Procedural Posture

Plaintiff sellers sought review of the decision of the Superior Court of Los Angeles County (California), which sustained a general demurrer as to plaintiffs’ claims for breach of contract, negligence, and breach of an implied covenant against defendants, a bank and its agents, in connection with defendant bank’s improper closing of an escrow account, and dismissed plaintiff’s action.

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Overview

Plaintiff sellers entered into an agreement with a couple for the sale of a restaurant. In furtherance of this sale, plaintiffs and the couple opened an escrow at defendant bank. Prior to the close of escrow, plaintiffs’ lawyer wrote a letter to defendant agent, who was acting on behalf of defendant bank, claiming that the written escrow instructions were in error. Defendant agent disregarded the letter and closed the escrow according to original instructions. Plaintiffs filed a suit against defendants, bank and its agent, alleging breach of contract, negligence, and breach of an implied covenant. The trial court dismissed the complaint after sustaining a general demurrer as to plaintiffs’ causes, but the appellate court reversed, holding that the failure of defendant bank to close the escrow despite having notice a possible error in the escrow could constitute a failure to exercise reasonable skill and ordinary diligence in the conduct of the escrow, and, thus, supported a negligence claim, presenting fact questions not resolvable a question of law on demurrer. Also, a reasonable construction of the written escrow instructions required defendant bank to at least delay closure.

Outcome

The appellate court reversed the trial court’s order dismissing plaintiff sellers’ action against defendants, a bank and its agents. Plaintiffs’ complaint stated a negligence claim regarding defendant bank’s improperly closure of an escrow, which raised fact issues not appropriate for a determination as a matter of law.