Written by Michael S. Brophy, Esq.*, Courtney A. Sorensen, Esq.*, Craig S. Weinstein, Esq.*, and Sara Z. May, Esq.*
A FINANCIAL INSTITUTION OWES AN INTENDED BENEFICIARY A DUTY OF CARE BECAUSE THERE IS A SPECIAL RELATIONSHIP BETWEEN THE FINANCIAL INSTITUTION AND THE INTENDED BENEFICIARY
Law Firm of Fox and Fox v. Chase Bank, N.A. (2023) 95 Cal. App.5th 182
The Second District Court of Appeal held that a financial institution has a special relationship with an intended beneficiary of an account and therefore owes that intended beneficiary a duty of care.
A daughter was the administrator of her father's probate estate and hired a law firm to represent her in that capacity. During the course of administration, the court ordered proceeds from the sale of real property be placed in a blocked account with a financial institution. The order creating the blocked account specifically stated that funds could only be withdrawn pursuant to further court order. The daughter, as administrator, was the only authorized signatory on the account. At the conclusion of the administration, the court entered an order for final distribution, which authorized payment from the blocked account of statutory compensation to the administrator and statutory fees, extraordinary fees, and costs to her counsel. Without the law firm's knowledge, the administrator withdrew all of the funds from the blocked account and did not pay her counsel's fees. The law firm filed suit against the financial institution for negligence in allowing the administrator to withdraw all the funds, even though the order for final distribution only directed a portion of those funds to actually go to the administrator. The financial institution filed a motion for summary judgment, which the trial court granted. The trial court found that the financial institution did not owe the law firm a duty of care because the administrator, not the law firm, was the customer. The law firm appealed.
The Court of Appeal reversed. The Court of Appeal analyzed the six-factor special relationship test articulated in the California Supreme Court case of Biakanja v. Irving (1958) 49 Cal.2d 647, to determine that the financial institution owed a duty of care to the law firm because it had a special relationship with the law firm as an intended beneficiary of the blocked account. The purpose of the blocked account and subsequent order for final distribution was to ensure estate funds would be available for distribution to the estate's intended beneficiaries, which included the law firm. The order for final distribution did not authorize the financial institution to distribute the balance of the blocked account to the administrator, and the financial institution owed the law firm a duty to act with reasonable care in that regard. Thus, there were triable issues of fact as to whether the financial institution breached its duty of care, and whether that breach caused the law firm harm.
A PERSONAL REPRESENTATIVE MAY NOT APPEAR IN PROPRIA PERSONA FOR CLAIMS PURSUED ON BEHALF OF THE BENEFICIARIES OF THE ESTATE
Estate of Sanchez (2023) 95 Cal.App.5th 331
The Sixth District Court of Appeal held that a personal representative of a decedent's estate cannot proceed in propria persona in claims against third parties for the benefit of the estate's beneficiaries.
A daughter was appointed executor to administer her father's estate. In his will, the decedent confirmed his surviving spouse's interest in their community and quasi-community property, and bequeathed his separate property and his one-half interest in the community and quasi-community property to his children. On behalf of the estate, the daughter, as executor, filed a complaint in propria persona in the probate action against the surviving spouse for partition by sale of real property and other related causes of action. The surviving spouse filed a motion to strike the complaint on the grounds that the daughter, as the executor, could not appear in propria persona in that capacity. The surviving spouse further alleged the complaint should be determined in a civil action, not a probate action. The daughter opposed the motion to strike, arguing she had
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a right to file a partition action as a tenant in common and as an estate beneficiary, and that the law only precluded her from appearing in propria persona...
