holding “when a bank and a prospective borrower are dealing at arm’s length, a fiduciary duty does not exist unless special circumstances exist”
How later courts described this case
- holding “when a bank and a prospective borrower are dealing at arm’s length, a fiduciary duty does not exist unless special circumstances exist”
- directed verdict is proper when, “after construing the evidence most strongly in favor of the party against whom the motion is directed, reasonable minds could come to but one conclusion upon the evidence submitted” (quotation marks omitted)
- no fiduciary duty arose between bank and prospective borrower where there were no special circumstances, and where parties were dealing at arm’s length, looking out for their own best interests
- a fiduciary is a “person having a duty, created by his undertaking, to act primarily for the benefit of another in matters connected with his undertaking”
Written by the judges who cited it.
The opinion
Pfeifer, J.,
dissenting.
{¶ 60} I agree that this court heretofore has not explicitly held that financial institutions owe a duty of confidentiality to customers. We have not had to. Most customers would be surprised to learn that such a duty does not already exist, and most banks necessarily behave as if one does. The outrageous facts of this case, however, require us to formally recognize the limited fiduciary duty of a financial institution to keep confidential the sensitive information provided to it by customers and potential customers. Since the majority declines to acknowledge such a duty, I dissent.
{¶ 61} This court has properly held in the past that a debtor-creditor relationship does not generally create a fiduciary relationship. Umbaugh Pole Bldg. Co., Inc. v. Scott (1979), 58 Ohio St.2d 282 , 12 O.O.3d 279 , 390 N.E.2d 320 , paragraph one of the syllabus; see, also, R.C. 1109.15(D). As the majority points out, a fiduciary duty can be quite broad when a fiduciary is defined as “ ‘ “a person having a duty, created by his undertaking, to act primarily for the benefit of another in matters connected with his undertaking.” ’ ” (Emphasis deleted.) Strode v. Pressnell (1988), 38 Ohio St.3d 207, 216 , 527 N.E.2d 1235 , quoting Haluka v. Baker (1941), 66 Ohio App. 308, 312 , 20 O.O.136, 34 N.E.2d 68 , quoting 1 Restatement of the Law, Agency (1933), Section'13, Comment a. The full breadth of a fiduciary duty is not appropriate when parties are engaged in a *360 business transaction in which each is operating according to his own best interests. A lender cannot be expected to serve only the interests of its customers when the relationship exists in the first place because it is advantageous to the bank.
{¶ 62} But this court has also defined a fiduciary relationship as a relationship “in which special confidence and trust [are] reposed in the integrity and fidelity of another and there is a resulting position of superiority or influence, acquired by virtue of this special trust.” In re Termination of Emp. of Pratt (1974), 40 Ohio St.2d 107, 115 , 69 O.O.2d 512 , 321 N.E.2d 603 . This definition of a fiduciary relationship gives rise to special, limited duties with regard to certain aspects of business relationships. In Stone v. Davis (1981), 66 Ohio St.2d 74 , 20 O.O.3d 64 , 419 N.E.2d 1094 , this court recognized a limited duty between a lender and a loan applicant, holding that the lender owes loan applicants who request mortgage insurance the duty to inform the applicants how to obtain mortgage insurance. In Stone , the loan applicant, in response to a query on the bank’s own loan documents, indicated that he wished to procure mortgage insurance. The court held that “in broaching the subject of mortgage insurance to a loan customer, a lending institution has a duty to advise the customer as to how this insurance may be procured.” Id. at 80 , 20 O.O.3d 64 , 419 N.E.2d 1094 . The court found that “[a] fiduciary relationship need not be created by contract; it may arise out of an informal relationship where both parties understand that a special trust or confidence has been reposed.” Id. at 78 , 20 O.O.3d 64 , 419 N.E.2d 1094 .
{¶ 63} Quoting Pratt, the court in Stone wrote that a fiduciary duty arises where “ ‘special confidence and trust [are] reposed in the integrity and fidelity of another and there is a resulting position of superiority or influence, acquired by virtue of this special trust.’ ” Id., quoting Pratt, 40 Ohio St.2d at 115 , 69 O.O.2d 512 , 321 N.E.2d 603 . The bank’s superior position in relation to the customer as to the procurement of mortgage insurance gave rise to a limited duty. The court relied on the fact that “while a bank and its customer may be said to stand at arm’s length in negotiating the terms and conditions of a mortgage loan, it is unrealistic to believe that this equality of position carries over into the area of loan processing, which customarily includes advising the customer as to the benefits of procuring mortgage insurance on the property which secures the bank’s loan.” Stone, 66 Ohio St.2d at 78-79 , 20 O.O.3d 64 , 419 N.E.2d 1094 .
{¶ 64} A special trust and an inequality of position also exist in this case and should give rise to a limited fiduciary duty of confidentiality on the part of the bank. To be given consideration by a loan officer, a prospective borrower must be willing to surrender all manner of sensitive information. Just saying, “Trust me, I’ve got a good idea,” is not going to cut it. In releasing his information, the customer puts a special trust in the bank. A customer does not disclose all the *361 information necessary for the bank to make the judgment on a loan application without being confident that the bank’s employees will not peddle the information up and down Main Street.
Waite, Schneider, Bayless & Chesley, Stanley M. Chesley, and Paul M. DeMarco; and Robert F. Croskery and Melinda E. Rnisley, for appellees.
Thompson Hiñe, L.L.P., William C. Wilkinson, Brian J. Lamb, and Timothy H. Linville, for appellants.
Risor & Winkler, L.L.C., and John C. Deal; and Jeffrey D. Quayle, urging reversal for amicus curiae, Ohio Bankers League.
{¶ 65} The bank is an information gatherer at the outset of the relationship, while the potential borrower receives only the opportunity to be heard. The relative positions of the parties are at their most unequal at that point, with the bank in the superior position. The special trust reposed in the bank and the bank’s resulting position of superiority should give rise to a limited fiduciary duty in the bank to keep the borrower’s sensitive information confidential.
{¶ 66} To find a limited fiduciary duty as to confidentiality would not change the practices of most banks, but would simply function as an affirmation of their existing policies. The system currently works because customers have faith in the confidentiality of their disclosures. The majority opinion throws that into doubt. To find that there is no duty is to jeopardize a public trust. In a time when financial information and identity can be corrupted and used in a growing number of nefarious ways, it inures to no one’s best interest to place in doubt the duty of financial institutions to be trustworthy holders of confidential, sensitive information.
Farmer and Lundberg Stratton, JJ., concur in the foregoing dissenting opinion.