Court of Appeal:
Bank Had Duty of Care to Law Firm in Distributing Funds
Under Probate Court Order, Lawyers Were to Be Paid Fees Out of Blocked Account; Bank Handed All Funds to Administrator Who Kept Them; Judge Erred, Opinion Says, in Granting Summary Judgment in Favor of Bank
By a MetNews Staff Writer
A Los Angeles Superior Court judge erred in granting summary judgment in favor of Chase Bank, N.A., in an action brought by a law firm which, under a probate court’s order, was to receive most of the funds in an account but, instead, the bank turned them over in their entirety to the decedent’s daughter who was to collect only $16,000, the Court of Appeal for this district held yesterday.
Justice Gail Ruderman Feuer of Div. Seven wrote the opinion. It reverses a judgment by Judge Maureen Duffy-Lewis.
Duffy-Lewis ruled on Jan. 13, 2022, that the bank had no duty to the law firm, Fox & Fox; the Court of Appeal yesterday held to the contrary.
On June 25, 2018, Los Angeles Superior Court Judge Daniel Juarez had signed an order confirming the sale of the estate of real property in Northridge. The order provides:
“The sum of $5,000.00 shall be withheld from the sale proceeds, in order to pay outstanding expenses o£ the Estate, and the remainder to be deposited into a blocked account.”
The account was opened at Chase on Oct. 31, with $63,383.47, the proceeds of the sale, placed in it. On Nov. 7, an authorized representative of Chase executed an acknowledgment of receipt of the court’s order and certified that there would be no withdrawal “without a signed court order under this case name and number, bearing the seal of this court.”
Los Angeles Superior Court Judge Paul Suzuki on Nov. 20, 2019, signed an order of final distribution, with Jazzmen Brumfield, daughter of the decedent, recording-artist manager Lamont Brumfield, to receive $16,000 for services as administrator, and the law firm of Fox & Fox to be awarded $66,324.64 for its fees and costs. Others were to receive funds if any were left.
Chase allowed the administrator to withdraw all moneys in the account which she retained. Fox & Fox sued the bank.
“Although banks do not generally have a duty to police customer accounts for suspicious activity,” Feuer wrote, “Chase owed the Law Firm, as an intended beneficiary of the blocked account order and acknowledgment, a duty to act with reasonable care in limiting distributions from the blocked account to those authorized by court order.”
“…Chase and the Law Firm had a special relationship because the Law Firm was an intended beneficiary of the blocked account order and acknowledgment, which limited distribution of estate funds.”
She noted that Probate Code §11420(a)(1) provides that “expenses of administration incurred that are reasonably related to the administration of that property by which obligations are secured shall be given priority” over secured debts.
“Accordingly, the blocked account order and acknowledgment, by preventing disbursement of the estate funds in the blocked account without a court order authorizing payment, were intended to affect the Law Firm, which had a priority right to those funds,” the justice said. “This factor therefore weighs strongly in favor of finding a duty of care.”
Fox & Fox, Feuer said, created a triable issue of fact as to whether Chase fulfilled its duty to use reasonable care.
The bank asserted that all it did, when final distribution was ordered, was to turn over the funds to the administrator, whose signature was the only one on the account, for distribution by her. Feuer responded:
“While possibly Brumfield’s signature would have been necessary to effectuate the release of funds to the Law Firm and other beneficiaries, that does not mean she could withdraw any funds from the blocked account without a court order directing Chase to release the funds to Brumfield. Further, [Probate Code] section 9704 provides that the bank, upon receipt of an order for distribution of money or personal property from an account, ‘may deliver the property directly to the distributees.’ And to the extent there was a lack of clarity in how the funds should have been distributed, Chase should have sought guidance from the court or required the Law Firm to obtain a more specific order.”
She declared that “because Chase failed to establish it owed no duty to the Law Firm, and the Law Firm created a triable issue of fact as to breach of duty and causation, we reverse the trial court’s order granting summary judgment.”
The case is Law Firm of Fox and Fox v. Chase Bank, 2023 S.O.S. 3291.
Frank O. Fox represented the husband-and-wife mid-Wilshire firm of Fox and Fox and Brett D. Watson of the Santa Monica firm of Cozen O’Connor acted for Chase.
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