New Jersey Trial Court Finds No Affirmative Cause Of Action Against Banks Under New Jersey Uniform Fiduciaries Law – Litigation, Mediation & Arbitration

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The New Jersey Trial Court finds no positive cause of action against banks under the New Jersey Uniform Trustees Act

July 26, 2021

Riker Danzig Scherer Hyland & Perretti

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A New Jersey court recently issued a summary judgment in favor of a national bank, finding that the New Jersey Uniform Fiduciaries Law (“UFL”) does not allow a positive cause of action against a bank and that the bank has no legal obligation to investigate alleged improper wire transfers under a power of attorney. See the estate of Ralph Sandor v. Wells Fargo Clearing Services et al., File number BER-C-54-21. In 2013, Ralph Sandor (the “Deceased”) opened a custody brokerage account with Wells Fargo and authorized the transfer of his accounts from another bank. Prior to opening the account, a Wells Fargo representative spoke to the testator by phone to confirm the transfer and validity of a 2013 power of attorney (the “POA”) authorizing the testator’s nephew to conduct business on the testator’s behalf. In November 2015 it should have been noted on the account of the testator that the testator was no longer able to make competent decisions himself. However, in July 2016, the testator completed a form to convert his brokerage account to a death-carryover account, with the testator’s nephew being the sole primary beneficiary. To ensure that such a change was the testator’s intention, a Wells Fargo representative consulted with the testator’s attorney, who confirmed. A month later, after the brokerage account was converted to a death account, the testator opened a new brokerage account with Wells Fargo and asked for the POA information to be reconciled with his new account. Wells Fargo said it processed the POA as a “full POA” according to Wells Fargo’s internal guidelines and linked the deceased’s nephew to the new account. Through the POA, the deceased’s nephew reportedly transferred hundreds of thousands of dollars to himself and others. Following the death of the deceased, the administrator of the deceased’s estate brought a lawsuit against Wells Fargo for negligence and violation of the Unified Trustees Act, alleging that Wells Fargo was responsible for improper transfers and, among other things, recovering funds from accounts. Wells Fargo then moved for a summary judgment.

The court granted Wells Fargo’s motion. First, it found that the Administrator’s complaint of violation of the UFL must be dismissed because the UFL failed to raise a positive plea against Wells Fargo. Rather, “the UFL offers a defense when a bank is sued for failing to observe the obligation of a trustee and for not acting.” The court then found that the Administrator’s negligence suit against Wells Fargo also failed for a number of reasons. First, the Court found that in New Jersey, a tort claim for damages does not arise from a contractual relationship, unless the infringing party has a separate statutory obligation. Here the relationship between the testator and Wells Fargo was based on a contract and Wells Fargo did not have a separate obligation to the testator. Next, the court found that even if the administrator were allowed to bring a negligence suit against Wells Fargo, the administrator would not be able to demonstrate the standard of due diligence and violation thereof. The Administrator relied solely on Wells Fargo’s internal policies which “‘stand alone … cannot demonstrate the applicable standard of care” “. The court also found that the administrator himself to the extent to which he was able to demonstrate the standard of due diligence and a breach of this, the administrator was still unable to overcome the liability umbrella created by the UFL. The court found that the UFL granted a bank limited immunity from claims, “‘… unless the bank was acting in bad faith or had actual knowledge of a fiduciary breach.'” There was no evidence of bad faith or factual knowledge here that the transfers were ultra vires. In particular, Wells Fargo was provided with a copy of the POA on which the transfers from the testator’s Wells Fargo account were based. The POA also expressly waived any liability to Wells Fargo and stated in a relevant part that the “[p]Arties can rely on my agent’s representations [the
nephew] in all matters relating to a power of attorney given to my agent, and no person who acts in reliance on the representations of my agent or the power of attorney given to my agent is liable to me or my estate if I give my agent permission, has no powers “In addition, the checks and transfers to be given to the deceased or his nephew were placed in accounts with their respective or common names. In the end, the court found that Wells Fargo had no actual knowledge of the nephew The testator allegedly violated his fiduciary duty to the testator, and since none of the third party transfers were originally intended for the testator or his nephew, “Wells Fargo was not legally required to investigate transfers that otherwise coincided with those of the vaccinated”. from the UFL. ” Accordingly, the court issued a summary judgment in favor of Wells Fargo and dismissed the claims unconditionally.

The content of this article is intended to provide general guidance on the subject. Expert advice should be sought regarding your specific circumstances.

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