settlement, First Equity forwarded a check in the amount of $70,696.36 (DS-8) to pay off the refinanced Mellon Bank mortgage and forwarded to Farmers a check in the amount of $45,575.70 to pay off the $45,575.70 loan secured by the 2nd DOT . (DS-10 ) First Equity deliv ered to Shannahan a check in the amou nt of $87 ,764.11, m ade payable to Shannahan, which represented Shannahan s cash out from the refinance, as well as a check in the am ount of $40,76 0.83 (D S-12). On December 3, 1997, Shannahan went to Farmers West Street branch and deposited th e $87,464 .11 check in [an] acc ount . . . which he maintained 4 The n otation DS r efers to Doc umen t Stipula tion. -4- in his individual n ame at Fa rmers. In ad dition, Shan nahan de posited in this same account, Check 2 in the amount of $40,760.83, which was ma de payable to Farmers and draw n on First Equity s account at A llfirst. [(DS-15)]. Shannahan endorsed the check with his signature. [(DS-12)]. Two [i]ndo rsemen ts of Fa rmers B ank als o appe ar on th e back of the c heck. When Shannahan attempted to deposit Check 2 to his account, the teller took the ch eck to Bill Grippo, the bank manager of the Farmers West Street branch, since the amount was over her lim it. Mr. Grippo called M r. Shannahan into his office and saw that the check w as made p ayable to Farmers. Mr. Grip po pulled up Shanna han s ban k and loan accounts o n his computer and saw that Farmers has a trust on [his] Shannahan s property. Mr. Grippo then alleged ly contacted Matt Pipkin, a loan o fficer at Farmers who was familiar with the loans extended by Farmers to Sh annahan and his several corporations. (DS-25) Shannahan maintained several bank ac counts with rather large balances at Farmers and, in addition, had at least four outstanding loans with Farmers. (DS-16, 17, 18, 19 and 20) According to Mr. Grippo, he advised Matt Pipk en regarding the che ck, and Mr. Pipken indicated that it was okay for Shannahan to deposit C heck 2 in Shanna han s acco unt. Accordin g to Mr. Grippo, he questioned the outstand ing trusts and Mr. Pipken indicated that is was okay to deposit the check [Check 2]. See, DS25. Mr. Pipken testified at his deposition that he was familiar with the contents of the Gripp o memo dated Jun e 30, 1998 , but the statem ents made by Grippo that he had discussed the depositing of Check 2 with Pipken were false. Mr. Pipken did not remember ever being called and discussing the depositing of Chec k 2 into Shann ahan s [acco unt]. . . . In late June/early July, Farmers initiated foreclosure action with regard to the IDOT, due to the fact that the $40,760.63 balance of the line of credit secured b y the IDOT remained unpaid and delinquent. A s a result of su ch foreclo sure proce eding, First E quity became aware or the first time that Farmers had not applied Check 2 against the unpaid note. First Equity notified Allfirst about Check 2 and requested that the bank recredi t its acco unt. (D S-21) A llfirst refu sed to d o so. The Armada Mortgage, which h ad been a ssigned to IM C Mo rtgage, wa s also in default and it desired to foreclose as well. An agreement was entered into between Chicago and Farmers, whereby Farmers agreed to subordinate its IDOT to that of IMC so that IMC could foreclos[e] upon the Shannahan property. The parties agreed tha t Chicago would f ile a comp laint seeking declaratory and other re lief in an attemp t to resolv e the dis pute. In finding for First Equity, the Circuit Court held that, notwithstanding S hannahan s -5- possession of Chec k No. 2, the instrumen t was payable to Farmers Bank and not to the bearer. Thus, Shannah an was n ot a holder o f the instrum ent and w as unable to properly negotiate the check to the credit of his personal account. The Circuit Court treated Shannahan s indorsement as an anomalous indorsement pursuant to Md. Code (1975, 2002 Repl. Vol.) § 3-205(d) o f the Com mercial La w Article, a nd thus disre garded it and treated the check as if Shannahan had not attempted to negotiate it, noting that Farmers Bank had placed two indorsements on the back of the check while neg otiating it to Allf irst. Thus, the Circuit Court held that Allfirst correctly dispersed the funds to Farmers Bank. Farmers Bank, however, permitted those funds, which were payable to itself, to be directed to Shann ahan s account. Therefore, Farmers Bank accepted the check from First Equity and then extended a payment to Shannahan in the same amount. Further, the court held that Farmers Bank negligently failed to apply the fun ds from C heck N o. 2 to Shannahan s outstanding balance on the line of credit, and that the delivery of Check No. 1 to Farmers Bank by mail, combined with the deliv ery of Ch eck N o. 2 to Shann ahan, con stituted a pay-of f in full of the Farmers Bank IDOT. Therefore, the Circuit Court held that Farmers Bank was required to release the IDOT in accordance with the provisions of Md. Code (1974, 2003 Repl. Vol.) § 7-106 of the Real P roperty A rticle. The case was then appealed to the Court of Spe cial Appe als. The interm ediate appellate court summarized the Circuit Court s additional findings: Allfirst correctly dispersed the funds to [Farmers] who then permitted these funds, intended for [Farmers], to be directed to -6- Shannahan's account. Thus, [Farmers] did accept the check from First Equity in the amount of $40,760.83 and then extended a payment to S hannaha n in the sam e amoun t. The court concludes that [Farmers] ne gligently failed to apply the funds to Shannahan's outstanding balance of $40,760.83 on the line of credit also referred to in the payoff statement from Farmers as the 3rd DOT. The court finds that the delivery by First Equity of [C heck 1] to [ Farmers] b y mail comb ined with the delivery by Shannahan of [Check 2] constitutes a pay-off in full of the Farmers IDOT and [Farmers] is required to release the IDOT in accordance with the provisions of Section 7-106 of the Re al Prop erty Article of the C ode. (E mpha sis adde d.) Farmers, 163 Md. A pp. at 164-65, 877 A .2d at 1149. (Emphasis in original). The intermediate appellate court ultimately held: We shall sustain the trial court's ruling that Farmers [Bank] was negligent in its handling of Check [No.] 2. We hold that the court erred, however, in failing to consider the con tributory negligence of First Equity, and in resting its decision on Md.Code (1974, 2003 Repl.Vol.), section 7-106 of the Real Property Article ( RP )(authorizing [a] cause of action against [a] lienholder for its failure to release [a] lien whe never full payment is made and a release is requested in writing). [5] Fina lly, we affirm the trial court in its hold ing that First E quity could not recover against Allfirst because the latter did not violate UCC section 4-401 when it charged Check [No.] 2 against First Equ ity's account. This is so because no signatu re on C heck [ No.] 2 was forged , and no indorse ment w as missi ng. 5 Neither First Equity, in its Petition for Writ of C ertiorari, nor Fa rmers Ba nk, in its Cross-Petition for Writ of Certiorari, addressed the holding of the intermediate appellate court that § 7-106 of the Real Property Article did not permit Farmers receipt of Check No. 2 to constitute payment of Shannahan s line of credit debt and to release the lien on his prop erty. Therefore, the issue of the applicability of § 7-106 and whether Shannahan is entitled to a releas e of the lien on h is prope rty is not be fore us . See Md. R ule 8-1 31(b). -7- Farmers, 163 Md. App. at 167, 877 A.2d at 1150. We shall discuss the reasoning of the Court of Special Appeals in support of its holding, as well as additional facts, in our a nalysis below . DISCUSSION I. Did the Court of Spe cial Appeals err in its holding that Check No. 2 was properly payable?6 First Equity argues that Check No. 2 was not properly payable w hen prese nted to Allfirst because Check No. 2 lacked the requisite payee indorsement from Farmers Bank, and that a missing in dorseme nt is equivalent to a forged indorsement for purposes of determining whether a check is properly payable. Specifically, First Equity contends that the Court of Special Appeals erred in its determination that Farmers Bank indorsed Check No. 2 as a payee. Instead, First Equity asserts that Check No. 2 was not properly payable under the Marylan d UC C bec ause it d id not b ear the n ecessa ry payee ind orsem ent. Prior to our discussion, we identify the roles of the parties as defined pursuant to the Maryland Uniform Commercial Code ( UCC ). Md. Code (1975, 2002 Repl. Vol.) §§ 1-101 et seq. of the Co mmercia l Law A rticle. For exam ple, Check No. 2 is bo th a negotia ble instrument and a draft. Commercial Law § 3-104(a) - (f). First Equity signed, or was identified in, the draf t as a pe rson o rdering paymen t; thus it is th e draw er of the check . § 6 We note that on February 24, 2006, Allfirst Bank withdrew its argument regarding Allfirst as a holder in due course as to Check No. 2. -8- 3-103(a)(3). Allfirst is the drawee, or person ordered in a draft to make payment, Section 3103(a)(2), and is also the payor bank. § 4-105(3). Farmers Bank is a depositary bank pursuant to Comm ercial Law § 4-105(2 ), as it was the first bank to take an item even though it is also the payor b ank unle ss the item is presented for immediate payment over the counte r. 7 Indor semen t of Ch eck N o. 2 First Equity argue s that Farm ers Bank did not indo rse Chec k No. 2 a s its payee. Farmers Bank was the designated payee on Check No. 2, issued by First Equity and made payable to the order of Farmers Bank. It is undisputed by First Equity that Farmers Bank deposited Check N o. 2 directly into Sh annahan s private acc ount. First Eq uity contends, however, that Farmers Bank s indorsement on Check No. 2 is a depositary bank indorsem ent, placed on Check N o. 2 after Sh annahan deposited it in to his private account with Farmers Bank, and after it had been sent by the bank to a processing department outside the An napolis Branc h of Fa rmers B ank. 7 We note , as did the inter mediate ap pellate court, O fficial Com ment 1 to § 4-105: The definitions in general exclude a bank to wh ich an item is issued, as this bank does not take by transfer except in the particular case covered in which the item is issued to a payee for collection, as in the case in which a corporation is transferring balances from o ne acc ount to anothe r. Thus , the definition of depositary bank do es not includ e the bank to which a check is made payable if a check is g iven in paym ent of a m ortgage. T his bank h as the sta tus of a payee[.] -9- First Equity argues that Farmers Bank s indorsement of Check No. 2 was intended to be that of a depositary bank, and urges us to evaluate the location of the physical characteristics of the Farmers Bank indorsement in relation to the deposit of that instrument into Shannahan s personal account, an d its tempora l and physical re lationship w ith Shannahan s signature on Check N o. 2. First Equ ity discounts the in termediate a ppellate court s notation that petitioners had not provided any expert testimony or otherwise that Farmers Bank s indorsement on Check No. 2 could not serve the dual purpose of a [dep osita ry] bank indorsement and a payee indorsement. Farmers, 163 Md. App. at 191, 877 A .2d at 11 64. First Equity contends that Farm ers Bank s signature on Check No. 2, by its placement on the instrument in full compliance with C.F.R. 12 guidelines, and its temporal and spatial relationship to Shannahan s signature in the location long established by custom and usage as that of the payee, clearly indicates that Farme rs Bank d id not intend to provide a p ayee s indorse ment o n Che ck No . 2. Farmers Bank and Allfirst note that Check No. 2 clearly bears four indorsements, one by Shannahan, two by Farmers Bank an d one by A llfirst.8 The intermediate app ellate court noted that the pattern of the indorsements placed by Farmers Bank on Check No. 2 is the same as that placed on the other ch eck tha t was p ayable to F armers Bank . Farmers, 163 Md. App. a t 191, 87 7 A.2d at 1164 . 8 Allfirst was known at that time as First National Bank or FNB. -10- An indorsement is defined by Md. Code (1975, 2002 Repl. Vol. & 2005 Supp.) § 3204(a) of the Commercial Law Article: (a) Indorsement means a signature, other than that of a signer as maker, drawer, or acceptor, that alone or accompanied by other words is made on an instru ment for th e purpose of (i) negotiating the instrument, (ii) restricting payment of the instrumen t, or (iii) incurring indorser's liability on the instrumen t, but regardless of the intent of the s igner, a signature and its accompanying words is an indorsement unless the accompanying w ords, terms of the in strument, place of the signature, or oth er circumstances unam biguou sly indicate that the signa ture was made for a purpose other than indorsement. For the purpose of determining whether a signature is made on an instrumen t, a paper aff ixed to the in strument is a part of the in strument. (Empha sis added). The Official Comment to § 3-204 (a) provide s some gu idance to its application: In some cases an indorsement may serve more than one purpose. For exam ple, if the hold er of a che ck depos its it to the hold er's account in a depositary bank for collection a nd indorses the check by signing holder s name with the accompanying words for deposit on ly the purpo se of the ind orsemen t is both to negotiate the check to the depositary bank and to restrict payment of the check. The but clause of the first sentence of subsection (a) elaborates on former Section 3-402. In some cases it may not be clear whether a signature was meant to be that of the indorser, a party to the instrume nt in some o ther capac ity such as drawer, maker or acceptor, or a person who w as not sig ning as a party. The general rule is that a signature is an indorsement if the instrument does not indicate an unambiguous intent of the signer not to sign as an indorser. Intent may be determined by words accompanying the signature, the place of the signature, or other circumstances. -11- (Emphasis add ed). Although the general rule is worded in a manner that is somew hat unnec essarily obtuse, we attempt to simplify the rule. A signature on the back of an instrument is an indorsement unless it says that it is not. If the instrument does not indicate any clear intent on the part of the signer to sign as anything other than an indorser, the signature is an indorsem ent. In the instant case, the intermediate appellate court was correct in finding that Shannahan s signature rep resented an anomalo us indorsem ent. 9 Shanna han wa s not a holder 10 of the instrument; therefore his signature on the back of the instrument did not affect the ma nner in which it could b e nego tiated. The only indorsem ent (other tha n Allfirst s subsequent indorsement as the payor bank) 9 See Md. Cod e (1975, 2002 R epl. Vol.) § 3-205 (d) o f the Com mercial La w Article ( Anomalous indorsement means an indorsement made by a person who is not the holder of the instrument . . . and does not affect the manner in which the instrument may be negotia ted. ). 10 Section 1-201(20)(a) of the Commercial Law Article defines a holder in regards to a negotia ble instrume nt as follow s: (20) Holder means: (a) The person in possession of a negotiable instrumen t that is payable either to bearer or to an identified person that is the person in possession; Check No. 2 is a negotiable instrument but was not payable to either bearer or Shannahan, who was the person in possession of the check. Therefore, Shannahan was not a holder of the check. -12- was that of Farmers Ba nk. We find no support for Farme rs Bank s contention that it indorsed the back of Check No. 2 as a depositary bank and not as the pa yee of the instru ment. Farmers Bank states in its brief, [t]here is no doubt that Farmers indorsement of Check No. 2 was intended to be, and was, that of a [depositary] bank. Petitioner s Brief at 21 (emphas is added ). Whether Farmers Bank intended its indorsemen t to be that of a depositary bank is irrelevant under the facts of the instant case and under the definition of indorsement set forth in § 3-204(a): [R]egardless of the intent of the signer, a signature . . . is an indorsement unless the accompanying words, terms of the instrument, place of the signature, or other circum stances un ambiguo usly indicate that the signature was made for a purpose other th an indo rsemen t. An examination of Check No. 2 indicates that there were no accompanying words with the stamp o f Farmer s Bank to indicate that th e indorsem ent was th at of a depositary bank only, or that the stamp was not intended to be an indorse ment. Farm ers Bank directs us to Official Comment 1 to § 3-204, which suggests that custom and usage may be used as a factor to determine intent, and contends that Farmers Bank s indorsement, and its temporal and physical relationship w ith Shann han s signa ture, dem onstrate that it w as solely that of a depositary bank. We acknowledge that specifications are provided by the Code of Federal Regulations for the location of the stamp of a depositary bank. The fact that Farm ers Bank s indorsement falls within th ose enum erated spec ifications do es not neg ate the facts th at Farmers Bank is the payee of the instrument; that the only other indorsement on the -13- instrument is an anomalous indorsement; and that there is no ac compan ying informa tion with its stamp to indicate that it is a dep ositary bank ind orsemen t only. Maryland law provides that an indorsement ca n be written anywhere on an in strume nt. Leahy v. McManus, 237 Md. 450, 454, 206 A.2d 688, 690 (1965 ). The fact that Farmers B ank s stamp on Ch eck N o. 2 was identical to that of its stamp on Check No. 1, where it was the payee, flies in the face of its contention that its stamp on Ch eck N o. 2 was unambiguously that of a depositary bank. Farmers Bank has not presented any expert testimony to support its contentions. Further, there was testimony from an experienced bank officer that stamped bank indorsem ents could appear anywhere on back of check. The words, or lack thereof, accompanying Farmers Bank s indorsement, the place of the stamp, and other circumstances surrounding Chec k No. 2 do not indicate a clear intent on the part of Farmers Bank not to sign as an in dorser. II. Did the intermediate appellate cou rt err in concluding that an action in negligence against Farmers Bank was permitted under Maryland law? Farmers Bank an d Allfirst arg ue that the Court of Special A ppeals erred in recognizin g the existence of a common law tort duty owed by a depositary bank to a noncustomer. 11 Farmers Bank notes that no contractual duty existed between First Equity and 11 We disagree with Allfirst s contention that our decision in Messing v. Bank of America, N.A., 373 Md. 672, 821 A.2d 22 (2003) stands for the p roposition that a depositary (contin ued...) -14- Farmers Bank, as First Equity was not a customer of Farmers B ank. In add ition, First Equ ity did not maintain an account with Farmers Bank and had no co ntractual or d irect relationsh ip with Farmers Bank. In regard to a common law duty of care, Farmers Bank s claim that the facts of the instant case are legally inadequa te to impose a duty of care ow ed by Farmers Bank to First Equ ity. We must firs t discuss, however, the argument that Md. Code (1975, 2002 Repl. Vo l. & 2005 Supp.) § 3-420 of the Commercial Law Article expressly rejects the position that a depositary bank such as Farmers owes a du ty to exercise reas onable ca re to 11 (...continued) bank has no duty to someone in Chicago Title s position as a non-customer and a stranger to the Ba nk. Id. at 691, 821 A.2d at 33. In Messing, the petitioner to ok issue w ith the Bank of America's Thumbprint Signature Program, where the bank requests non-customer presenters of checks over the counter to place an inkless thumbprint or fingerprint on the face of the check as part of the identification process. Id. at 679, 821 A.2d at 25-26. Petitioner elected to present the check for payment at a branch of the drawer's bank, and the check went as far as being placed into the teller s computer's printer slot which stamped certain data on the back of the check. Id. at 680, 821 A.2d at 26. After endorsing the check, the teller asked for petitioner's identification, and wrote that information on the back of the check. Id. At some point in the transaction, the teller ascertained that the petitioner was not a customer of Bank of America, and informed him tha t his thumbprint wou ld be necessary to comp lete the tra nsactio n. Id. at 681, 821 A.2d at 26. Petitioner refused, and after taking up the m atter wit h the ba nk ma nager, w as turne d awa y. Id. at 681, 8 21 A.2 d at 27. Petitioner argued , inter alia, that the check had been properly presented to Bank of America and thus, it was improper for the bank to refuse to pay the check. In our rejection of petitioner's point of view, we noted that, [r]eceipt of a check does not . . . give the recipient a right against the bank. The recipient may present the check, but if the drawee bank refuses to honor it, the recipient has no recourse against the drawee. Id. at 691, 821 A.2d at 33. In support of this, we stated, Absent a special relationship, a non-customer h as no claim against a bank for refusing to honor a presented check. Id. at 692, 821 A.2d at 33 (citing City Check Cashing, Inc. v. Manufacturers Hanover Trust Co., 764 A.2d 411, 417 (N.J. 2001)). As we shall discuss, unlike the non-customer in Messing, the facts of the instant case do not dem onstrate a tra nsient, non-c ontractual re lationship, in sufficient to establish a duty, on the part o f Farm ers Ban k. See id. -15- non-cu stomer drawe rs of ch ecks th at are pr esented for dep osit. Section 3 -420 of th e Com mercial L aw A rticle Both the respondents and The American Banker Association, as amici, argue that § 3-420 of the UCC displaces the common law causes of action against a depositary bank by the draw er of a che ck. Section 3-420 pro vides in per tinent part: (a) The law applicable to con version of personal p roperty applies to instrumen ts. An instrum ent is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment. An action for conversion of an instrument may not be brought by (i) the issuer or acceptor of the instrument or (ii) a payee or indorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a co-payee. (b) In an action under sub section (a), the measure o f liability is presumed to be the amount payable on the instrument, but recovery may not exceed the amount of the plaintiff's inte rest in the instrume nt. (c) A representative, other than a depositary bank , who ha s in good faith dealt w ith an instrum ent or its proceeds on behalf of one who was not the person entitled to enf orce the instru ment is not liable in conversion to that person beyond the amount of any proceeds that it has not p aid out. We disagree w ith amici and the resp ondents th at our decisio n in the instant case implicates Hartford Fire Ins. Co. v. Maryland Nat l Bank, N.A., 341 Md. 408, 671 A.2d 22 (1996), and the subsequent amendment of § 3-420 of the UCC abolishing a drawer s common law action for conversion. The facts of the instant case are distinguishable in that the drawer in the instant case does not have an adequate remedy under the UCC because payment of the check -16- was authorized pursuant to the guidelines of the UCC.12 Section 1-103 of the UCC provides that, unless displaced by Titles 1 through 10 of the Commercial Law Article, the principles of law and equity, including the law merchant and the law relative to capac ity to contra ct, princi pal and agent, e stoppe l, fraud, misrepresentation, duress, coercion, mistake, bankrup tcy, or other validating or invalidating cause shall sup pleme nt its pro visions . 13 The plain language of the statute states that actions in conversion are prohibited in specific situations. We disagree with the reading of the statute by amici. In our view, to conclude that the prohibition of one tort action by the UCC means the prohibition of all tort actions is unsupported by Maryland law. To allow a 12 The Of ficial Com ment 1 to § 3-420 pro vides: Under former Title 3, the cases were divided on the issue of whether the drawer of a check with a forged indorsement can assert rights against a depositary bank that took the check. The last sentence of Section 3-420(a) resolves the conflict by following the rule stated in [Stone & Webster Engineering Corp. v. First National Bank & Trust Co.,] 184 N.E.2d 358 (Mass.1962). There is no reason why a drawer should have an action in conversion. The check represents an obligation of the drawer rather th an prop erty of the drawe r. The drawer has an adequate remedy against the payor bank for recredit of the drawer's account for unauthorized payment of the check. (Empha sis added). Our treatment of Stone in Hartford Fire Ins. Co., supra, is inapplicab le to the instant case as we have fou nd that Ch eck No . 2 was no t unauthoriz ed and w as, in fact, proper ly payable. 13 The exceptions to this statement are: (a) the age of majority as it pertains to the capacity to contract is eighteen years of age; and (b) no person who has attained the age of eighteen years shall be considered to be witho ut capacity by reason of age. Md. Code (1975, 2002 Repl. Vol. & 2005 Supp.) § 1-103 (a) - (b) of the Commercial Law Article. -17- negligence action to proceed in the instant case, where Check No. 2 was properly payable, is not err or. Section 4-401(a) o f the Com mercial La w Article provides that [a] bank may charge against the account of a customer an item that is prop erly p ayable from that acc ount . . . . [A]ny item is properly payable if it is authorized by the customer and is in acc ordance w ith any agreem ent betw een the custom er and b ank. As we have discussed supra, there were no missing or unauthorize d indorsements on Check No . 2. Farmers Bank s stamp constituted a proper ind orsemen t of the che ck. The ch eck was payable to Farmers Bank only, and there is no evidence on the record that Shannahan s signature constituted a forg ery. 14 The loss in the instant case was indeed caused by events that occurred outside of the check itself, and therefore the UCC loss allocation rules do not apply to First Equity s claim.15 We look instead to the rules of common law negligence. 14 The UCC does not define forgery, but forgery is equated with the concept of unauthorized signatures or indorsements, as defined in § 1-201(43). A forged indorsements, in other w ords, unde r the law of Maryland a nd elsew here, is one th at is unauthorized within the meaning of § 1-201(43). Northwestern Nat l Life Ins. Co. v. Laurel Fed. Sav. Bank, 979 F.Supp. 354, 356 (D. Md. 1996) (citing Citizens Bank of Maryland v. Maryland Indus. Finishing Co., Inc., 338 Md. 448, 458, 659 A.2d 313, 318 (1995)). Section 1-201(43) of the Commercial Law Article defines an unauthorized signature as one made without actual, implied, or ap parent a uthority an d includ es a for gery. Shannahan did not attempt to indorse the instrument as Farmers Bank, nor is there any evidence as to wha t type of autho rity he purported to have w hile signing the che ck. As we have already discuss ed, Shann ahan s sign ature was more fittingly an anom alous signature per § 3-205(d) of the Commercial Law Article. 15 Thus, the C ircuit Court w as correct in concluding that First Equity had no cause of action again st Allfirst. -18- Negligence We turn now to determin e whethe r Farmers B ank may be held liable to First E quity in negligence for its handling of Check No. 2, notwithstanding the fact that First Equity was not a customer of Fa rmers Bank, and there was no formal contract between the parties. As we shall discuss, M aryland law p rovides tha t a contractual re lationsh ip, or its equivalent, may establish the necessary intimate nexus between the parties in a tort action w here only econom ic loss results. See Jacques v. First Nat'l Bank, 307 Md. 527, 534-35, 515 A.2d 756, 759-60 (1986). The elements of negligence a re well-estab lished and r equire a pla intiff to assert in the complaint the following: (1) that the defendant was under a duty to protect the plaintiff from injury, (2) that the defendant breached that duty, (3) that the plaintiff suffered actual injury or loss, and (4) that the loss or injury proximately resulted from the d efen dant's breach of the duty. Valentine v. On Target, Inc., 353 Md. 544, 549, 727 A.2d 947 , 949 (1999) (quoting BG & E v. Lane, 338 M d. 34, 43, 656 A.2d 307, 311 (1995) (citation omitted) ). On e of o ur pr imar y concern s in th e instant c ase is the elem ent o f duty: The duty to take precautions against the negligence of others thus becomes mer ely a matter of the customary process of multiplying the probability that such negligence will occur by the magnitude of the harm likely to result if it does, and weighing the result against the burden upon the defendant of exercis ing suc h care. Hogge v. SS Yorkmar, 434 F. Supp. 715, 729 (D. Md. 1977) (citation omitted). We must consider two elements when resolving whether a tort duty should be recognized based upon a particular set of facts: -19- the nature of th e harm like ly to result from a failure to exercise due care, and the relationship that exists between the parties. Where the failure to exercise due care creates a risk of eco nomic loss only, courts have generally required an intimate nexus between the parties as a condition to the impo sition of tort liabi lity. This intima te nexus is sa tisfied by contra ctual privity or its equivalent. By contrast, where the risk created is one of personal injury, no such d irect relationsh ip need be shown, and the principal determinant of duty becomes foreseeability. Noble v. Bruce, 349 Md. 730, 739-40, 709 A.2d 1264, 1269 (1998) (quoting Jacques, 307 Md. at 534-35, 515 A.2 d at 759-6 0). Absen t a breach o f duty, there is no liability in neglige nce. Wells v. General Elec. Co., 807 F . Supp . 1202, 1 204 (D . Md. 1 992). We begin by ack nowledging Chief Judge Bell s comprehensive analysis of the elements of duty and privity in Walpert, Smullian & Blume nthal, P.A. v. K atz, 361 Md. 645, 762 A.2d 582 (20 00), 16 and our decision in Jacques v. First Nat l Bank of Maryland, 307 Md. 16 We disagree with Farmers Bank s contention that the Court o f Special A ppeals interpreted our decision in Walpert, supra, to mean that an intimate nexus is no longer required for the imposition of a duty where the failu re to exercise due care re sults in econom ic loss only. In support of this argument, respondents direct us to the following language in the decisio n of the inte rmediate ap pellate court: In sum, what we distill from Walpert s interpretation of Jacques and the New York cases is that the nexus requirement may not be as close as the word intimate would suggest, and to determine whether it is met, we m ust focus on t he defen dant's knowledge. Applying th is lesson, we conclude that Farmers had a suff icien t nex us to First Equ ity to ju stify imposition of a tort duty to ha ndle C heck [ No.] 2 with or dinary ca re. Farmers, 163 M d. App. at 1 77-78, 87 7 A.2d a t 1156. W e do not rea d this statement of the intermediate appellate co urt to mean that an intimate nexus is no longer required. Rather, the (contin ued...) -20- 527, 515 A.2d 75 6 (1986). 17 Both cases discuss the concepts of duty and privity at great length. We have no desire to reinvent the wheel. Therefore, we discuss the analyses of those cases relevant to the facts of the instant case. Walpert involved the liabi lity of an accountant for economic losses of a party who relied on a financial report which an accountant prepared. George and Shirley Katz (the Katzses ) sued Walpert, Smullian & Blumenthal, P.A. ( WS & B ) in damages for negligence, gross negligence, negligent misrepresentation and breach of contract as a consequence of loans they made to Magnetics, Inc., George Katz's former company and WS & B's client. Walpert, 361 Md. at 648, 762 A.2d at 583. We affirmed the holding of the Court of Special Appeals in Walpert that an accountant s know ledge of a third-party s reliance on the accountant s work product was the legal equivalent of privity necessar y to establish an accounting malpractice claim. Id. at 653, 762 A.2d at 586. In discussing the element of duty, we noted our analysis in Jacques v. First Nat l Bank of Maryland: 16 (...continued) Court of Specia l Appeals opined on the degree of intimacy required to establish a duty in a situation in which only economic loss occurs in light of our decision in Walpert. We do not agree with the intermediate appellate court s contention that the intimacy of the nexus required to establish duty is somewhat relaxed in light of our decision in Walpert. Nonetheless, as explained infra, we find th at a sufficien t intimate nex us existed in the instant case to establish a cause of action in negligence. 17 In Jacques, individuals who w ere buying a home brought suit against the bank at which they app lied for a hom e mortg age loa n. Id. at 528, 515 A.2d at 756. We were called upon to determine whe ther a bank that has agreed to process an application for a loan owes a duty of reasonable care to its customer in the processing and determination of that application. Id. -21- This Court extensively considered the duty element of negligence in Jacques. See id. at 532-37, 515 A.2d at 75 9-61. In that case, the issue was w hether a ba nk that had agreed to process a loan application owed its customer a duty of care in the processing of that application. Duty, an obligation to which the law will give effect and recognition to conform to a particular standard of conduct toward anothe r, id. at 532, 515 A.2d at 758, citin g J. D oole y, Modern Tort Law, § 3.03 at 18-19 (1982, 1985 Cum.Supp.), we said, has been defined as the expression of the sum total of those considerations of policy which lead the law to say that the plain tiff is entitled to protecti on. Id. at 533, 515 A.2d a t 759, quoting Prosser and Keeton on The L aw of To rts, § 53 at 357 (1984). The Court also acknowledged two major cons iderations affecting duty: the nature of the harm likely to res ult from a f ailure to exercise due care, and the relationship that exis ts betw een the parties. See id. at 534, 515 A.2d at 759. With regard to the connection between the harm and the relationship between the parties, we observed: Where 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 liabi lity. This intima te nexus is sa tisfied by contra ctual privity or its equivalent. By contrast, where the risk created is one of personal injury, no such direct relationship need be shown, and the prin cipal de termina nt of du ty becom es fore seeabili ty. 307 Md. at 534-35, 515 A.2d at 759-60. Id. at 657-58, 762 A.2d at 588-89 (quoting Jacques, 307 Md. at 532-33, 515 A .2d at 758-59). To illustrate the concept of the intimate nexus, it w as necessa ry to note our relia nce in Jacques upon tw o decisions from N ew Yo rk: Ultramares Corporation v. Touche, 174 N.E. 441 (N.Y. 1931)18 and Glanzer v. Shepard, 135 N.E. 275 (N .Y. 1922). 19 18 Our review of In Ultramares, the plaintiff sued for damages sustained as a result of misrepresentations of a firm of pub lic acco untants . Id. at 442. The accountants were employed by Fred Stern & Co. to prepare and certify a balance sheet exhibiting the condition (contin ued...) -22- Maryland and New York case law led us to state in Walpert that the rationale underlying the requirement of p rivity or its equivale nt as a cond ition of liability for n egligent co nduct, including negligent misreprese ntations, resultin g in econo mic dam ages . . . [is] to avo id liability in an indeterminate amount for an indeterminate time to an inde terminate class. Walpert, 361 Md. at 671, 762 A.2d at 596 (quoting Ultramares, 174 N.E. at 444). We explained that the reason f or the privity requirement is to limit the defen dant s risk exposure to an actu ally forese eable e xtent, allowing a defendant to control the risk to which he or she is expos ed. Id. In support of this statement, we cited the facts of Jacques, where the Jacqueses were no t strangers to th e loan transa ction as the b ank in that case promised the Jacqueses to process th eir loan applic ation as a sp ecific locked-in in terest rate for a specific 18 (...continued) of its busin ess. Id. The business required extensive credit and borrowed large sums of money from banks and other len ders in orde r to ope rate. Id. The defendants were aware of this fact, and provided numerous certified copies of the balance sheet to the company, although it was not aware that a copy would be given to the plaintiff s. Id. at 442. The status of the company, contrary to what was stated in the balance sheet, was insolvent, due to the falsification of the books by those in charge of the b usiness . Id. The plaintiffs loaned money to the company on the basis of the balance sheet and b rought suit a gainst the ac countants to recove r the loss suffer ed by the plaintiff in relian ce upo n the au dit. Id. at 443. 19 The plaintiffs in Glanzer bought b eans from a mercha nt, the price of which was determined by the weight of the b eans. Glanzer, 135 N.E. at 275. The buyers were given a certificate noting the c ertified we ight of the beans that was prepared by public weighers who, at the seller s req uest, weigh ed the b ags. Id. at 275-76. When the purchasers learned that the actual weight was less than that amount specified in the certified weight sh eet, the purchasers sued the public weighers. Id. Despite the fact that the plaintiffs had no contract with the weigher of b eans, the court held that the purc hasers were the known and intended beneficiaries of the contract between th e seller and the weighe r, and the purchasers w ere benef iciaries o f the du ty owed by the w eigher. Id. -23- period of time . Id. (citing Jacques, 307 M d. at 537 , 515 A .2d at 76 1). Then, citing Glanzer, Chief Judge Bell, writing for the Court, stated that a defendant s knowledge o f a third party s reliance on the defendant s action may be important in the determination of whether that defendant owes that party a duty of care. Id. at 684, 7 62 A.2 d at 603 . The identity of the plaintiffs in Glanzer, and the class in which those plaintiffs belonged, was known by the defenda nt, as was the fact that the prospective plaintiffs would be relying on the information provid ed by the defen dant. Id. at 687, 7 62 A.2 d at 605 . Credit Alliance Corp. v. Arthur Andersen & Co., 483 N.E.2d 11 0, 118 (N.Y. 198 5),20 subseque ntly clarified Ultramares, supra, in regard to th e privity equivale nt, or near priv ity requirement. The court in Credit Alliance determined that a plaintiff must establish: (1) the accountants must have been aware that the financial reports were to be used for a particular purpose or purposes; (2) in the furtherance of which a known party or parties was intended to rely; and (3) there must have been some conduct on the part of the accou ntants linking to that party or parties, which evinces the accountants' understanding of that party or parties' reliance . Id. We noted in Walpert: 20 In the two appeals involved in Credit Alliance, the plaintiff loaned money to an accountant s client in reliance on audited financial statements prepared by the accountants. The Court of Appeals of New York held that the plaintiffs f ailed to allege sufficient f acts to demons trate the existence of a re latio nshi p between th e par ties th at am ounted to privity. Credit Alliance, 483 N.E.2d at 119. Specifically, the court found that there was no sufficient allegation of either a particular purpose for the reports preparation or the pre requisite conduct on the part of the accountants . . . [and] there is simply no alleg ation of any . . . action on the part of [the acco untants] directed to plaintiffs . . . which prov ided the necessary link betw een the m. Id. at 119. -24- The policy objective underlying the Ultramares approach is the same policy reflected in our cases involving negligence claims brought by third parties not in contractual privity with the defenda nt, limiting the unpredictable and unlimited nature of econom ic damages. See Ultramares,[]255 N.Y. at 179, 174 N.E. at 444 (explaining the holding, Judge Cardozo wrote that if third parties were allowed to recover from an accountant for negligence, a thoughtless slip or blunde r AAA [would] expose accounta nts to liability in an indeterminate amount for an indetermin ate time to an indeterminate class ). At the same time, this approach seeks to recognize and give effect to the current commercial reality in which th e certified pu blic accountant plays a major role in assuring the reliability of financial statements. Walpert, 361 Md. at 675-76, 762 A.2d at 598-99 (footnotes omitted). We further stated that Credit Alliance has clarified the ambiguity surrounding the nature of the relationship between the plaintiff and the defendant sufficient to constitute the required nexus that approaches privity under Ultramares and Glanzer. Clearly, it must be su ch that wo uld allow th e defe ndant to predict i ts liability ex posure . Id. at 690, 762 A.2d at 606. We turn now to the instant case. An Intimate Nexus As the instant case presents a situ ation in wh ich the failure to exercise due care creates a risk of economic loss only, we examine the relationship between Farmers Bank and Allfirst to determ ine if a s ufficie nt intima te nexu s betw een the parties e xisted, thus allowing the imposition of tort liability. Both Farmers Bank and Allfirst contend that Farmers Bank and First Equity were not in privity with one another, and that the only nexus between First -25- Equity and Farmers Bank is that First Equity was the draw er of a check prese nted to Farmers Bank for deposit and collection. Allfirst further contends that such a connection is too attenua ted to giv e rise to a duty of c are ow ed by Fa rmers B ank to F irst Equ ity. Because Bill Grippo, the Farmers Bank representative who handled Check No . 2, could not be found, the only evidence of what occurred from his p erspective is c ontained in a memo he wrote : Mr. Shanna han we nt to the teller to deposit the check, the teller brought the check to me since it was over her limit. At that time I had Mr. Shannahan come into my office and I saw that the check was payable to Farmers Bank. At that time I retrived [sic] his acco unts and saw that t he bank had a trust on his p rope rty. At that time I called Matt Pipkin an d told him w hat I had. M att stated it was oka y for Mr. Sh annahan to deposit the check[.] I questioned the outstanding trusts and again Matt stated it was okay to deposit the check. It was my practice to review Mr. Shannahan s large deposit, as I did with any other customer. If I or Brenda Higdon had any questions, we usually contacted Matt as he was the primary office r on the accou nt. At deposition, Matt Pipkin denied ever having this conversation with Grippo. We noted in Walpert that Glanzer clearly recogn izes that a defendant's knowledge of a third party s reliance on the defendant's action may be important in the determination of whether that defendant owes that party a duty of care. Walpert, 361 Md. at 684, 762 A.2d at 603. In the instant case, Farmers Bank was aware that the check presented by Shannahan was drawn on Allfirst Bank and, although endorsed by him, the che ck was n ot made p ayable to Shannahan. When asked at trial what a branch manager was supposed to do when -26- receiving a check like Check No. 2, payable to itself with no other restrictions or instructio ns, John Yaremchuk, president of Farmers Bank, responded that a bank officer or branch manager should make inquiries to the presenter on how they wanted to use the funds and should determine if the customer s request w as reasonable. Desp ite Yaremchuk s testimony that inquiries should be made when a check like Check No. 2 is presented, the court ascertained that the only statement of the individual who handled the transaction w ith Shann ahan, B ill Gripp o, did no t indicate that Sh annah an wa s asked any ques tions. As noted by the intermediate appellate court, Farmers Bank received a sizable check payable to itself f rom Fi rst Equ ity, an institution that was not indebted to it, and with no direction as to its purpose. Yaremchuk even testified that, in his experience, it would have been advisable to contact First Equity when a check like Check No. 2 was received. But Yaremchuk did not testify, and indeed there is no proof in the record that Farmers ever contac ted First Equity to inquire about th e chec k. Here, Farmers Bank was aware that the funds drawn on Check No. 2 w ere not payab le to Shann ahan, and yet placed them in his account. As a bank, Farmers was aware that Allfirst would pay Check No. 2 out of its funds. Farmers Bank was also aware that First Equity was a title com pany, and, through the receipt of Check N o. 1 which was sent d irectly to Farmers Bank, was on notice that the necessary payments to remove the liens on Shannahan s property were being made. Farmers Bank acknowledges that Shannahan s line of credit was included with his other business and person al debts that were all secured by the -27- IDOT. Certainly, if Farmers Bank was aw are that First E quity was attem pting to perf ect its title in Shannahan s property through its receipt of Check No. 1, it would be reasonab le to assume that Farmers Bank s knowledge of the refinancing process w ould make them aware that Chec k No. 2 represented a payment in connectio n with Sh annahan s refinancin g as well. This knowledge supports both the Circuit Court s and the intermediate appellate court s conclusions that the requ isite intimate nexus was created between Farmers Bank an d First Equ ity. 21 21 In its analysis, the Court of Special Appeals relied upon Sun n Sand, Inc. v. United 582 P.2d 920, 936-37 (Cal. 1978 ). While the intermediate appellate court found Sun n Sand persuasive, we decline to ap ply the California case because it is inapposite. In Sun n Sand, a drawer claimed negligence on the part of a depositary bank that allowed a check that was payable to the bank to be deposited in the personal account of the check s presenter, the drawer s employee. An employee of Sun n Sand, Eloise Morales, prepared several checks for signature by a corporate officer as part of her employment for varying small amounts, payable to United California Bank ( UCB ), and obtained authorized signatures from a Sun n Sand officer who b elieved the sum s repres ented d ebts tha t his com pany ow ed to U CB.. Sun n Sand, 582 P.2d at 926. There were no debts owed to UCB, however, and Morales subseque ntly altered the checks by increasing the amount, and then presented them to UCB. Id. Despite the fact that UCB was the named payee, it allowed the proceeds of the checks to be de posited into M orales's p ersona l accou nt at UC B. Id. The Supreme Court of California held that the common law negligence cause of action was not superseded by the Commercial Code, noting that an attemp t by a third party to divert the proceeds of a check dra wn payab le to the orde r of a bank to the bene fit of one other than the drawer or drawee suggests a possible misappropriation . . . and UCB should have been alerted to the risk that Sun 'n Sand's em ployee w as perp etrating a fraud . Id. at 694-695. It is important f irst to note that Sun n Sand is expressly . . . and narrowly--limited to the particular factual allegations then be fore the Suprem e Court [of C alifornia]. Lee Newman, M.D., Inc. v. Wells Fargo Bank, 87 Cal.App.4th 73 , 80 (Cal. Ct. App. 200 1). Next, we find Sun n Sand distinguishable because it involves a check tha t was frau dulently altered. In the instant case, Check No. 2 was neither fraudulently altered nor indorsed and (contin ued...) -28- We also note, as did the Court of Special Appeals, that the drawer of the check was a title compan y in the busines s of insuring against title defects, including the priority of a lend er's lien on real p rope rty. Sh annahan s ou tstan ding loan s we re se cure d by re al property. Also, Farmers Bank had received a payoff request from Armada, the new lender (to whom First Equity would issue a lend er's title policy). Farmers Bank had replied to that request identifying its two s ecured loans a nd statin g the am ount du e. Cumulatively, these factors suggest that Farmers Bank knew, or should have know n, that there was a risk that First Equity was exp ecting the p roceeds o f the check to pay off the line of cred it secured by the IDOT. This conduct on the part of Farmers Bank, taken into consideration with all the other circumstances surrounding the transaction, represents conduct on the part of Farmers Bank that links it to First Equity, and evinces Farmers B ank s understanding of First Equity s reliance.22 Unlike the facts of Ultramares, our holding does not im pose liability on Farmers Bank to a n indeterm inate class of people for an indeterminate time, but rather, addresses a specifi c entity, Firs t Equity, fo r this spe cific tran saction . Conclusion An action for negligence, where the damages are only economic, may be brought by 21 (...continued) was p roperly pa yable un der the U CC. 22 We do not agree with respondents argument that a holding th at an intimate nexus existed between Farmers Bank and First Equity w ould lead to the result that a drawer of a check is always the eq uivalent of contractua l privity with the depositary bank that receives the che ck. O ur hold ing app lies to the specifi c facts o f the ins tant case . -29- a non-custo mer draw er against a d epositary bank , where th ere is no violation of the provisions of the UCC, and where duty is established by a sufficient intimate nexus between the depositary bank and the non-customer, through privity or its equiv alent. We affirm the judgment of the in termed iate app ellate co urt, and in so doing, remand this matter to the Circuit Court to co nsider the d efense of contributory ne gligence as it applies to A llfirst.23 For the reasons stated supra, the trial court did not err in permitting a negligence claim against Farmers Bank in th e instant case . We affirm the Circuit C ourt s denia l of First Eq uity's claim against A llfirst, and the ho ldings of th e intermed iate appellate c ourt. JUDGMENT OF THE COURT OF SPECIAL APPEALS AFFIRMED. COSTS IN THIS COURT AND IN THE COURT OF SPECIAL APPEALS TO 23 The intermediate appellate court did not err in remanding the matter for consideration of this issue. The record is clear that First Equity mailed Check No. 1 to Farmers Bank directly, and provided directions to Farmers Bank about how to handle the check. It clearly did not follo w the sam e procedu re in the ma iling of Ch eck No . 2 to Shannahan, choosing to entrust Shannahan, who was clearly not its agent, to deliver Check No. 2 and its accompa nying documentation to F armers Bank in order to properly perf ect title to Shann ahan s proper ty. See K assam a v. Magat, 368 Md. 113, 127, 792 A.2d 1102, 1110 (2002) (quoting Craig v. Greenbelt Consumer Services, Inc., 244 Md. 95, 97, 222 A.2d 836, 837 (1966) (quoting Restatement (S econd) o f Torts § 4 63) ( Co ntributory neglig ence is conduct on the part of the plaintiff which falls below the stan dard to w hich he sh ould conform for his ow n protection , and wh ich is a legally contribu ting cause c o-operating with the neglige nce of the def endan t in bring ing abo ut the pla intiff's ha rm. ). Contributory negligence is ordinarily a question for the j ury. Kasten Const. Co. v. Evans, 260 Md. 536, 541, 27 3 A.2d 90, 93 ( 1971) (citation omitted ). -30- BE DIVIDED EQUALLY AMONG THE PARTIES. -31-
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
