Metropolitan News-Enterprise


Wednesday, July 14, 2010


Page 3


Bank Held Not Liable for Third Party Fraud on Elderly Customer


By a MetNews Staff Writer


A state law enacted to protect elderly Californians from financial abuse does not subject a bank to liability for negligently processing transactions for a septuagenarian customer who was being defrauded by a third party without the defendant’s knowledge, this district’s Court of Appeal has ruled.

Div. Four, in a June 28 opinion certified Monday for publication, said Bank of America had no duty to notify authorities of any deficiencies in Kaustubh K. Das’ ability to manage his own finances.

Das suffered one or more strokes in 2004 and died in 2008, following multiple organ failure. Following his death, his daughter Baishali Das alleged in her complaint, it was discovered that he had borrowed more than $100,000 to acquire a Georgia property that was later foreclosed upon, and that in an effort to recoup his losses, he became involved in lottery scams that cost him more than $300,000, which he transferred to other countries from his Bank of America accounts.

Baishali Das, who represented herself, alleged that if it had exercised reasonable diligence, the bank would have noticed that her father was in no condition to manage these large sums of money and would have notified authorities of the suspicious nature of the transactions.

Duty Alleged

She alleged that Bank of America had a duty under Welfare and Institutions Code Sec. 15630.1, part of the Financial Elder Abuse Reporting Act of 2005, to report “suspected financial abuse” it encountered “in connection with providing financial services with respect to an elder” to local law enforcement or adult protective services agencies.

A Los Angeles Superior Court judge, in sustaining the bank’s demurrer, ruled that the statute does not create negligence per se liability for failure to report under that section. Justice Nora Manella, writing for the Court of Appeal, agreed. 

Manella cited the section’s subdivision (g), which provides that violators are subject to civil penalties, that the penalties “shall be recovered only in a civil action brought against the financial institution by the Attorney General, district attorney, or county counsel,” that “[n]o action shall be brought under this section by any person other than the Attorney General, district attorney, or county counsel,” and that “[n]othing in the Financial Elder Abuse Reporting Act of 2005 shall be construed to limit, expand, or otherwise modify any civil liability or remedy that may exist under this or any other law.”

The quoted language, the justice wrote, “expressly negates any inference of legislative intent to enlarge the legal bases for a private civil action predicated on a bank’s failure to report suspected financial abuse.”

Argument Rejected

She rejected the plaintiff’s argument that Evidence Code Sec. 669, which codifies the rule of negligence per se, takes precedence over subdivision (g)’s ban on private enforcement. “...Evidence Code section 669 does not override subdivision (g),” Manella wrote.

Nor, she went on to say, can the plaintiff plead a claim for direct financial abuse under another section of the act that may allow for private enforcement, or for breach of fiduciary duty or general negligence.

While a bank may be liable to a depositor if it assists in a fraud or fails to act to protect the customer upon becoming aware of one, the justice said, nothing in the complaint alleges such culpability on Bank of America’s part. The mere allegation that the bank was aware of Kaustubh Das’s impaired mental state, and that employees “[w]ondered” about it as a result of his requesting hundreds of blank wire transfer forms, was insufficient, Manella concluded.

“In our view, these allegations do not establish tortious misconduct by respondent because they fail to state even an adequate basis for rescission of a contract or transaction under common law principles,” the jurist wrote. “The fact that a person suffers from a measure of mental incapacity does not, by itself, extinguish the person’s ability to participate in contractual relationships and transactions.”

Attorneys for the bank on appeal were Chaise R. Bivin, Eduardo Martorell and Jan T. Chilton of Severson & Werson.

The case is Das v. Bank of America, N.A., 10 S.O.S. 3948.


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