BARNETT BANK OF WEST FLORIDA, Petitioner, v. W. Richard HOOPER, Respondent, 498 So. 2d 923

SHAW, Justice. We review Hooper v. Barnett Bank, 474 So.2d 1253 (Fla. 1st DCA 1985), because of express and direct conflict with Milohnich v. First National Bank, 224 So.2d 759 (Fla. 3d DCA 1969). We have jurisdiction. Art. V, § 3(b) (3), Fla. Const. Dr. W. Richard Hooper moved to Pensacola in 1973 and began doing business with the Barnett Bank of West Florida. In June of 1981, Hooper met with Joe G. Hosner, an attorney and customer of the bank, to discuss tax shelter investments. Hosner took Hooper to see Edwin Riffel, the loan officer in charge of Hosner’s accounts at the bank.

According to the testimony of Hooper, Riffel told him at this meeting that he was familiar with Hosner Investments and that they were sound and had passed Internal Revenue Service scrutiny. Hooper borrowed $50,000 from the bank which he placed with Hosner as a tax shelter investment. During the spring of 1982, Harry Stump, the assistant vice president of the bank became suspicious that Hosner was involved in a check kiting scheme. He passed this information on to Riffel.

On May 11, Stump instructed bank employees to make copies of the checks which were being deposited to the Hosner account, and to send copies to him prior to crediting the account. Stump testified that by May 14 the situation had deteriorated to the point that he felt that the bank was at risk, and in an effort to protect the bank he returned all Hosner checks presented on May 13 as drawn against uncollected funds. Late in the afternoon of May 14, Hooper returned a call from Hosner who put him on hold.

Hosner came back on the line with Riffel and during the ensuing three-way conversation, Hooper asked to borrow $90,000 for an investment which Riffel, according to his trial testimony, assumed was to be with Hosner. A promissory note prepared by Riffel and a check representing the proceeds of the loan in the sum of $89,865 were delivered to Hooper after banking hours by a messenger from Hos-ner’s office. The check, bearing Hooper’s endorsement and the stamp, “For Deposit Only, Hosner Enterprises, Inc., 1170027502,” was deposited into the Hos-ner account.

By May 24 the check kiting scheme was confirmed, but because of the Hooper deposit, Barnett was able to zero out the Hosner account. Stump admitted at trial that without the deposit, Hosner’s account would have been overdrawn approximately $87,000. Hooper sought cancellation of the promissory note on the basis that he and Barnett had established a confidential and fiduciary relationship imposing upon Barnett a duty to disclose facts material to the loan transaction, or, alternatively, that Barnett had an affirmative duty to disclose actual knowledge of Hosner’s fraudulent activity.

Based on the rule of confidentiality set forth in Milohnich, that a national bank owes an implied duty to its depositors not to disclose information to third parties concerning a depositor’s account, the trial court directed a verdict against Hooper at the close of the evidence and entered a final judgment on Barnett’s counterclaim for amounts owing under the note. The district court reversed and remanded for a new trial, finding that the jury was entitled to weigh any proven duty of disclosure owed to Hooper against Barnett’s duty of confidentiality owed to Hosner.

With these facts in mind, we limit our opinion to the following inquiry: When a bank enters into a transaction with a customer with whom it has established a confidential or fiduciary relationship, and the transaction is one from which the bank stands to benefit at the expense of the customer, does the bank assume a duty to disclose information material to the transaction which is peculiarly within the bank’s knowledge and not otherwise available to the customer?

We see nothing wrong with, but much to commend, a rule of law recognizing that under these special circumstances a bank may by its conduct be found to have assumed a duty of disclosure. Accordingly, we answer the inquiry in the affirmative. Citing Milohnich, Barnett points out that disclosure of information concerning another depositor conflicts with the bank’s duty of confidentiality.

Milohnich noted that a bank’s general duty of confidentiality concerning a depositor’s account is qualified, noting that disclosure is permissible: 1) under compulsion of law; 2) pursuant to public interest; 3) pursuant to the bank’s interests; or 4) when made with the expressed or implied consent of the customer.

While approving these exceptions, we disapprove any language in Milohnich which would preclude a bank from assuming a duty of disclosure under other “special circumstances.” Such “special circumstances” may be found where a bank, having actual knowledge of fraud being perpetrated upon a customer, enters into a transaction with that customer in furtherance of the fraud, Richfield Bank & Trust Co. v. Sjogren, 309 Minn. 362, 244 N.W.2d 648 (1976), or where a bank has established a confidential or fiduciary relationship with a customer, Tokarz v.

Frontier Federal Savings & Loan Association, 33 Wash.App. 456, 656 P.2d 1089 (1982); Klein v. First Edina National Bank, 293 Minn. 418, 196 N.W.2d 619 (1972). Recognizing the impact of the Milohnich decision upon the banking industry, we are reluctant to formulate a rule of disclosure that will be at tension with the general rule of confidentiality. However, since the usual relationship between a bank and its depositor is one of debtor to creditor, Vassar v. Smith, 134 Fla. 346, 183 So. 705 (1938); Edwards v.

Lewis, 98 Fla. 956, 124 So. 746 (1929), not ordinarily imposing a duty of disclosure upon the bank, we do not feel that our decision herein will overly burden the banking industry. Accordingly, we find that where a bank becomes involved in a transaction with a customer with whom it has established a relationship of trust and confidence, and it is a transaction from which the bank is likely to benefit at the customer’s expense, the bank may be found to have assumed a duty to disclose facts material to the transaction, peculiarly within its knowledge, and not otherwise available to the customer.

Where the bank defends its breach of duty on the ground that it owes a conflicting duty of confidentiality to a second customer, the jury is entitled to weigh the one duty against the other.

In the instant case, taking the evidence most favorable to Hooper, the jury could reasonably have found that, prior to the May 14 loan, Riffel had established a confidential relationship with Hooper; that Hooper relied upon this relationship when in a three-way conversation Riffel was put on the phone by Hosner for the purpose of approving the loan; and that at the time Riffel approved the loan he was aware that Hosner was delinquent in loan payments to the bank and was on notice of Stump’s suspicions relative to Hosner’s fraudulent loan kiting schemes.

The jury could also have found that by May 13 the bank considered itself at risk and had made the decision to return all Hosner’s checks as being drawn against uncollected funds.

The jury was free to consider the unusual circumstances under which the loan was negotiated; that the next working day, Monday, May 17, Hosner checks totaling $270,000 were returned to Barnett by the First American Bank; that, without Hooper’s check in the amount of $89,865, the Hosner account would have been overdrawn in the amount of $87,000; and that, with the Hooper deposit, the bank was able to zero out the account and suffer no loss.

In sum, the jury could have found that the bank, having established a confidential or fiduciary relationship with Hooper, entered into a transaction with Hooper from which it was likely to benefit and that at the time of the transaction the bank had special knowledge of material facts which were not otherwise available to Hooper. Given these “special circumstances,” the jury could have found that Barnett owed Hooper a duty of disclosure against which the jury was entitled to weigh Barnett's duty of confidentiality owed to Hosner.

Accordingly, we approve the district court’s decision reversing the directed verdict and the final judgement and remanding to the trial court for a new trial on all issues. It is so ordered. MCDONALD, C.J., and ADKINS, OVER-TON and BARKETT, JJ., concur. BOYD, J., dissents with an opinion. Denison State Bank v. Madeira, 230 Kan. 684, 640 P.2d 1235 (1982); Klein; Annot., Existence of Fiduciary Relationship between Bank and Depositor or Customer so as to Impose Special Duty of Disclosure upon Bank, 70 A.L.R.3d 1344, 1347 (1976).