Trusts and Estates

The Law Firm of Fox & Fox v. Chase Bank, N.A.

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Cite as B319265
Filed September 5, 2023
Second District, Div. Seven

By Golnaz Yazdchi
Sheppard Mullin Richter & Hampton LLP

Headnote:  Bank’s Duty of Care to Intended Beneficiary of Blocked Account

Summary:  Bank owed law firm a duty of care based on the special relationship it had with the law firm as an intended beneficiary of a court-ordered estate blocked account.

Jazzmen Brumfield (Brumfield) was the administrator of her father’s probate estate and was represented by the Law Firm of Fox and Fox (Law Firm).  During the course of the probate administration, the court confirmed the sale of estate real property and ordered that the proceeds be deposited into a blocked account at Chase Bank, N.A (Chase). The blocked account order specifically said that funds could be withdrawn only pursuant to court order.  Chase opened the blocked account, acknowledged receipt of the blocked account order, and certified that no withdrawal would be permitted without a court order.  Brumfield was the only authorized signatory on the account.  Upon conclusion of the probate administration, the court entered an order for final distribution, which authorized payment of statutory compensation to Brumfield, attorney’s fees and costs to Law Firm, and the balance of the funds remaining in the account to pay creditor’s claims and heirs.  Attorney at Law Firm and Brumfield then went to Chase and presented the order for final distribution, and attorney claimed that he was assured by the Chase representative that no funds would be paid without both Attorney and Brumfield being physically present.  Without Law Firm’s knowledge, Brumfield proceeded to withdraw the entirety of the funds from the blocked account and absconded with the funds.  Law Firm filed suit against Chase alleging negligence.  The trial court granted summary judgment in favor of Chase, finding that it did not owe a duty of care to Law Firm because Brumfield was the customer not Law Firm, and that there was no liability because Chase complied with the probate court order.  Law Firm appealed.

The appellate court reversed.  Chase owed a duty of care to Law Firm because it had a special relationship with Law Firm as an intended beneficiary of the blocked account order and acknowledgment, the purpose of which was to ensure that estate funds would be available for distribution to the estate’s intended beneficiaries.  Although banks generally do not have a duty to police customer accounts for suspicious activity, Chased owed the Law Firm a duty to act with reasonable care in allowing distributions pursuant to court order only.  The order for final distribution did not authorize Chase to distribute the balance of the blocked account to Brumfield.  Accordingly, there were triable issues of fact as to whether Chase breached its duty of care, and whether that breach caused harm to Law Firm.

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