Opinion ID: 1267568
Heading Depth: 1
Heading Rank: 2

Heading: The Bank's Liability.

Text: The issue of the Bank's liability is governed by the provisions of the Uniform Fiduciaries Act. In the instant case, NRS 162.090, covering the duty of a bank when a check is drawn upon the account of a principal by a fiduciary, is controlling with regard to Adrian's withdrawal of the $17,000 from West's account, and the issuance of the $37,000 cashier's check to Adrian. [1] With respect to the $14,000 deposit Adrian made in her own checking account and the subsequent cashing of checks on that deposit, NRS 162.100 governs the Bank's liability. [2] It is noted that Bank becomes liable in each instance if it receives the deposit or pays the check by the fiduciary with actual knowledge that the fiduciary is committing a breach of his obligation in making such deposit or in drawing such check or with knowledge of such facts that the Bank's action in receiving the deposit or paying the check amounts to bad faith. Guild contends that the Bank had actual knowledge that Adrian was appropriating funds of her principal, West, and that the Bank's actions in respect to West's account amounted to bad faith on the Bank's part. Guild theorizes that actual notice is established by virtue of the Bank's knowledge that the $17,000 check cashed by Adrian and the $37,000 cashier's check issued to her constituted trust moneys and, because the Bank was aware that Adrian had opened a personal checking account at the same Bank and simultaneously deposited a large amount of money therein, that Bank had to know that the money was being used for Adrian's personal use. This assertion is an allegation not supported by any direct evidence. Furthermore, under our statutory scheme, such an inference appears to be impermissible, since the Bank may, under NRS 162.090, supra, cash personal checks of the fiduciary on his principal's account and may, under NRS 162.100, permit such funds to be deposited in the fiduciary's personal account. It would defeat the purpose of the statutes to allow misconduct to be inferred from acts specifically permitted by the statutes. We turn to consider whether the facts mandate the conclusion that the Bank was acting in bad faith in permitting Adrian to withdraw funds from West's account and in allowing her to deposit the same into her personal account. The Uniform Fiduciaries Act does not define bad faith. It does, however, define good faith as an act done honestly, whether it be done negligently or not. NRS 162.020, subsection 2. [3] Courts, smitten with the notion of symmetry in the law, have concluded that bad faith, being the antonym of good faith, is an act done dishonestly. Colby v. Riggs Nat'l Bank, 67 App.D.C. 259, 92 F.2d 183 (1937); Rheinberger v. First Nat'l Bank, 276 Minn. 194, 150 N.W.2d 37 (1967); Davis v. Pennsylvania Co. for Ins. on Lives & Granting Annuities, 337 Pa. 456, 12 A.2d 66 (1940). Logic of this sort, however, is less satisfactory than examining the underlying purposes of the Act in order to ascertain what definition of bad faith best accords with the legislative intent regarding a bank's liability when it deals with wrongdoing trustees and mismanaged trust accounts. The underlying purpose of the Act was to facilitate the performance by fiduciaries of their obligations, rather than to favor any particular class of persons dealing with fiduciaries. 7 Uniform Laws Annotated 394 (West 1970). The Act was clearly meant to relax the standards of care owed by banks to principals and third parties when dealing with fiduciary accounts. Board of County Comm'rs v. First Nat'l Bank, 368 P.2d 132 (Wyo. 1962). Liability cannot be predicated on a showing of lack of due care, or negligence, because bad faith imports a moral connotation approximating purposeful or motivated conduct (misconduct). Cf. Davis, supra . There is no showing in the instant case that the Bank derived any benefit from Adrian's transactions, [4] actually knew or suspected that funds were being misappropriated, or deliberately or willfully closed its eyes or refused to investigate after having its suspicions aroused. [5] In the absence of one of such scienters or conscious purposeful misconduct, banks may not be held liable. Under the facts presented, we cannot rule as a matter of law in the instant case that the Bank is liable to Guild as West's executor. Therefore, the judgment is affirmed. GUNDERSON, C.J., and BATJER, ZENOFF and THOMPSON, JJ., concur.