The U.S. Court of Appeals for the Fifth Circuit recently held that, although a bank had actual notice of an heir’s claim to her decedent father’s account funds, the bank’s compliance with the post-death affidavit provisions of California Probate § 13106(a) rendered the bank immune from liability for wrongful disbursement of the funds.

In any event, the Court also held, the decedent’s surviving spouse who withdrew the funds had a probate claim that was statutorily superior to the heir’s claim.

A copy of the opinion is available at:  Link to Opinion.

Plaintiff heir’s father died in a mountain climbing accident.  Plaintiff heir’s father had a will leaving the money he held in two bank accounts (“subject accounts”) to the plaintiff heir.

Plaintiff heir went to a Texas branch of the defendant bank and requested information on the decedent’s accounts.  Plaintiff heir was informed that she needed a copy of the decedent’s death certificate and will (“withdrawal requirements”).  Plaintiff heir informed the defendant bank that her step-mother may try to withdraw the funds, and to place a note in the records that she was claiming the funds in the subject accounts.

The defendant bank’s employee refused, but assured plaintiff heir that the funds could not be withdrawn without the withdrawal requirements and court intervention.  Subsequently, plaintiff heir returned with copies of the withdrawal requirements and was informed that her step-mother had emptied and closed the subject accounts from a California branch of the defendant bank.

Plaintiff heir sued the defendant bank in state court for negligence, promissory estoppel, and conversion.  The defendant bank removed to federal court.  The trial court granted summary judgment for the defendant bank under California Probate Code § 13106(a).  Plaintiff heir appealed, arguing that Texas state law governed rather than the law of California and there were genuine issues of material fact.

The Fifth Circuit first found that plaintiff heir had waived her objection on choice-of-law grounds at the trial court level as she never claimed that such rules required application of Texas law to California events.

Plaintiff heir also argued that her interactions with defendant bank’s Texas branch provided the bank with actual notice of her claims, and that the trial court improperly ignored disputed factual issues regarding this argument.

Applying California law, the Fifth Circuit held that there was no issue of material fact.  The Court noted that California Probate Code § 13106(a) discharged the defendant bank “from any further liability with respect to money or property” upon receipt of a duly executed affidavit under California Probate Code §§ 13100 – 13104.

The Fifth Circuit held that, under California Probate Code § 13106(a), the defendant bank could rely on the statutory affidavit and had “no duty to inquire into the truth of any statement in the affidavit or declaration.”

The Fifth Circuit also rejected plaintiff heir’s argument that Mautner v. Peralta, 215 Cal. App. 3d 796 (1989), attributed liability to the defendant bank because the defendant bank had actual notice of her claim.  The Court explained that Mautner created an exception to California Probate Code § 13106(a) when the holder of funds has actual notice of a superior statutory claim.  However, the Court distinguished Mautner and noted that the plaintiff heir did not probate her father’s will.

Thus, the Fifth Circuit held, plaintiff heir’s only possible statutory claim arose under California’s laws of intestate succession.  The Court explained that California’s intestate laws only gave the decedent’s heirs a share in the estate not passing to the spouse, and plaintiff heir’s claim was therefore inferior to the surviving spouse’s claim.

Accordingly, the Court found that the defendant bank’s actual notice of plaintiff heir’s claim was of no import as the California statutory scheme granted defendant bank immunity from any alleged wrongful disbursement of funds, and in any event the plaintiff heir’s actual notice argument failed.  The Fifth Circuit therefore affirmed the district court’s decision.