Defendant bank appealed from a judgment of the Superior Court of San Mateo County (California), which awarded plaintiff law firm and new trustees damages for breach of contract. Plaintiffs cross-appealed from the judgment insofar because it failed to award them exemplary damages.
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The trust agreement covering plaintiff law firm’s pension plan provided that the trustee, defendant bank, would invest trust funds as directed by plaintiff law firm, and that defendant could resign if it was unwilling to comply with those directions. When plaintiff law firm instructed defendant to invest funds in an investment other than defendant’s common funds, defendant refused, resigned, and liquidated the investments of the trust at a loss. The court affirmed a judgment awarding plaintiff law firm and new trustees damages for breach of contract represented by the amount lost on the liquidation of trust investments. Defendant’s resignation and liquidation of trust assets because plaintiff law firm would not acquiesce in defendant’s insistence on investing trust funds in defendant’s common fund was in breach of an obligation of good faith and fair dealing implied in the trust agreement. The amount lost on liquidation of the trust assets was proximately caused by the breach. The judgment denying exemplary damages was reversed. Plaintiffs’ evidence was sufficient to require the trial court to make findings on their claim for exemplary damages for breach of fiduciary duties.
The judgment awarding plaintiff law firm and new trustees damages for breach of contract by defendant bank was affirmed. The evidence clearly showed that defendant breached the obligation of good faith and fair dealing implied in the trustee agreement. The judgment was reversed and the cause was remanded with directions that the trial court make findings on the claim seeking exemplary damages for breach of fiduciary.