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Bank of America, N.A. v. Jericho Baptist Church Ministries, Inc.

United States District Court, D. Maryland

February 8, 2019

BANK OF AMERICA, N.A., Plaintiff,
v.
JERICHO BAPTIST CHURCH MINISTRIES, INC. et al., Defendants.

          MEMORANDUM OPINION

          PAULA XINIS UNITED STATES DISTRICT JUDGE

         Currently pending and ripe for resolution are the parties' cross-motions for summary judgment. ECF Nos. 188, 189. The issues have been fully briefed, and the Court held a hearing on February 5, 2019. For the reasons articulated below, the Court GRANTS in part and DENIES in part Counter-Defendant Bank of America's (“BOA”) motion and DENIES Counter-Plaintiff Jericho Baptist Church Ministries' (“Jericho D.C.”) motion.

         I. Background

         A. Procedural History

         This case originated as an interpleader action filed by BOA seeking Court determination of who rightfully owns the funds held in various BOA accounts. At the center of this case is the longstanding dispute over the control and governance of Jericho Baptist Church Ministries, Inc. (“the Church”), located in Landover, Prince George's County, Maryland. BOA asked this Court to determine which of two warring Church factions, Jericho D.C. or Jericho M.D., rightfully owned account funds held in the name of the Church. In the same action, Jericho D.C. filed three counterclaims against BOA for breach of contract, negligence and gross negligence. ECF Nos. 19, 48.

         As to the initial interpleader action, the Court determined that Jericho D.C. was the rightful owner of the BOA account funds. Applying principles of collateral estoppel, the Court held that the decision reached in George v. Jackson, No. 2013 CA 007115 B (D.C. Super. Ct. July 7, 2015), declaring Jericho D.C. the controlling Board as of 2009, compelled the same result with regard to the BOA bank accounts. As a result, Jericho D.C.'s counterclaims alleging BOA mishandling of the accounts necessitated resolution.

         Turning to the Counterclaims, the Court denied BOA's motion to dismiss and set a discovery schedule. ECF No. 108. While discovery has been protracted and fraught with difficulty, it has concluded. The parties' cross-motions for summary judgment have been briefed comprehensively and the Court held a hearing. Based on the record evidence, the following facts are undisputed unless otherwise noted.

         B. Factual Background

         Betty Peebles and her husband, Reverend James R. Peebles, incorporated the Church in 1962. ECF No. 188-3. After James Peebles' death in 1996, Betty Peebles assumed control over the Board governing the Church, referred to in this opinion as Jericho D.C. Peebles maintained such control uninterrupted until her death in 2010. ECF No. 188-4.

         In September and October of 2002, the Church opened two deposit accounts with BOA. In connection with those accounts, the Church granted Betty Peebles authority to enter into agreements with BOA, to “appoint and delegate” others to enter into agreements with the Bank, and to “take any other actions pursuant to such agreements in connection with said accounts that the officer or employee deems necessary.” ECF Nos. 188-7, 188-9. Betty Peebles, therefore, retained broad powers to transact business with BOA on behalf of Jericho D.C.

         On March 15, 2009, Trustees from Jericho D.C. executed Resolution I-09, which purportedly recognized the Church Board of Trustees to be Betty Peebles, Dorothy Williams, Gloria McClam-MacGruder, Denise Killen, Clarence Jackson, Jennie Jackson, Bruce Landsdowne, Norma Lewis, and Lashonda Terrell. ECF No. 188-23. This Resolution completely changed the composition of the controlling Board, most notably removing Joel Peebles as a Trustee. BOA, however, was unaware of Resolution I-09 until Denise Killen produced it to BOA in October 27, 2010, nearly 18 months after the resolution purported to take effect. ECF No. 189-8. Joel Peebles was equally in the dark. ECF No. 189-22.

         On October 19, 2009, Betty Peebles executed several documents which collectively overhauled the Church accounts with BOA. The first, entitled “Deposit Account Documentation Banking Resolution and Certificate of Incumbency, ” permitted Betty Peebles or Denise Killen (identified as Trustee/Secretary) “acting alone (a) to establish accounts” as well as to “operate and close such accounts” and to “designate persons to operate each such account.” ECF No. 188-10. The Certificate plainly states that it “will apply to all accounts you maintain with us.” Id. The second was an updated signature card that added Killen as a signatory. ECF No. 188-10 at 2. The signature card granted K illen “authority to operate an account, ” which included “authority to sign checks, and other items and to give us other instructions to withdraw funds; to endorse and deposit checks and other items payable to or belonging to you to the account; and to transact other administrative business related to the account, including closing the account.” Id. Betty Peebles also authorized Killen to be the “designated account signer” on all BO A accounts associated with the Church. ECF No. 188-20. These documents, in conjunction with the Deposit Agreement, formed the contract between BOA and Jericho DC. ECF No. 188-10.

         Prior to the execution of these documents, however, Joel Peebles was granted similar signatory authority on the Church operating account ending in #8458. ECF No. 188-18.[1] The parties vigorously disagree as to whether the documents executed in 2009 removed Joel Peebles as an authorized signatory for this account or simply added Denise K illen as an authorized signatory. Further, the testimony in this respect is less than clear. BOA Regional Executive, Patricia Brooks-Nobles, who was personally involved in the Jericho dispute, testified that she “did not see anything” in the BOA account documents “that deleted Joel Peebles as an authorized signatory for the Church operating account”; however, she also testified that the corporate resolution documents executed in 2009 “supersede[]” the prior signature card, and so it was “unnecessary” for the bank to do anything more to effectuate Joel Peebles' removal as a signatory. ECF No. 189-29 at 18, 39. Further, the 2009 signature card for the operating account, on its face, notes that Killen was added to the account, but nowhere does the card indicate Joel Peebles was “deleted, ” even though the form of the signature card provides for such notation. ECF No. 188-19 (Deposit Account Documentation Signature Card noting an “update” and “adding” Denise Killen as signatory).

         A year after the documents were executed, Betty Peebles died. On November 5, 2010, Joel Peebles wrote BOA expressing thanks for BOA's condolences for his mother's passing and discussing the Church's relationship with BOA. ECF No. 188-24. He further instructed BOA that “as the authorized representative of the governing body of the Jericho Baptist Church Ministries, Inc. I am the only person authorized to make financial transactions with your bank; that includes drafting checks, money transfers, etc.” Id. On November 9, 2010, Brooks-Nobles of BOA responded to Joel Peebles in writing, stating that because his assertions contradicted the operative account documents executed on October 9, 2009, the Bank required further documentation to confirm the switch of authority. ECF No. 188-25.

         On March 4, 2011, Joel Peebles responded to Brooks Nobles, first alerting her that he had just received her correspondence two days prior because “sadly your communication was intercepted.” ECF No. 188-26. Peebles also included for BOA's records “Resolution from the board of directors/trustees which names Joel Peebles as . . . the sole authorized signer for the Jericho Baptist Church Ministries, Inc.” and “the only person authorized to make financial transactions with the Bank, ” as well as Board meeting minutes and organizational documents confirming the same. Id. Curiously, this Board resolution was signed by the same individuals who signed Resolution I-09. Compare id., with ECF No. 189-8.

         Brooks-Nobles concedes that at this time she clearly recognized “that there was a conflict” regarding Church control. ECF No. 189-29 at 23 (acknowledging a draft email which documents a “sincere hope that the church will come to a resolution in the near future. It is not the desire of the bank to be placed in the middle of this division.”) (emphasis added). BOA had also received a flurry of corroborative correspondence that the two Church factions were embroiled in a series of legal disputes over Church control. BOA had received a subpoena for bank records (ECF No. 188-27); had been warned by attorneys for both the Board of Jericho D.C. and of Jericho M.D. that each regarded its own Board as in control of the funds held with BOA (ECF Nos. 189-12, -23); and BOA had begun internal discussions as to the status of pending litigation that BOA expected would only “get messier before it gets better.” ECF Nos. 189-17, 189-18. Joel Peebles also carefully laid out the status of such litigation by separate correspondence. ECF No. 189-22; see also ECF No. 189-23 (letter from Jericho D.C. attorney Timothy Maloney identifying two separate pending court cases concerning Church control and warning that BOA's continued disbursements to “Dorothy Williams, Denise Killen or anyone working on their behalf” may result in litigation against the Bank).

         On September 4, 2011, Jericho D.C. filed suit against BOA on almost identical grounds as those asserted in the current counterclaims pending before this Court. See Jericho Baptist Church Ministries, Inc. v. Bank of America, N.A., 8:11-cv-2618-AW (D. Md. 2011) (“2011 suit”). While the 2011 suit was pending, however, the Circuit Court for Prince George's County, Maryland declared Denise Killen and the other Jericho M.D. Board members to be the lawful Board governing the Church. ECF No. 188-28.[2] Jericho D.C., as a result, voluntarily dismissed the federal suit without prejudice to refile. Then, on September 19, 2012, the Court of Special Appeals of Maryland reversed the Prince George's County Circuit Court's grant of summary judgment and remanded for further proceedings, finding that ...


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