Bank Liable to Victimized Heirs For Participation in Plan

SEPTEMBER 16, 1996 VOLUME 4, NUMBER 11

Evelyn Gruber was an elderly widow, living in Florida. In 1992, she had executed a will leaving most of her $5 million estate to Estelle, who she viewed as her “real family” despite the fact that Estelle was a step-daughter. Evelyn’s mental status was deteriorating, and shortly after signing the will she came under the control of her and nephew.

Over the next two years, Evelyn’s sister and nephew engaged in what the trial court later called a “reprehensible conspiracy” to divert her estate into their own names and control. They took her to a lawyer of the nephew’s choosing and had her sign a power of attorney (giving the nephew authority over her estate) and, over the course of time, two new wills.

So far, Evelyn Gruber’s story is sadly commonplace. The distinguishing element of the story is the involvement of a local Florida bank in the scenario. After Ms. Gruber’s death, Estelle moved to invalidate the later wills and sought return of $1,325,000 taken from Evelyn by her nephew. Estelle also made a claim against Ms. Gruber’s bank, alleging that it had been involved in the conspiracy to transfer Ms. Gruber’s estate.

Estelle’s claim against the bank was based on two transactions. In the first, an officer of the bank had honored the disputed power of attorney and permitted Ms. Gruber’s nephew to withdraw large sums of money in his own name and also to purchase nearly a half-million dollars worth of securities using Ms. Gruber’s funds. In the second, a trust officer for the bank went with Ms. Gruber and her nephew to the lawyer’s office to act as a third witness to the will.

According to Estelle, both bank officers had been warned that Ms. Gruber was incompetent, and that she was subject to the undue influence of her nephew. Both officers became willing participants in the conspiracy, she argued, because the new will named the bank as co-Personal Representative of Ms. Gruber’s estate and co-Trustee of the trust established by that will.

After trial, the Florida Circuit Court found that Ms. Gruber had in fact been subjected to undue influence and invalidated the will. It also entered judgment against the nephew for funds taken from Ms. Gruber prior to her death. Neither result is terribly surprising, based on the facts as found by the court.

More surprisingly, the court entered judgment against the bank for $1,325,000 in loss, plus $208,000 of lost interest. It also imposed punitive damages of $4,500,000 against the bank.

This case has not yet reached the Florida Court of Appeals (where it is apparently headed). It is still a striking example of how liability can be imposed against not only the primary wrongdoers, but also those who do not act to prevent loss. Estate of Gruber, Feb 13, 1996.

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