Tuesday, April 22, 2014

FYI: Cal App Ct Upholds Dismissal of Elder Abuse Claims

Thursday, July 22, 2010

A California appellate court recently upheld the dismissal of allegations against a bank that had extended a mortgage loan to plaintiff's elderly and disabled father, and allowed plaintiff's father to make several fraudulent money transfers from his bank account, claiming: (1) negligence per se based on the bank's alleged failure to report under reporting requirements of elder abuse statues; (2) breach of fiduciary duty or negligence in connection with the loan and fund transfers; and (3) for financial abuse of an elder under elder abuse statutes .   

In this alleged elder abuse lawsuit, the father of the plaintiff had obtained a mortgage loan from the defendant bank after he was found to have a form of dementia.  Plaintiff's father also fell victim to various scams and transferred large amounts of money from accounts he held with the defendant bank.  Plaintiff brought this action against the bank, alleging that the mortgage loan was "predatory" and constituted financial abuse of an elder, and also claiming that, based on elder abuse statutes, her father suffered injury due to the bank's failure to report suspected financial abuse in connection with the fund transfers.  The trial court dismissed the complaint, and this appeal followed.

The appellate court affirmed the trial court's decision that plaintiff's claims predicated on elder abuse statutes failed as a matter of law.  The court first noted that changes made after the plaintiff's father's death to the section of the elder abuse statutes which governs mandatory reporting by banks and financial institutions (CA Welf. & Inst. Code s. 15630.1) were inapplicable to her claims.  The court further held that the plaintiff's complaint did not state a claim against defendant bank under section 15630.1. 
The court pointed to a subdivision of that section which bars civil actions under the section by private individuals,and further states that the section does not “limit, expand, or otherwise modify any civil liability or remedy that may exist under this or any other law."  The court held that this subdivision, by its plain language, precludes any expansion of tort liability, and rejected the plaintiff's suggestions that imposition of the reporting duty enlarged the bank's exposure to potential tort claims based on other theories, such as negligence per se. 

The court further held that the plaintiff did not state a claim for breach of fiduciary duty or negligence under common law principles applicable to banks, citing another California appellate opinion which held that "as a general rule, a financial institution owes no duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money." 
Additionally, the court noted that the relationship between a bank and its depositor is not fiduciary in character.  The court found that the complaint was properly dismissed because plaintiff failed to allege facts to suggest that the defendant undertook a special fiduciary duty to plaintiff's father, that the bank knew of the supposed fraud on her father, and also failed to allege an adequate basis for rescission of a contract.

Finally, the court held that the plaintiff did not state a claim for financial abuse of an elder under the elder abuse statutes, as she failed to allege that the bank acted in bad faith, or with a fraudulent intent and further failed to allege that the bank knew of the schemes that victimized her father.

Eric Tsai
McGinnis Wutscher Beiramee LLP
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