Opinion ID: 2075955
Heading Depth: 1
Heading Rank: 9

Heading: service charges imposed on dormant accounts

Text: The final category of funds in dispute consists of service charges imposed on dormant accounts held by Riggs from January 1, 1980 through April 1982 and the interest that would have accrued on these accounts but for the imposition of the service charges. The District contends that these charges were imposed in violation of the UPA, and that Riggs is required to report and deliver to the District a sum equivalent to the deducted charges and interest. Riggs contends that the District has failed to prove that its conduct contravened the Act. Section 42-206(e) provides that [n]o holder may impose ... any charges due to dormancy or inactivity, or cease payment of interest unless: (1) There is a valid enforceable contract between the holder and the owner of the property pursuant to which the holder may impose such charges or cease payment of interest; (2) The holder regularly imposes such charges or ceases accrual or payment of interest and does not regularly reverse or otherwise cancel such charges or retroactively pay interest with respect to such property; and (3) For property in excess of $10, the holder, no more than three months prior to the initial imposition of such charges or cessation of interest, gives written notice to the owner of the amount of such charges at the last known address of the owner that the charges will be imposed or that interest will cease. The dispute as to the service charges focuses on paragraphs (1) and (3) of Section 42-206(e). The District contends that there was no enforceable contract between Riggs and the owners of the respective accounts because the signature cards which Riggs characterizes as constituting contracts are inadequate. Specifically, the District claims that these signature cards contain no notice, or inadequate notice, of the service charges to be imposed, and that some of them provide no warning at all that the depositor has entered into a contract. Riggs responds that the signature cards constitute valid deposit agreements which conform to general banking practice and which have been held to be adequate in a number of other jurisdictions. The District also contends that Riggs did not provide the three months notice required by Section 42-206(e)(3) to the owners of dormant accounts. Riggs acknowledges that it did not provide such notice, but argues that the District has not established that any of the accounts contained funds in excess of ten dollars. Riggs says that the District has therefore failed to satisfy its burden of proof on this issue. The District responds that it was incumbent upon Riggs to establish that the accounts contained less than ten dollars.
The trial judge denied Riggs' motion for summary judgment with respect to the service charges and granted the District's motion. He expressed the view that if the signature cards were contracts of any kind, they were contracts of adhesion. He commented that the size of the print of the purported contractual language, and its positioning on the rear of a card containing a large space for a signature, were virtually calculated not to be read by a customer as a contract of agreement with a bank. He also observed that the charges were not specified in the purported contracts, and stated that he had the impression that these cards are invariably presented to customers not as contracts, but as devices for banks to maintain a record of the signatures of customers. The judge said that it would be up to the trier of fact to draw the appropriate inference as to how the contracts were presented, however, and that he could not decide this issue on summary judgment. The judge also found it to be clear beyond peradventure that Riggs had failed to comply with the three-month notice requirement as to any accounts containing in excess of ten dollars. He did not expressly rule on the question whether Riggs was required to prove that an account contained ten dollars or less or whether the District had the obligation to prove the opposite. By granting summary judgment to the District, however, the judge at least implicitly placed the burden on Riggs.
The District contends that in order to sustain the imposition of service charges, Riggs has the burden of establishing that it has complied with all three paragraphs of Section 42-206(e). Riggs and WABA respond that on the contrary, the District, like any plaintiff, has the burden of persuasion on this issue, and must prove its case. According to the District, Section 42-206(e) creates a general proscription against service charges, but provides for an exception to the general rule if the three conditions of Section 42-206(e) are met. That seems to us to be a correct appraisal of the structure of the section. The key words in the opening sentence are that no holder may impose ... any charges ... unless  [the enumerated conditions are met]. The primary meaning of the word unless is under any other circumstance than that: except on the condition that.  WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 2503 (1966) (emphasis added). The words that follow unless therefore constitute an exception to the general rule of Section 42-206(e). [28] In the enforcement of remedial statutes, it has been the practice to cast the burden of proving an exception to the general policy of the statute upon the person claiming it. Weeks v. Southern Bell Tel. & Tel. Co., 408 F.2d 228, 232 (5th Cir.1969) (prohibition against discrimination in employment); [29] Goodman v. District of Columbia Rental Hous. Comm'n., 573 A.2d 1293, 1297 (D.C.1990) (rent control). A proscription against relatively minor service charges on dormant bank accounts does not, standing alone, carry the remedial wallop of legislation designed to end invidious discrimination or to protect the supply of housing available to persons of limited means. Nevertheless, Section 42-206(e) is a part of the UPA, and the remedial character of the statute as a whole is not subject to dispute. The regulations promulgated pursuant to Section 42-238 provide that a holder who files an abandoned property report pursuant to the UPA is subject to the following requirements: If service charges have been deducted, a holder shall include or attach as part of the report the following: (a) The citation to the authority or copy of the form [or] contract authorizing the service charge(s); (b) The value or amount of each item of property before any service charge(s) were deducted; and (c) The amount of service charge(s) deducted from each item and the date(s) on which the service charge(s) were deducted. 9 DCMR § 3004.7 (1986). See also 9 DCMR § 3004.12 (1986). The regulation makes no specific allusion to the burden of proof. This reporting procedure requires, however, that the holder demonstrate through his report that he is not subject to a general prohibition which is otherwise controlling. Under the regulation, he must establish a basis for exemption from the presumptive ban, failing which no service charge may be imposed. In addition, the facts regarding Riggs' service charges are more likely to be within the knowledge of the [bank] than of the [government and] considerations of fairness argue for placement of the burden [of persuasion] on [the bank]. Green v. District of Columbia Dep't of Employment Servs., 499 A.2d 870, 876 (D.C.1985). This consideration should not be overemphasized, for expanded pretrial discovery has reduced its significance in allocating the burden of proof. E. CLEARY, McCORMICK ON EVIDENCE § 337, at 950 & n. 11 (3d ed. 1984). The availability of such discovery, however, although relevant, is not decisive. In Fitzgerald v. Wright, 155 N.J.Super. 494, 498, 382 A.2d 1162, 1165 (1978), the court recognized that the defendant in a no-fault case had some ability to ferret out [through discovery] the requisite data [as to whether the plaintiff's medical expenses had met the statutory no-fault threshold], but nevertheless allocated the burden of proof to the plaintiff because it was he who was privy to the knowledge and information required to determine whether the threshold has been met. In the present case, discovery procedures notwithstanding, Riggs is obviously in a better position than the government to understand and evaluate the meaning of its own records with respect to its practices regarding service charges. [30] Although perhaps none of the foregoing considerations would be sufficient, standing alone, to sustain a departure from the general rule that the burden of proof rests with the plaintiff, we conclude that the phrasing and structure of Section 42-206(e), the use of the word unless, the remedial character of the Act, the procedures under the implementing regulations, and Riggs' superior access to relevant data cumulatively sustain the District's position that Riggs must carry the burden of persuasion with respect to the service charge issue.
Having examined the signature cards on which Riggs relies for its claim that it complied with Section 42-206(a), we share the trial judge's misgivings in regard to the basic fairness of characterizing them as a contract in which the customer agreed to the imposition of service charges. As the District points out, brief at 38, a depositor given a signature card to sign for the purpose of preventing fraudulent transfers is not likely to be aware that the obverse side of the card contains terms and conditions of a contract. Nothing in the record demonstrates that the bank called these terms or conditions to depositors' attention at the time the account was opened. In light of concessions made by the District in the trial court, however, we think that Riggs must prevail on this issue. It is generally held that a binding contract between a bank and its depositors is created by a deposit agreement contained on a signature card. See, e.g., Bennett v. First Nat'l Bank, 443 F.2d 518, 520 (8th Cir.1971); Perdue v. Crocker Nat'l Bank, 38 Cal.3d 913, 919, 702 P.2d 503, 509, 216 Cal.Rptr. 345, 351 (1985), appeal dismissed 475 U.S. 1001, 106 S.Ct. 1170, 89 L.Ed.2d 290 (1986); In re Estate of Cilvik, 439 Pa. 522, 525, 267 A.2d 836, 838 & n. 2 (1970). Such a contract may be one of adhesion, and is therefore subject to judicial scrutiny for unconscionability. Perdue, supra, 38 Cal.3d at 922, 702 P.2d at 511-12, 216 Cal.Rptr. at 354. To establish unconscionability, however, the District must prove not only that one of the parties lacked a meaningful choice but also that the terms of the contract are unreasonably favorable to the other party. Williams v. Walker-Thomas Furniture Co., 121 U.S. App.D.C. 315, 319, 350 F.2d 445, 449 (1965); see also Perdue, supra, 38 Cal.3d at 924, 216 Cal.Rptr. at 354-55, 702 P.2d at 512-13. [31] In support of its motion for summary judgment on the service charge issue, Riggs set forth, and the District conceded as not in dispute, the following facts: Riggs' signature cards and the Rules and Regulations governing savings deposits at the bank have long carried a provision informing customers that the bank is authorized to impose service charges on small inactive accounts.       At the beginning of 1980, both the signature card in use for savings accounts and Section J of the Rules and Regulations governing savings deposits informed customers that the bank would impose a reasonable service charge ... on accounts with balances less than $50.00 which have been inactive for three years or more.       During the period 1980-82, the service charges on dormant accounts were imposed in March and September, and were shown as service charges on the quarterly statements mailed to each customer for whom the bank still had an address.       The signature cards used by Riggs on savings accounts conformed with generally accepted banking practices for the drafting of signature cards. The District filed no affidavits in the trial court by customers claiming to have been misled by the allegedly inadequate disclosure on the signature card and offered no proof that the charges were unreasonably high. Given the District's concession that Riggs' signature cards were consistent with generally accepted banking practices and the judicial consensus that such cards create a valid contract between the bank and the customer, we think that, for purposes of this litigation, Riggs has met its burden under Section 42-206(e)(1) of proving a valid and enforceable contract between holder and owner. We emphasize that we find the use of these cards troubling, and that it is the District's acceptance as undisputed of Riggs' basic allegations about them that has put Riggs over the top. A different result might well follow on a different record.
The District contends that it was incumbent upon Riggs to establish that each account as to which three months notice was not provided had a balance of less than ten dollars. Putting all of its eggs in the basket invisibly labelled the District has the burden of proof, Riggs offered no such evidence. The label turned out to be wrong, however, and under a sporting contest theory of justice, [32] that might perhaps end our consideration of the matter; litigants generally have to live with their counsel's tactical decisions. In the present case, however, there is strong evidence that many of the accounts had balances of less than ten dollars. Riggs explains that [e]ffective March 1, 1980 Riggs charged dormant accounts $8.00 semiannually in March and September. The record shows that the first imposition of such charges relevant here was on March 9, 1980. It yielded $37,945.70 from charges applied against 6,875 accounts. No fewer than 3,803 of these accounts were closed out as a result of the imposition of the $8.00 service charge in March 1980. This establishes that these accounts had total balances of $8.00 or less before the service charge was imposed. The remaining 3,072 accounts would have had balances of between $8.01 and $50.00 at the time the service charges were imposed. It is likely, however, that many of these totaled between $8.01 and $10.00 because, although 1,311 new dormant accounts were transferred to the dormant list by September 1980, when the second $8.00 charge was made, those charges yielded only $24,757.74. Imposition of the $8.00 service charge in September 1980 was sufficient to close out 2,295 of the 4,383 dormant accounts that were subject to service charges at that time. This pattern continued through April 1982 despite the addition of new dormant accounts. It thus appears that a vast majority of the $117,637.13 claimed by the District was derived from service charges on accounts of $10 or less at the time the charges were first imposed. Riggs brief at 43 (citations to record omitted). The trial judge granted the District's motion for summary judgment on the service charge issue. In District of Columbia v. Pierce Assocs., Inc., 527 A.2d 306, 312 (D.C.1987), this court articulated the applicable principles as follows: Summary judgment is permissible only when no genuine issue of material fact exists, after all inferences in the record are drawn against the moving party. Spellman v. American Security Bank, 504 A.2d 1119, 1122 (D.C.1986); Phenix-Georgetown v. Charles H. Thompkins Co., 477 A.2d 215, 221 (D.C.1984). See Super.Ct.Civ.R. 56(c). To be successful, the moving party has the burden of demonstrating the absence of any material factual issue. Spellman, supra, 504 A.2d at 1122. When reviewing a trial court's order granting summary judgment, this court must conduct an independent review of the record. Phenix-Georgetown, supra, 477 A.2d at 221. A material issue of fact is obviously presented as to whether any particular account against which a service charge was imposed contained more than ten dollars. Riggs did not prove that it did; the District was not required to, and did not, show the contrary. There can be little doubt that some accounts exceeded the ten-dollar threshold and that some did not. We are not prepared to treat as fatal Riggs' failure to submit proof, account by account, as to the balance in each one, where the result of our doing so would significantly distort reality. Assuming that it was a mistake on Riggs' part not to provide such a breakdown [o]ur Rules, like the Federal Rules of Civil Procedure, `reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive as to the outcome.' Goodman, supra, 573 A.2d at 1300 (quoting Conley v. Gibson, 355 U.S. 41, 48, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957)). Service charges on accounts containing in excess of ten dollars were unlawful. They must be identified, and Riggs' liability must be based on the charges imposed on those accounts and the accumulated interest on those charges. [33]