The Law Firm of Fox and Fox v. Chase Bank - Case Brief
Case Number: B319265
Court: California Supreme Court
Date Filed: 2025‑09‑01
Holding
The court held that Chase Bank owed a duty of care to the Law Firm of Fox and Fox as an intended beneficiary of the probate‑court‑ordered blocked account, and that genuine issues of fact existed as to whether Chase breached that duty and whether the breach was the proximate cause of the Law Firm’s economic loss; consequently, the trial court’s grant of summary judgment in favor of Chase was reversed.
Narrative
Lead – In a decision that reshapes the contours of a bank’s liability to third‑party beneficiaries of probate‑court‑directed blocked accounts, the California Court of Appeal reversed a summary‑judgment ruling for Chase Bank, finding that the bank’s acceptance of a “blocked‑account” order created a special relationship obligating it to exercise reasonable care in disbursing estate funds. The ruling underscores that a bank’s traditional immunity from third‑party negligence claims does not extend to situations where statutory probate procedures expressly limit withdrawals to court‑issued orders.
Procedural backdrop – The Law Firm of Fox and Fox (the “Law Firm”) represented Jazzmen Brumfield, the appointed administrator of the estate of Lamont Brumfield. After the probate court ordered the sale of estate real‑property, it required that the net proceeds—$63,383.47—be deposited in a blocked account at Chase Bank, withdrawable only upon a signed court order. The Law Firm’s fee claim, totaling roughly $66,000, was also earmarked in the final probate order as a creditor of the estate. In January 2020 Brumfield, acting as sole signatory, withdrew the entire balance from the blocked account, later absconding with the funds. The Law Firm sued Chase for negligence, alleging the bank breached its duty by releasing the funds without a specific court order directing payment to the Law Firm.
Chase moved for summary judgment, arguing (1) it owed no duty to a non‑customer; (2) the economic‑loss rule barred recovery; (3) no fiduciary relationship existed; and (4) the bank had complied with the probate court’s final order. The trial court granted the motion, concluding that Chase had acted in accordance with the probate order and that no duty to the Law Firm existed. The Law Firm appealed; the appellate panel reversed, finding that the trial court erred in its duty analysis and in its handling of evidentiary objections.
Key facts –
- Blocked‑account order – On June 25 2018 the probate court entered an order (the “blocked‑account order”) directing that the sale proceeds be deposited in a blocked account at Chase, with withdrawals permitted only “on court order.”
- Acknowledgment – On November 7 2018 Chase’s attorney‑in‑fact signed Judicial Council Form MC‑356, certifying that “no withdrawal of principal or interest … will be permitted without a signed court order.”
- Final probate order – On December 20 2019 the court approved the final account, authorizing $16,000 statutory compensation to Brumfield, $16,000 statutory compensation, $44,151.25 extraordinary compensation, and $6,173.39 costs to the Law Firm, to be paid from the remaining blocked‑account balance of $47,383.47. The order also directed payment of child‑support claims and, if any funds remained, equal shares to Brumfield and the minor children.
- Bank’s actions – Between January 21‑23 2020 Brumfield withdrew the entire blocked‑account balance. Chase’s internal records show the withdrawals were processed by a transaction specialist, John M. Chiavacci, without a subsequent court order specifying amounts to be paid to the Law Firm.
- Disputed communications – The Law Firm’s declaration asserts that private‑client banker Sergio Chun agreed to withhold disbursements until both the Law Firm and Brumfield were present, whereas Chun’s declaration denies any such authority. The trial court did not resolve these conflicting statements.
Legal issues –
- Whether a duty of care existed – Does a bank that accepts a probate‑court‑directed blocked‑account order owe a duty of care to an intended third‑party beneficiary (the Law Firm) under California tort law?
- Whether the duty was breached – Assuming a duty, did Chase’s release of the entire balance to Brumfield constitute a breach of that duty?
- Whether the breach caused the Law Firm’s loss – Is there sufficient factual dispute to preclude summary judgment on causation, given that Brumfield’s unauthorized withdrawal may have been the intervening act?
- Whether the economic‑loss rule bars recovery – Does the plaintiff’s purely monetary loss fall within the “pure economic loss” exception when a special relationship exists?
Court’s analysis
Duty of care – The appellate court applied the “special‑relationship” framework first articulated in Biakanja v. Irving, 49 Cal.2d 647 (1958), and refined in Gas Leak Cases (7 Cal.5th 401). The court emphasized that a duty is a question of law, but its existence hinges on policy considerations captured in the Biakanja factors: (1) the extent to which the transaction was intended to affect the plaintiff; (2) foreseeability of harm; (3) certainty of injury; (4) closeness of the causal connection; (5) moral blame; and (6) public policy.
- Intent – The blocked‑account order and Chase’s acknowledgment expressly limited withdrawals to “court order.” The probate code ( §§ 10810, 10811, 11420) designates attorney fees as a priority claim, making the Law Firm a statutory “intended beneficiary” of the blocked‑account scheme.
- Foreseeability – It was foreseeable that allowing an unauthorized withdrawal by the sole signatory would deprive the Law Firm of its statutory fees, especially because the final order left the precise allocation of the remaining balance ambiguous.
- Certainty of injury – The record shows the Law Firm received no payment; the loss is undisputed.
- Causal proximity – The bank’s acceptance of the withdrawal request without a supplemental court order is the immediate antecedent to the loss.
- Moral blame – While the bank’s conduct was not motivated by malice, the court noted that the bank “relied on a mistaken interpretation” of the final order, satisfying the factor’s neutral stance.
- Policy – Imposing a duty incentivizes banks to enforce probate‑court safeguards, aligning with the longstanding statutory scheme (Probate Code § 9703(a)) that requires court‑controlled disbursement of estate assets.
Balancing these factors, the court concluded that a duty of care existed. The presence of a special relationship overrides the general rule that banks owe no duty to non‑customers, as recognized in Bullis v. Security Pac. Nat. Bank, 21 Cal.3d 801 (1978), and Sun ’n Sand, Inc. v. United California Bank, 21 Cal.3d 671 (1978), which permit limited duties when policy considerations demand it.
Breach – The appellate panel found genuine factual disputes as to whether Chase’s internal protocols required a court order specifying amounts payable to each creditor before any withdrawal. The bank’s own acknowledgment that “no withdrawal … will be permitted without a signed court order” suggests a higher standard than the trial court applied. Because the final probate order did not itself direct payment to Brumfield, the bank’s reliance on Brumfield’s signature card alone raises a triable issue of breach.
Causation – The court rejected Chase’s argument that Brumfield’s independent fraud broke the causal chain. Citing J’Aire Corp. v. Gregory, 24 Cal.3d 799 (1979), the court held that when a defendant’s negligent act creates the opportunity for a third party’s wrongdoing, the defendant remains a proximate cause. Here, Chase’s unauthorized release of the funds was the necessary condition for Brumfield’s misappropriation.
Economic‑loss rule – The court applied the “special‑relationship” exception to the economic‑loss rule, following Sheen v. Wells Fargo Bank, 12 Cal.5th 905 (2022). Because the Law Firm was an intended beneficiary, its purely monetary loss is recoverable in negligence, provided a duty exists— which the court affirmed.
Disposition – The appellate court reversed the trial court’s summary‑judgment grant and remanded for further proceedings consistent with its finding of duty, breach, and causation issues. The decision directs the lower court to conduct a trial on the merits of the negligence claim.
Implications – This opinion extends the reach of the Biakanja special‑relationship doctrine into the probate‑banking context, signaling that banks must treat blocked‑account orders as more than procedural formalities. Practitioners representing estate creditors should now scrutinize a bank’s acknowledgment forms and seek explicit confirmations that the bank will not release funds absent a detailed court order. Conversely, banks must revise internal controls to ensure that any withdrawal from a probate‑blocked account is predicated on a clear, court‑issued directive specifying each creditor’s share. The ruling also clarifies that the economic‑loss rule does not shield banks from liability when a statutory scheme creates a foreseeable, intended‑beneficiary relationship.
Unresolved questions – The opinion leaves open how courts will assess the “moral blame” factor when a bank’s breach stems from a misinterpretation of a probate order rather than overt negligence. Additionally, the decision does not address whether a bank’s internal compliance policies could constitute a defense under Financial Code § 1451, which limits a bank’s duty to monitor authorized withdrawals. Future litigation may need to reconcile these statutory provisions with the special‑relationship analysis articulated here.
Referenced Statutes and Doctrines
- Civil Code § 1714 – General negligence duty.
- Probate Code §§ 10810, 10811 – Statutory compensation for attorney services; extraordinary compensation.
- Probate Code § 11420(a)(1) – Priority of administration expenses (including attorney fees).
- Probate Code § 9703(a) – Court authority to order blocked accounts.
- Financial Code § 1451 – Limits on a bank’s duty to monitor withdrawals by authorized parties.
- Biakanja v. Irving, 49 Cal.2d 647 (1958) – Special‑relationship duty analysis.
- Gas Leak Cases, 7 Cal.5th 401 (2021) – Economic‑loss exception for intended beneficiaries.
- J’Aire Corp. v. Gregory, 24 Cal.3d 799 (1979) – Proximate cause when defendant’s negligence enables third‑party misconduct.
- Sheen v. Wells Fargo Bank, 12 Cal.5th 905 (2022) – Economic‑loss rule exception for intended beneficiaries.
- Bily v. Arthur Young & Co., 3 Cal.4th 370 (1992) – Limits on duty to non‑clients absent intended‑beneficiary status.
- Bullis v. Security Pac. Nat. Bank, 21 Cal.3d 801 (1978) – Bank’s duty of care to depositors and estates.
- Sun ’n Sand, Inc. v. United California Bank, 21 Cal.3d 671 (1978) – Narrow duty to inquire about suspicious large checks.
- Kurtz‑Ahlers, LLC v. Bank of America, 48 Cal.App.5th 952 (2020) – No implied duty to supervise account activity.
- Rowland v. Christian, 69 Cal.2d 108 (1968) – General factors for duty analysis (adopted in Biakanja).