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Fiduciary Duty – Maryland

Author: LegalEase Solutions


  1. What are the claims the son may have against the bank? 


There is no separate claim for breach of fiduciary duty in Maryland. The son, however, may be able to bring a claim for negligence and breach of contract. 


Breach of fiduciary duty

“[A]lthough the breach of a fiduciary duty may give rise to one or more causes of action, in tort or in contract, Maryland does not recognize a separate tort action for breach of fiduciary duty.” Vinogradova v. Suntrust Bank, Inc., 162 Md. App. 495, 510, 875 A.2d 222, 231 (2005). “[U]nder Maryland law, the two separately pleaded claims [breach of fiduciary duty and negligence] in . . . [the] complaint condense to only one: the claim based on the tort of negligence.” However a party “may . . . plead an action for breach of contract, in addition to its claim for negligence . . . .” Id. See Vinogradova., 162 Md. App. at 510n.10  (Taylor v. Equitable Trust, 269 Md. 149, 155-56, 304 A.2d 838 (1973))(“Unless modified by the parties the contract is that implied in a banking relationship. For a breach of this contract, an action in tort will lie.”).

“[T]there is no universal or omnibus tort for the redress of breach of fiduciary duty by any and all fiduciaries.” Kann v. Kann, 344 Md. 689, 713, 690 A.2d 509, 521 (1997). “This does not mean that there is no claim or cause of action available for breach of fiduciary duty.” Id. This only “means that identifying a breach of fiduciary duty will be the beginning of the analysis, and not its conclusion. Counsel [is] required to identify the particular fiduciary relationship involved, identify how it was breached, consider the remedies available, and select those remedies appropriate to the client’s problem.” Id.

Thus, it has been held that, “[g]iven the standard of conduct imposed upon fiduciaries . . . fiduciaries who breach their duty should be held accountable under an independent cause of action aimed at such conduct.” Id. at 709. Further, “punitive damages are not at all available in equity.” Id. at 712.

Breach of Contract – Third Party Beneficiary

“Since the establishment of the doctrine of third party beneficiaries in the landmark decision of the Court of Appeals of New York in Lawrence v. Fox, 20 N.Y. 268 (1859), substantially all state courts of last resort, including [Court of Appeals of Maryland], have adopted and applied the doctrine” of third party beneficiary contracts. Shillman v. Hobstetter, 249 Md. 678, 687, 241 A.2d 570, 575 (1968).

Generally, “a third party beneficiary contract arises when two parties enter into an agreement with the intent to confer a direct benefit on a third party, allowing the third party to sue on the contract despite the lack of privity.” Flaherty v. Weinberg, 303 Md. 116, 125, 492 A.2d 618, 622 (1985).

In Maryland, “a person for whose benefit a contract is made can maintain an action upon it. But before one can do so it must be shown that the contract was intended for his benefit . . . .” Shillman v. Hobstetter, 249 Md. 678, 687, 241 A.2d 570, 575 (1968). “[I]n order for a third party beneficiary to recover for a breach of contract it must clearly appear that the parties intended to recognize him as the primary party in interest[sic] and as privy to the promise.” Id. In seeking to enforce the contract, a third party beneficiary must establish the same elements of breach of contract and will be subject to the same defences as a contracting party Coll. of Notre Dame of Maryland, Inc. v. Morabito Consultants, Inc., 132 Md. App. 158, 179, 752 A.2d 265, 276 (2000) (“Both the promisee and the beneficiary may enforce the contract . . . with the third party beneficiary bound by the contract provisions.”)


“Maryland law provides that a contractual relationship, or its equivalent, may establish the necessary “intimate nexus” between the parties in a tort action where only economic loss results.” Chicago Title Ins. Co. v. Allfirst Bank, 394 Md. 270, 290, 905 A.2d 366, 377 (2006). (citing Jacques v. First Nat’l Bank, 307 Md. 527, 534-35, 515 A.2d 756, 759-60 (1986)).

The elements of negligence a plaintiff is to assert in the complaint are 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 defendant’s breach of the duty.” Id. at 291. (citing Valentine v. On Target, Inc., 353 Md. 544, 549, 727 A.2d 947, 949 (1999). Thus, in a negligence case, a plaintiff must prove to prevail, “‘a duty owed to him [or her] (or to a class of which he [or she] is a part), a breach of that duty, a legally cognizable causal relationship between the breach of duty and the harm suffered, and damages.’” Schultz v. Bank of Am., N.A., 413 Md. 15, 27, 990 A.2d 1078, 1085 (2010) (quoting Jacques v. First Nat’l Bank, 307 Md. 527, 531, 515 A.2d 756, 758 (1986)).

Further, it has been held that the court “must consider two elements when resolving whether a tort duty should be recognized based upon a particular set of facts:”

“the nature of the harm likely 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 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. By contrast, where the risk created is one of personal injury, no such direct relationship need be shown, and the principal determinant of duty becomes foreseeability.”

Chicago Title Ins. Co., 394 Md. at 291. 

Furthermore, with regard to the applicable standard of care in a case where negligence has been alleged against a bank, the court should determine “whether expert testimony is necessary to establish the standard of care for a bank . . . .” Schultz, 413 Md. at 27. In Schultz, the court under the facts of the case concluded that “expert testimony was necessary to establish the standard of care.” Id. “Th[e] case involved alleged negligence in regard to internal bank procedures that the trier of fact could not be expected to appreciate without the aid of expert testimony.” Id. “[P]rofessional standards are often ‘beyond the ken of the average layman,’ such that the expert’s testimony is necessary to elucidate the relevant standard for the trier of fact.” Id. (quoting Bean v. Dept. of Health, 406 Md. 419, 432, 959 A.2d 778, 786 (2008)). However, the courts do not require “expert testimony to establish the defendant’s standard of care in every case involving alleged negligence by a professional. “[S]ometimes the alleged negligence, if proven, would be so obviously shown that the trier of fact could recognize it without expert testimony.” Id. at 29.

In regard to the duty a bank owes to its customers when disbursing the customers’ funds, “case law and the comments to the Maryland Uniform Commercial Code (“Commercial Code”) establish that a duty of “ordinary care” applies.” Id. at 28 (See Taylor v. Equitable Trust Co., 269 Md. 149, 155-56, 304 A.2d 838, 841-42 (1973) (applying the ordinary care standard to a bank’s alleged negligence in disbursing a customer’s funds); Md.Code (1975, 2002 Repl.Vol.), § 3-103 of the Commercial Law Article, cmt. 5 (explaining that the duty of ordinary care applies to banks); see also § 4-103 of the Commercial Law Article, cmt. 4 (explaining that “banks come under the general obligations of the use of good faith and the exercise of ordinary care”).

“The Commercial Code defines “ordinary care” as the “1) observance of reasonable commercial standards, 2) which prevail in the area in which the person is located, 3) with respect to the business in which the person is engaged.” Id. (citing State Security v. American General, 409 Md. 81, 117, 972 A.2d 882, 903 (2009) (quoting § 3-103(a)(7) of the Commercial Law Article). “A bank customer may bring a negligence suit against a bank for a violation of this duty of ordinary care.” Id.

Additionally, “[i]n a case of alleged negligence by a professional, the plaintiff bears the burden of overcoming the presumption that due skill and care were used.” Id. at 29. “If the plaintiff presents no such evidence, the trial court may rule, in its general power to pass upon the sufficiency of the evidence, that there is not sufficient evidence to go to the [trier of fact].” Id.

Likelihood of Success on Both Claims

In this case, the decedent account holder requested the bank to have his son joint owner of the account and filled Client Relationship Agreement including his son’s name in it.  He signed client relationship agreement prior to his death. The bank intimated via email that the document has been approved and updated to the account accordingly. Thus, it was clear to the Bank that the purpose of the transaction was to benefit the son. However, the bank failed in acting upon the customer’s instruction and failed to make effect of the client’s intent. This amounts to negligence in that the bank owed a duty to the customer, which it breached, whereby the account may become part of the decedent’s estate or devolve in to the pre deceased legatee’s estate. This has caused damages to the son’s interest. The bank committed a breach of contract with the father and the son, being the third party beneficiary for whose benefit the agreement was made, can maintain both a negligence action and an action upon the breach.


A bank owes a duty of ordinary care to its customers. This ordinary care is the reasonable commercial standards required in the business engaged in by the institution/person. Where negligence is alleged against a professional, expert testimony may be necessary to establish the requisite standard of care owed by the professional. In this case, breach of fiduciary duty may not be available as an independent cause of action. The son, being the person for whose benefit the Agreement was made may maintain a third party breach of contract action showing clearly that “the parties to the contract intended to recognize him as the primary party in interest.” Thus, the viable cause of actions available in this case is a cause of action based on negligence and breach of contract that could be raised by a third party beneficiary.