## Facts

- Clara Sather, an elderly woman living with Charles O. Cook and his wife, signed documents in October 1933 directing a transfer of $4,155.68 to a bank account intended for her credit.
- The receiving bank credited the transfer to an account styled “Clara Sather by Charles O. Cook,” and Cook withdrew the entire balance, moved the funds into accounts in his and his wife’s names, and later transferred them to another bank.
- Sather died in November 1933, and Cook became executor of her estate.
- In probate, beneficiaries objected to Cook’s account for omitting the disputed funds; after a hearing, the probate court settled the account and expressly found that Sather had made a lifetime gift of the deposit to Cook.
- After Cook’s discharge, Helen Bernhard was appointed administratrix with the will annexed and sued the successor bank, alleging it wrongfully paid the funds to Cook without Sather’s authorization.
- The bank asserted that Sather approved payment to Cook and that the probate determination conclusively resolved ownership of the funds.
- The trial court entered judgment for the bank on res judicata/collateral estoppel grounds, and Bernhard appealed.

## Issues

1. Whether the probate court’s determination that Sather made a lifetime gift of the deposit to Cook decided an identical issue presented in the later action against the bank.
2. Whether the probate order settling the executor’s account was a final judgment on the merits for purposes of issue preclusion.
3. Whether Bernhard, as administratrix with the will annexed, was in privity with the probate objectors such that she was bound by the prior determination.
4. Whether a defendant who was not a party (and not in privity) to the earlier proceeding may assert collateral estoppel defensively against a plaintiff who was a party or privy to the prior adjudication (mutuality of estoppel).

## Decision

- The California Supreme Court affirmed the judgment for the bank.
- The Court held that the probate proceeding conclusively determined ownership of the funds by finding a valid lifetime gift from Sather to Cook.
- The Court held the probate order settling the account was a final judgment on the merits within the probate court’s jurisdiction.
- The Court held Bernhard, suing in a representative capacity, was in privity with the beneficiaries who litigated and lost the ownership issue in probate.
- The Court rejected a mutuality requirement for collateral estoppel and permitted the bank, a nonparty to probate, to invoke the probate finding defensively to bar relitigation.

## Legal Principles

- Issue preclusion applies when (1) the issue is identical to one decided previously, (2) the prior decision is final and on the merits, and (3) the party against whom preclusion is asserted was a party or in privity with a party to the prior adjudication.
- Mutuality is not required for defensive collateral estoppel; a nonparty to the earlier case may assert issue preclusion against a party (or privy) who had a full opportunity to litigate the issue.
- A representative litigant (such as an executor or administratrix) may be bound by prior adjudications involving the same interests and persons represented.
- When a probate court, acting within its jurisdiction, settles an account and determines ownership of disputed property, that determination can bar later litigation of the same ownership issue in a separate civil action.

## Conclusion

Because the probate court finally determined that Sather had gifted the deposit to Cook and the estate’s interests had already litigated that issue, Bernhard was barred from relitigating ownership, and the bank could invoke that determination defensively despite not being a party to the probate proceeding.


Bernhard v. Bank of Am. Nat’l Tr. & Sav. Ass’n, 19 Cal. 2d 807, 122 P.2d 892 (Cal. 1942)