Does a Bank Have a Duty to Respond? Silence as Consent, Fiduciary Duty and the UCC

The depositor is the bank’s creditor

Lawtopolis publishes this discussion for informational and educational purposes, and as an exercise of the freedoms of speech, press, assembly, belief and religion protected by the First Amendment. It sets out what each statute and decision says and what courts have done with it. It is not legal advice and does not recommend any course of action.

The relationship of bank and depositor is that of debtor and creditor, founded upon contract.

Bank of Marin v. England, 385 U.S. 99, 101 (1966)

The essay is right that a deposit makes the depositor a creditor and the bank a debtor. The bank owns the deposited funds and owes the customer the balance, so it can lend them out. The quotation often attributed to Bank of the United States v. Waggoner (1835), “A deposit is a loan to the bank,” does not appear in that opinion, which concerned usury.

Is a bank a fiduciary?

Kansas recognizes the general rule that the relationship between a bank and its depositor is that of creditor-debtor and not of a fiduciary.

Dugan v. First National Bank in Wichita, 227 Kan. 201, 207 (1980)

Courts across the country apply this general rule. A fiduciary duty can arise in special circumstances — when a bank acts as trustee or executor, or takes on a relationship of special trust and control. The fiduciary standard is then very high. In Meinhard v. Salmon, 249 N.Y. 458, 464 (1928), Judge Cardozo wrote: “A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.” The OCC rule cited in these essays, 12 C.F.R. § 9.9, requires national banks to audit those trust and estate activities; it does not apply to ordinary deposit accounts.

What the UCC sections say

• § 1-103(b): “the principles of law and equity, including … estoppel, fraud, misrepresentation, duress, coercion, mistake … supplement its provisions.” It does not mention fiduciary duties or a duty to answer letters.
• § 1-201(b)(20): “Good faith” means “honesty in fact and the observance of reasonable commercial standards of fair dealing.”
• § 1-308(a): a party that performs “with explicit reservation of rights” does not prejudice the rights reserved. It protects the person reserving rights; it does not create duties for the other side.
• §§ 2-204 and 2-206 govern contracts “for sale of goods.” Bank accounts are governed by Article 4 and the account agreement.
• § 3-502 defines dishonor of a negotiable instrument (a note, draft or check) that has been presented for payment. § 3-505(b) defines a “protest,” a notary’s certificate of dishonor. Neither applies to a letter or affidavit.
• § 9-509(a): a person may file a financing statement “only if” the debtor authorizes it, usually in a security agreement.

When silence is acceptance

Hobbs v. Massasoit Whip Co., 158 Mass. 194 (1893)

… silence on its part, coupled with a retention of the skins for an unreasonable time, might be found by the jury to warrant the plaintiff in assuming that they were accepted, and thus to amount to an acceptance.

Hobbs v. Massasoit Whip Co., 158 Mass. 194, 197 (1893) (Holmes, J.)

What the case was about: A seller had shipped eel skins to the buyer several times before, and the buyer had always paid. When the buyer kept a new shipment without objecting, a jury could find acceptance.

How it applies: Hobbs shows the narrow rule. Silence counts as acceptance where prior dealings or the keeping of a benefit make silence a reasonable sign of assent (Restatement (Second) of Contracts § 69). The essay’s other case, “Carmichael v. Lavengood, 158 N.E. 469,” could not be located in any reporter. The maxim “Qui tacet consentire videtur” (“he who is silent appears to consent”) is a maxim, not a statute.

How courts treat notices sent to banks and lenders

Federal courts have rejected the idea that a bank or lender admits anything by not answering an “affidavit of truth,” conditional acceptance or “certificate of non-response.”

• Bryant v. Washington Mutual Bank, 524 F. Supp. 2d 753, 762 (W.D. Va. 2007) — the UCC provisions do not suggest “that Defendants had any legal obligation to respond to Plaintiff’s affidavits at all.”
• McLaughlin v. CitiMortgage, Inc., 726 F. Supp. 2d 201, 208 (D. Conn. 2010) — “not even pro se parties are entitled to make up their own rules and insist that defendants follow them.”
• Young v. PNC Bank (N.D. Fla. 2018) — a suit claiming a bank employee’s “Received/Accepted” stamp paid off a mortgage was dismissed as frivolous.

How to check the silence as consent claim yourself

The best test of silence as consent is simple: look for a court that accepted it. We have not found one in the reported decisions. Next, read the actual law the claim points to. For example, check the statute, the UCC section or the constitutional text it cites. Then compare that text with what the claim says it means. For a real problem with a debt, a court case or a tax bill, a licensed attorney can explain your actual options. Our directory is a good place to start.

Sources and further reading

Official sources used on this page:

• law.cornell.edu
• law.cornell.edu
• law.cornell.edu
• static.case.law
• static.case.law

Related reading on Lawtopolis:

• Unrebutted Affidavits, Commercial Maxims and Discharge Bonds
• Contract Law and Consent: How Contracts Form and When They Bind
• "Accepted for Value," Bills of Exchange and Debt Discharge