Title: Groob v. KeyBank

State: ohio

Issuer: Ohio Supreme Court

Document:

[Cite as Groob v. KeyBank, 108 Ohio St.3d 348, 2006-Ohio-1189.] 
 
 
 
GROOB ET AL., APPELLEES, v. KEYBANK ET AL., APPELLANTS. 
[Cite as Groob v. KeyBank, 108 Ohio St.3d 348, 2006-Ohio-1189.] 
Absent special circumstances, a bank dealing at arm’s length with a prospective 
borrower does not have a fiduciary duty to that prospective borrower — 
For an employer to be liable for a tortious act of its employee, the 
employee must be acting within the scope of employment when she 
commits the tortious act. 
(No. 2004-0214 — Submitted February 2, 2005 — Decided March 29, 2006.) 
APPEAL from the Court of Appeals for Hamilton County, 
No. C-020191, 155 Ohio App.3d 510, 2003-Ohio-6915, 801 N.E.2d 919. 
__________________ 
SYLLABUS OF THE COURT 
1. 
A bank dealing at arm’s length with a prospective borrower does not have 
a fiduciary duty to that prospective borrower unless special circumstances 
exist. 
2.   
For an employer to be liable for a tortious act of its employee, that 
employee must be acting within the scope of employment when the 
employee commits the tortious act. 
__________________ 
 
LANZINGER, J. 
{¶ 1} The question presented here is whether a bank may be held liable 
for breach of fiduciary duty or under the doctrine of respondeat superior when a 
bank employee uses confidential information obtained from a prospective 
borrower for the employee’s personal advantage. We hold that a bank dealing at 
arm’s length with a prospective borrower does not have a fiduciary duty to that 
prospective borrower unless special circumstances exist.  We also hold that for an 
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employer to be liable for a tortious act of its employee, that employee must be 
acting within the scope of employment when the employee commits the tortious 
act. 
{¶ 2} This case is before us on a discretionary appeal by appellants, 
KeyBank National Association and KeyCorp (collectively, “KeyBank”), from the 
First District Court of Appeals’ decision reversing the trial court and ordering a 
new trial on appellees’ fiduciary-duty and respondeat superior claims. 
{¶ 3} Appellee Jeffrey Groob learned in the spring of 1997 that Oldfield 
Equipment Company, Inc., a company that sold and rented hydraulic pumps, was 
for sale.  Groob was interested in purchasing Oldfield and in May 1997 signed an 
agreement not to disclose any confidential business information that Oldfield’s 
owner, John Scheve, might give him to evaluate a prospective purchase of the 
company.  After researching the business and making a financial analysis, Groob 
offered Scheve $1.8 million for Oldfield. 
{¶ 4} Groob began to look for financing.  He first approached Peoples 
Bank of Northern Kentucky, but his loan application was turned down.  Star Bank 
also had no interest in making the loan.  Believing that he needed to get additional 
investment money, Groob contacted appellee Lowell Bowie for help.  The two 
decided to pursue financing with KeyBank, a bank with which Bowie and 
Oldfield had an existing relationship.  Groob himself was not a customer. 
{¶ 5} Groob and Bowie met with Caroline Sapinsley, a loan officer, and 
Michael Kennedy, a credit officer, at KeyBank on October 28, 1997.  Kennedy 
left the meeting after 15 minutes.  Groob presented Sapinsley with a financial 
summary of Oldfield and later faxed her a draft of an asset-purchase agreement.  
A few days later, Sapinsley told Groob that KeyBank was not interested in 
providing financing.  Although Groob and Bowie tried to find additional investors 
and submitted two additional proposals to Scheve, they were unsuccessful in their 
efforts to purchase Oldfield. 
January Term, 2006 
3 
{¶ 6} In the meantime, while Groob and Bowie were looking for 
investors, Sapinsley informed Clark Sarver, another KeyBank customer, about 
Oldfield.  Less than a week after she turned down Groob, Sapinsley’s husband 
and Sarver sent a letter of intent to Scheve to purchase Oldfield for $1.8 million.  
Sapinsley resigned from KeyBank in March 1998.  She and Sarver took control of 
Oldfield the following month. 
{¶ 7} Groob was unaware that Sapinsley had negotiated with Scheve to 
purchase Oldfield.  In March 1999, Groob learned that Sapinsley and Sarver had 
become Oldfield’s owners when he saw Scheve’s obituary in the Kentucky 
Enquirer. 
{¶ 8} Groob, his wife, and Bowie filed a complaint against Sapinsley and 
KeyBank, alleging, among other things, tortious interference with prospective 
economic advantage, breach of fiduciary duty, and negligence.  With respect to 
KeyBank, a directed verdict was entered at trial in its favor on the claims for 
breach of fiduciary duty and negligence. A jury returned a verdict for KeyBank on 
the remaining tortious-interference claim based on the theory of respondeat 
superior.  The jury also found Sapinsley liable and awarded appellees $556,020 in 
damages.1 
{¶ 9} Bowie and the Groobs appealed the trial court’s decision.  They 
argued, among other things, that the court erred in directing a verdict in favor of 
KeyBank on their claim for breach of fiduciary duty and that the trial court’s jury 
instructions on respondeat superior were incorrect.  The First District Court of 
Appeals held that KeyBank owed Groob and Bowie a duty of confidentiality and 
that therefore the trial court had erred when it granted a directed verdict to 
KeyBank on the claim for breach of fiduciary duty.  The appellate court also 
                                                 
1.  Jeffrey Groob was awarded $50,000 in compensatory damages and $253,000 in punitive 
damages.  Bowie received an award of $20 in compensatory damages and $253,000 in punitive 
damages.   
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determined that the trial court’s jury instruction on respondeat superior was 
inadequate because it failed to advise the jury that KeyBank could be held liable if 
Sapinsley had been aided in her tortious conduct by her status as a KeyBank loan 
officer. 
{¶ 10} We accepted KeyBank’s appeal, which argues the following 
propositions of law: 
{¶ 11} “I. An employer is not liable for the intentional torts of its 
employee committed outside the scope of employment where the behavior giving 
rise to the tort is not calculated to facilitate or promote the business for which the 
employee was employed, but instead is merely the independent, self-serving act 
of the employee.” 
{¶ 12} “II. A lending institution does not owe a fiduciary duty to 
prospective commercial borrowers in the absence of an agreement to the 
contrary.” 
{¶ 13} We will address KeyBank’s propositions of law in reverse order. 
Standard for Directed Verdicts 
{¶ 14} The trial court directed a verdict in favor of KeyBank on the claim 
for breach of fiduciary duty.  According to Civ.R. 50(A)(4), a motion for directed 
verdict should be granted 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 and that conclusion is 
adverse to such party.”  In Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co., 
95 Ohio St.3d 512, 2002-Ohio-2842, 769 N.E.2d 835, ¶ 4, we noted, “ ‘A motion 
for directed verdict * * * does not present factual issues, but a question of law, 
even though in deciding such a motion, it is necessary to review and consider the 
evidence.’  O’Day v. Webb (1972), 29 Ohio St.2d 215, 58 O.O.2d 424, 280 
N.E.2d 896, paragraph three of the syllabus.  See, also, Wagner v. Roche 
Laboratories (1996), 77 Ohio St.3d 116, 119, 671 N.E.2d 252.  Since we are 
January Term, 2006 
5 
presented with a question of law, we apply a de novo standard of review.  
Cleveland Elec. Illum. Co. v. Pub. Util. Comm. (1996), 76 Ohio St.3d 521, 523, 
668 N.E.2d 889, 891.” 
Fiduciary Duty Owed to Prospective Borrower 
{¶ 15} KeyBank argues that for the first time in Ohio, the appellate court 
has imposed a fiduciary duty upon banks based on a special duty of 
confidentiality owed by banks to their prospective borrowers.  KeyBank contends 
that this new duty is contrary to Ohio’s existing law and is not necessary to 
protect prospective borrowers. 
{¶ 16} The term “fiduciary relationship” has been defined as a 
relationship “in which special confidence and trust is 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.  Similarly, 
“fiduciary” has been 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.)  Strock 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. 
{¶ 17} In the past, we determined that a debtor-and-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.  When both parties understand that a special trust or 
confidence has been reposed, however, a fiduciary relationship may be 
established.  Id.  In Umbaugh, this court held that a fiduciary relationship had not 
been created between a married couple, Lelland and Vivian Scott, and their credit 
association.  In applying for a loan to expand their hog farm, the Scotts were 
SUPREME COURT OF OHIO 
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required to give financial information and information pertaining to their farm 
operations.  The Scotts were given several loans, and the association took a 
security interest in the hogs and farm equipment and obtained a mortgage on the 
Scotts’ real estate.  During the loan period, the association gave advice to the 
Scotts concerning their farming operation.  When the Scotts became delinquent, 
the association suggested that they liquidate some of their assets so that they 
could retain their home and a scaled-down farming operation.  The Scotts 
followed the association’s suggestion.  When another creditor filed for 
foreclosure, the Scotts sued the association and alleged, among other claims, that 
the association had breached its fiduciary duty. 
{¶ 18} In rejecting the claim for breach of fiduciary duty, the Umbaugh 
court stated, “While the advice was given in a congenial atmosphere and in a 
sincere effort to help the Scotts prosper, nevertheless, the advice was given by an 
institutional lender in a commercial context in which the parties dealt at arms 
length, each protecting his own interest.”  Id. at 287, 12 O.O.3d 279, 390 N.E.2d 
320.  The court held that the limited amount of advice “did not vitiate the business 
relationship because neither party had, nor could have had, a reasonable 
expectation that the creditor would act solely or primarily on behalf or the 
debtor.”  Id. 
{¶ 19} The issue of whether a fiduciary relationship exists between a bank 
and a borrower was again presented to this court in Stone v. Davis (1981), 66 
Ohio St.2d 74, 20 O.O.3d 64, 419 N.E.2d 1094.  The borrowers in that case, 
Danny and Judy Davis, financed a dairy farm in large part with a bank loan.  After 
the loan was approved, the Davises signed a disclosure form provided by the bank 
that indicated that they wanted mortgage insurance.  The bank, however, did not 
take any steps to procure the mortgage insurance or tell the Davises that they had 
to obtain it themselves. 
January Term, 2006 
7 
{¶ 20} This court observed that “while a bank and its customers 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.”  Id. at 78-79, 20 O.O.3d 64, 419 N.E.2d 1094.  Thus, because the 
bank had mentioned mortgage insurance and received the Davises’ express desire 
for that insurance, we found that a special trust or confidence had been placed in 
the bank to advise the Davises in how to obtain the insurance.  Id. at 79, 20 
O.O.3d 64, 419 N.E.2d 1094.  This court held that the bank had breached its 
fiduciary duty in failing to either obtain the insurance or tell the Davises that they 
needed to procure the mortgage insurance themselves. 
{¶ 21} In Blon v. Bank One, Akron, N.A. (1988), 35 Ohio St.3d 98, 519 
N.E.2d 363, Geraldine and Richard Blon bought a car from West Chevrolet, Inc., 
financed by Bank One.  The Blons later learned that the car dealership had 
received a fee from Bank One for preparing and placing the loan with the bank.  
This fee was based on the loan’s interest rate—the higher the interest rate, the 
higher the fee.  We held that there was no special relationship of trust and 
confidence between the bank and its borrowers and thus Bank One did not have a 
duty to disclose the fee arrangement or that lower interest rates were available.  
We distinguished Stone, noting that Stone had “expressly distinguished the area of 
loan processing, in which the fiduciary duty was held to arise, from the 
negotiation of the terms and conditions of a mortgage loan in which the bank and 
its customer engaged in an arm’s-length transaction.”  Blon, 35 Ohio St.3d at 102, 
519 N.E.2d 363.  “[A] creditor and consumer stand at arm’s-length in negotiating 
the terms and conditions of a consumer loan and, absent an understanding by both 
parties that a special trust and confidence has been reposed in the creditor, the 
SUPREME COURT OF OHIO 
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creditor has no duty to disclose to the consumer the existence and details of a 
finder’s fee or similar arrangement with a credit arranger.”  Id. 
{¶ 22} From Umbaugh, Stone, and Blon, it is clear that a fiduciary duty 
does not arise between a bank and a prospective borrower unless there are special 
circumstances.  The General Assembly codified this principle in R.C. 1109.15(D), 
which states, “Unless otherwise expressly agreed in writing, the relationship 
between a bank and its obligor, with respect to any extension of credit, is that of a 
creditor and debtor, and creates no fiduciary duty or other relationship between 
the parties.”  Appellees never submitted a formal loan application and did not 
enter into any written agreements with KeyBank.  They were not obligors of the 
bank.  Even if they had been, however, under R.C. 1109.15(D), there would have 
been no fiduciary duty. 
{¶ 23} Appellees, nonetheless, contend that this court should hold that a 
special, limited duty of confidentiality created between a prospective borrower 
and a bank gives rise to a fiduciary duty.  Appellees argue that such a holding 
would protect prospective borrowers in the event that the bank or its employees 
used the applicant’s confidential information for the bank’s or the employee’s 
benefit.  Appellees argue that prospective borrowers place a special trust in banks 
by providing banks with confidential information and as a result of this special 
trust, banks occupy a superior position in the relationship. 
{¶ 24} Essentially, appellees ask this court to impose a fiduciary duty on a 
bank whenever it receives confidential information from a prospective customer.  
We decline to do so. 
{¶ 25} Appellees confuse the duty of confidentiality with fiduciary duty.  
A breach of a duty of confidentiality is separate and distinct from a breach of 
fiduciary duty.  A bank’s committing to keep a customer’s information 
confidential does not create an obligation to act only in its customer’s best 
interest, even to its own detriment, which is what a fiduciary relationship requires.  
January Term, 2006 
9 
If we were to hold that a special trust (fiduciary duty) is created whenever a bank 
receives confidential information from a potential customer, then nearly every 
transaction with a bank would give rise to a fiduciary duty.  Such a holding would 
abrogate the holdings in Umbaugh and Blon. 
{¶ 26} A bank does not owe a fiduciary duty to a prospective borrower 
unless it is aware of a special repose or trust.  There was nothing special about 
appellees’ request for a loan that would have created a fiduciary relationship.  The 
requirement that Groob provide the terms of the deal for which the loan was 
sought was not unusual.  Although Groob and Bowie both testified that they 
placed a special trust or repose in KeyBank, they also testified extensively about 
their personal business experience.  During Groob and Bowie’s meeting with 
Sapinsley, the parties were dealing at arm’s length, looking out for their own best 
interests.  Sapinsley’s alleged statement that appellees had found “the goose that 
laid the golden egg” is not evidence of a special relationship.  There is also no 
indication that the loan was wrongfully denied.2  Nothing in the record indicates 
that the parties engaged in anything but arm’s-length negotiations. 
{¶ 27} We do not find persuasive either of the two non-Ohio cases relied 
upon by the appellate court to find a special duty of confidentiality.  In Pigg v. 
Robertson (Mo.App.1977), 549 S.W.2d 597, a Missouri court found that a 
confidential relationship existed when Joseph Pigg went to a bank for a loan to 
purchase certain real estate.  Pigg asked to speak to the bank president, with 
whom Pigg had previously dealt in obtaining a loan. A teller told Pigg that the 
president was out of town but that he could talk to Mr. Robertson, who was sitting 
at the president’s desk.  Unbeknownst to Pigg, Robertson was not an employee of 
the bank, but was there to conduct an audit.  Robertson told Pigg that his proposed 
                                                 
2.  Appellees did not offer to put any cash toward the purchase of Oldfield.  Witnesses from 
KeyBank and one witness employed by Fifth Third Bank testified that banks typically require that 
borrowers have some cash to put down on the business for which they are seeking financing.  
Sapinsley’s denial of the loan, therefore, was in the bank’s interests.   
SUPREME COURT OF OHIO 
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collateral was probably insufficient and that he should come back later in the 
week when the bank president returned.  That same day, Robertson purchased the 
property himself. 
{¶ 28} This case is distinguishable. In Pigg, the bank was not named as a 
defendant and Pigg’s claim was for breach of confidential relationship.  Also, 
Robertson’s position was superior to Pigg’s, for Pigg did not know that Robertson 
was not a bank employee.  Unlike Pigg, Groob and Bowie possessed equal 
bargaining power with KeyBank and were dealing with KeyBank at arm’s length. 
{¶ 29} In Djowharzadeh v. City Natl. Bank & Trust Co. of Norman 
(Okla.App.1982), 646 P.2d 616, a bank president’s wife and the wife of the 
bank’s senior vice-president, who was also chairman of the board of directors, 
purchased property that a loan applicant had disclosed an interest in purchasing.  
Both wives were stockholders of the bank and had learned about the property 
from the loan officer who had rejected the application.  The appellate court 
overturned a summary judgment in favor of the bank, finding that material issues 
of fact existed.  The bank’s stockholders, officers, and directors benefited directly 
and indirectly from the transaction, the bank had no official policy for 
safeguarding customer information, and in fact, the bank’s policy required 
employees to inform bank insiders of prime investment opportunities.  None of 
those circumstances exists in this case. 
{¶ 30} We hold that when a bank and a prospective borrower are dealing 
at arm’s length, a fiduciary duty does not exist unless special circumstances exist.  
Because we have determined that KeyBank did not owe a fiduciary duty to 
appellees, the trial court properly granted a directed verdict in favor of KeyBank 
on appellees’ claim for breach of a fiduciary duty. 
Jury Instruction on Respondeat Superior 
{¶ 31} The appellate court determined that the trial court failed to 
properly instruct the jury on the issue of respondeat superior.  It held that a 
January Term, 2006 
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respondeat superior instruction must include language that an employer can be 
held liable even if the tort was committed outside the scope of her employment, if 
the employee was aided in accomplishing the tort by her employment.  KeyBank 
asks this court to reverse that decision and reinstate the jury’s verdict in its favor, 
arguing that the trial court’s instruction on respondeat superior was correct. 
{¶ 32} A trial court must give jury instructions that correctly and 
completely state the law.  Sharp v. Norfolk & W. Ry. Co. (1995), 72 Ohio St.3d 
307, 312, 649 N.E.2d 1219, citing Marshall v. Gibson (1985), 19 Ohio St.3d 10, 
12, 19 OBR 8, 482 N.E.2d 583.  An inadequate jury instruction that misleads the 
jury constitutes reversible error.  Id 
{¶ 33} The only claim against KeyBank that went to the jury was a claim 
for intentional interference with a business relationship, based on a theory of 
respondeat superior.  The trial court instructed the jury as follows: 
{¶ 34} “I want to talk to you [a] little bit about the responsibility of 
KeyBank.  If you find that plaintiffs have proved by a preponderance of the 
evidence that defendant Carol Sapinsley has wrongly interfered with a business 
relationship between plaintiffs and John Scheve you must then consider whether 
KeyBank is responsible for her conduct. 
{¶ 35} “You may find KeyBank responsible only if plaintiffs have proven 
by a preponderance of the evidence that the acts of Carol Sapinsley in wrongfully 
interfering with the business relationship between plaintiffs and Scheve was 
within her scope of employment with KeyBank. 
{¶ 36} “An employer is liable for damages caused by its employee while 
acting within the scope of employment.  The key elements for you to consider are: 
Carol Sapinsley was an employee of KeyBank; the acts that plaintiffs claim 
caused them damages was done by Carol Sapinsley within the scope of her 
employment; and her acts were a proximate or direct cause of plaintiffs’ damages. 
SUPREME COURT OF OHIO 
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{¶ 37} “A person is an employee of a corporation when the corporation 
has the right to control what the employee shall do and how she shall do it. 
{¶ 38} “An employer is not liable for damages to a third party caused by 
the act or acts of an employee performed intentionally and solely for the 
employee’s own purposes which in no way facilitate or promote the employer’s 
business. 
{¶ 39} “You may find the employer liable if you find by the greater 
weight of the evidence that the intentional act was done wholly or in part for the 
benefit of the employer and not solely for the employee’s own benefit.” 
{¶ 40} Appellees had proposed an instruction that included the following 
language: “If you find that Carol Sapinsley was not acting within the scope of her 
employment in turning down the loan to Jeff Groob and Lowell Bowie and 
buying Oldfield, you must consider whether she was aided in her wrongful 
interference by her status as a loan officer at KeyBank.  If you find she was aided 
in her wrongful interference by her status as a loan officer at KeyBank[,] then you 
must find for the Plaintiffs and against Defendant KeyBank.” 
{¶ 41} Appellees argue that the trial court’s instruction was erroneous 
because an employer can be liable for the intentional act of an employee even if 
the employee’s act does not facilitate or promote the employer’s business.  They 
contend that when an employee acts with apparent authority, the employer is 
liable under the doctrine of respondeat superior. 
{¶ 42} We hold that the instructions given by the trial court are a correct 
and complete statement of the law as it applies to this case.  “It is well-established 
that in order for an employer to be liable under the doctrine of respondeat 
superior, the tort of the employee must be committed within the scope of 
employment.  Moreover, where the tort is intentional, * * * the behavior giving 
rise to the tort must be ‘calculated to facilitate or promote the business for which 
the servant was employed * * *.’ ”  Byrd v. Faber (1991), 57 Ohio St.3d 56, 58, 
January Term, 2006 
13 
565 N.E.2d 584, quoting Little Miami RR. Co. v. Wetmore (1869), 19 Ohio St. 
110, 132.  Byrd also noted, “As we held in Vrabel v. Acri (1952), 156 Ohio St. 
467, 474, 46 O.O 387, 390, 103 N.E.2d 564, 568, ‘an intentional and wilful attack 
committed by an agent or employee, to vent his own spleen or malevolence 
against the injured person, is a clear departure from his employment and his 
principal or employer is not responsible therefore.’  See, also, Schulman v. 
Cleveland (1972), 30 Ohio St.2d 196, 59 O.O.2d 196, 283 N.E.2d 175.  In other 
words, an employer is not liable for independent self-serving acts of his 
employees which in no way facilitate or promote his business.”  Byrd, 57 Ohio 
St.3d at 59, 565 N.E.2d 584. 
{¶ 43} In this case, the jury determined that Sapinsley had intentionally 
interfered with Groob’s and Bowie’s business relations.  Thus, for the jury to find 
KeyBank liable for Sapinsley’s act, the jury would have to find that the act was 
calculated to facilitate or promote KeyBank’s business.  See Byrd. 
{¶ 44} The trial court’s jury instruction on respondeat superior adequately 
covered these principles.  The appellate court, however, determined that the jury 
instruction was insufficient because it did not incorporate an exception for “when 
the agent’s misconduct is not a result of unrelated intentional conduct—that is, 
when the agent’s position enables her to commit the tort.”  Groob, 155 Ohio 
App.3d 510, 2003-Ohio-6915, 801 N.E.2d 919, ¶ 32. 
{¶ 45} In defining this exception, the appellate court combined Sections 
261 and 219(2) of the Restatement of the Law 2d, Agency (1958).  Section 261 
provides, “A principal who puts a servant or other agent in a position which 
enables the agent, while apparently acting within his authority, to commit a fraud 
upon third persons is subject to liability to such third persons for the fraud.”  Id. at 
570. 
{¶ 46} Comment a to Section 261 states, “The principal is subject to 
liability under the rule stated in this Section although he is entirely innocent, has 
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received no benefit from the transaction, and, as stated in Section 262, although 
the agent acted solely for his own purposes.  Liability is based upon the fact that 
the agent’s position facilitates the consummation of the fraud, in that from the 
point of view of the third person the transaction seems regular on its face and the 
agent appears to be acting in the ordinary course of the business confided to him.” 
{¶ 47} Reliance on Section 261 is inappropriate, however, because under 
this Restatement section, the principal’s being liable is based on the agent’s 
commission of a fraud on a third party.  Fraud consists of “(a) a representation or, 
where there is a duty to disclose, concealment of a fact, (b) which is material to 
the transaction at hand, (c) made falsely, with knowledge of its falsity, or with 
such utter disregard and recklessness as to whether it is true or false that 
knowledge may be inferred, (d) with the intent of misleading another into relying 
upon it, (e) justifiable reliance upon the representation or concealment, and (f) a 
resulting injury proximately caused by the reliance.”  Gaines v. Preterm-
Cleveland Inc. (1987), 33 Ohio St.3d 54, 55, 514 N.E.2d 709.  Appellees did not 
allege that Sapinsley committed a fraud or misrepresented a fact to either 
appellees or Oldfield’s owner.  They did not allege that she wrongfully or 
fraudulently turned down appellees’ loan request.  Sapinsley’s tortious conduct 
was her using appellees’ information to take their business opportunity. 
{¶ 48} Section 219(2) of the Restatement provides, “A master is not 
subject to liability for the torts of his servants acting outside the scope of their 
employment, unless: 
{¶ 49} “(a) the master intended the conduct or the consequences, or 
{¶ 50} “(b) the master was negligent or reckless, or 
{¶ 51} “(c) the conduct violated a non-delegable duty of the master, or 
{¶ 52} “(d) the servant purported to act or to speak on behalf of the 
principal and there was reliance upon apparent authority, or he was aided in 
accomplishing the tort by the existence of the agency relation.” (Emphasis added.) 
January Term, 2006 
15 
{¶ 53} Comment e to Section 219 states, “Clause (d) includes primarily 
situations in which the principal’s liability is based upon conduct which is within 
the apparent authority of a servant, as where one purports to speak for his 
employer in defaming another or interfering with another’s business.”  Id. at 484-
485. 
{¶ 54} Employer liability under this section is premised on the 
employee’s act occurring outside the scope of employment.  This court has not 
adopted Section 219(2)(d),3 and we decline to do so here.  We have not previously 
determined that an employer can be found liable for the acts of its employee 
committed outside the scope of employment.4  Thus, we find that a jury 
instruction based on Restatement Section 219(2)(d) is inappropriate. 
{¶ 55} Appellees nonetheless argue that an instruction that Sapinsley was 
“aided in her wrongful interference by her status as a loan officer at KeyBank” 
was warranted under an implied- or apparent-authority analysis.  In Kerans v. 
Porter Paint Co. (1991), 61 Ohio St.3d 486, 491, 575 N.E.2d 428, we held that an 
employee who sexually harasses another employee over whom he has supervisory 
duties may be found to have been acting with apparent authority and, therefore, 
may be found to have been acting within the scope of employment. 
                                                 
3.  Although it mentioned Section 219(2)(d) of the Restatement in Osborne v. Lyles (1992), 63 
Ohio St.3d 326, 587 N.E.2d 825, Osborne did not adopt this Restatement section.  Section 
219(2)(d) was noted because a Michigan case that the court discussed had expressly relied on it. 
 
4.  In Kerans v. Porter Paint Co. (1991), 61 Ohio St.3d 486, 575 N.E.2d 428, Kerans sued her 
employer on a theory of respondeat superior after being sexually harassed by her supervisor.  This 
court found that there was a genuine issue of material fact as to whether the supervisor’s actions 
took place within the scope of his employment, and therefore it was not proper to grant summary 
judgment to the employer on Kerans’s claim.  Id. at 490-491, 575 N.E.2d 428.  Kerans further 
stated that “even if [the supervisor’s] activities took place outside the scope of his employment 
summary judgment against appellants’ claims would not be proper.”  Id. at 491, 575 N.E.2d 428.  
The basis for this statement was a Restatement section that imposes liability on employers if they 
are aware that an employee represents an unreasonable risk of bodily harm to others.  2 
Restatement of the Law 2d, Torts (1965) 125, Section 317.  Because this case does not involve 
any risk of bodily injury, Kerans is inapplicable. 
SUPREME COURT OF OHIO 
16 
{¶ 56} Under an apparent-authority analysis, the acts of the principal, 
rather than the agent, must be examined.  Master Consol. Corp. v. BancOhio Natl. 
Bank (1991), 61 Ohio St.3d 570, 576-577, 575 N.E.2d 817.  For the principal to 
be liable, the principal’s acts must be found to have clothed the agent with 
apparent authority.  Id.  There is no evidence that KeyBank represented to 
appellees that Sapinsley was authorized to use their information for purposes 
other than reviewing their loan request. 
{¶ 57} Thus, appellees’ proposed jury instruction that KeyBank is liable if 
“Sapinsley was aided in her wrongful interference by her status as a loan officer at 
KeyBank” was not supported by the evidence.  Also, the instruction implies that 
the jury could find KeyBank liable even if Sapinsley was not acting within the 
scope of her employment when she committed the tort.  We hold that the trial 
court’s instruction was a complete and accurate statement of Ohio law and 
reinstate the jury’s verdict in favor of KeyBank. 
Conclusion 
{¶ 58} We hold that, unless there are special circumstances, a bank does 
not have a fiduciary duty to a prospective borrower.  We also hold that an 
employer is not liable under a theory of respondeat superior unless its employee is 
acting within the scope of her employment when committing a tort—merely being 
aided by her employment status is not enough. 
{¶ 59} For the foregoing reasons, the judgment of the court of appeals is 
reversed, and the jury’s verdict in favor of KeyBank is reinstated. 
Judgment reversed. 
 
MOYER, C.J., O’CONNOR and O’DONNELL, JJ., concur. 
 
FARMER, PFEIFER and LUNDBERG STRATTON, JJ., dissent. 
 
SHEILA G. FARMER, J., of the Fifth Appellate District, sitting for RESNICK, 
J. 
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January Term, 2006 
17 
 
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.) Strock 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 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 
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18 
(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 
January Term, 2006 
19 
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 
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. 
{¶ 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. 
__________________ 
 
Waite, Schneider, Bayless & Chesley, Stanley M. Chesley, and Paul M. 
DeMarco; and Robert F. Croskery and Melinda E. Knisley, for appellees. 
SUPREME COURT OF OHIO 
20 
 
Thompson Hine, L.L.P., Williams C. Wilkinson, Brian J. Lamb, and 
Timothy H. Linville, for appellants. 
 
Kisor & Winkler, L.L.C., and John C. Deal; and Jeffrey D. Quayle, urging 
reversal for amicus curiae, Ohio Bankers League. 
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