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Factual Background:

The DeLaRosa Estate was opened in 1991, with Derrick DeLaRosa being the sole beneficiary thereof.  Nancy Coyner was appointed personal representative and conservator to the estate.  The Estate’s funds were deposited into an estate savings account with Farmers State Bank.  Acting with her power as personal representative and conservator, Ms. Coyner misappropriated larger sums of money from the estate: On January 28, 1995, Coyner withdrew $64,664.17 worth of estate funds and placed them in a joint account with Farmers Bank held by Ms. Coyner and her daughter; On January 31, 1995, Coyner used estate funds to open three custodial savings accounts in the amount of $10,000 each at Farmers Bank in the names of an for the benefit of her three grandchildren and withdrew $34,664.17 or $44,664.17 in cash from the Estate account; and in early 1995 and early 1996 Coyner wrote there checks, payable to the bank, drawn from an Estate Account held at a Roosevelt Bank in the amounts of $20,000, $9,000 and $10,000.  When Coyner passed away, a new personal representative and conservator was appointed who determined that the aforementioned transactions had been unauthorized.  The Estate filed suit against Farmers Bank in an attempt to recover the funds wrongfully appropriated.  The Circuit Court, Vernon County, Bickel J., granted summary judgment in favor of Farmer’s Bank.  The Estate appealed.

On Appeal:

A bank cannot be held liable for allowing a fiduciary to fraudulently misappropriate monies under their control unless the Bank has either actual knowledge of the fraudulent taking or acted in bad faith with respect to the misappropriation—knowledge of facts which create a mere suspicion of misappropriation is not sufficient.

Rationale:

The Uniform Fiduciaries Law, as adopted by Missouri, specifically acts to limit bank liability when a fidicuiary misappropriates funds.  RSMo. §§ 469.270 and 469.310 explicitly provide that a bank is not bound to inquire whether a fiduciary is committing a breach of his obligations when accepting or paying an instrument unless the bank has actual knowledge of some breach or with knowledge of such facts that his action in accepting or paying the instrument amounts to bad faith.  Further, mere negligence is insufficient to amount to “bad faith.”  Here, while the bank could have been alerted to the fraud through anti-fraud internal control reports and a forfeited interest report which listed a number of possible suspect transactions, these reports provided nothing more than mere suspicions of Ms. Coyner’s misappropriations.  The failure to take note of these suspicions did not constitute “bad faith” on the part of Farmer’s Bank, and therefore were mere negligent omissions which did not create a duty to investigate.  As a result, the Farmers Bank incurs no liability stemming from the bad acts of Ms. Coyner.  Thus, the trial court’s grant of summary judgment in Farmer’s favor was proper.  Judgment affirmed.