Maryland Court of Special Appeals Holds Bank Trustee Not Liable for Lead Paint Liability

From the summary of the court’s opinion:

“While they were young children, appellants lived from 2001 to 2002 at a property which allegedly contained lead paint. Appellants supposedly consumed lead paint at the property and contracted lead poisoning, causing them serious permanent injuries.

At the time that appellants lived at the property and were allegedly exposed to lead paint, Bank of New York Mellon (“BNYM”) served as the trustee of the Trust that owned the property (and numerous other properties and loans). The Trust was created when BNYM and other parties executed a Pooling and Servicing Agreement (“PSA”) which defined the roles and responsibilities of each of the parties to the Trust.

In April 2016, appellants filed an amended complaint against Bank of New York Mellon (“BNYM”), alleging BNYM’s negligence as the “owner” of the property pursuant to the Baltimore City Housing Code. BNYM moved for summary judgment, arguing that appellants had conflated BNYM in its individual capacity with BNYM in its trustee capacity. BNYM also argued that it was not an “owner” under the Housing Code and was therefore not personally liable to appellants for any injuries they sustained.

The circuit court granted BNYM’s motion for summary judgment on the basis that appellants had sued the wrong party, i.e., that appellants should have pursued their claim against BNYM as Trustee, not BNYM individually. The court then granted appellants’ request for leave to amend their amended complaint. Appellants amended their complaint, and BNYM moved to strike or dismiss the amended complaint. The court granted BNYM’s motion, essentially affirming the prior ruling that appellants had sued the wrong party. Appellants timely appealed.

Held: Judgment affirmed. There is a distinction between a party in its capacity as a trustee and that same party in its individual capacity. Although the Maryland Trust Act [Md. Code (1974, 2017 Repl. Vol.), § 14.5-908 of the Estates and Trusts Article] recognizes that a trustee may be held personally liable in tort, it does not address the circumstances that may give rise to such personal liability. The Restatement (Third) of Trusts, however, provides that a trustee may be held personally liable for claims sounding in tort “only if the trustee is personally at fault.” To be “personally at fault,” the trustee must have personally committed, inspired, or participated in the alleged torts in accordance with Allen v. Dackman, 413 Md. 132, 155 (2010).

Even assuming BNYM as Trustee were an “owner” of the property pursuant to the Baltimore City Housing Code, appellants failed to produce any facts tending to show that BNYM was personally at fault by personally committing or participating in negligence related to the lead paint. Contrarily, BNYM produced evidence showing that, pursuant to the PSA, its role as trustee was passive, and that it was “not empowered to manage or improve” the property. Instead, BNYM as Trustee was simply responsible for “safekeeping of cash and collateral, distribution of cash flows from the collateral, and relaying trust asset and performance information received from the servicer to the certificateholders.”

Because appellants failed to produce any facts showing that BNYM as Trustee was personally at fault, they could not maintain their action against BNYM for personal liability. Accordingly, the court correctly granted summary judgment in favor of BNYM.”

The full opinion is available here.