Court Opinion

ID: 9741803
Source: CourtListenerOpinion
Date Created: 2023-08-26 21:02:23.404321+00
Date Added: 2024-06-11T11:58:14.362178
License: Public Domain

WOLLMAN, Chief Justice
(dissenting).
Appellant relies principally on the case of Skinner v. First National Bank & Trust Co., 61 S.D. 481, 249 N.W. 821, in support of his contention that the evidence presented a jury question on the issue of the bank’s liability for conversion. The holding in that case, however, has been largely vitiated by the adoption in 1943 of the Uniform Fiduciaries Act, SDCL 55-7-2 to 55-7-15. The purpose of the Act “was to facilitate banking transactions by relieving a depository, acting honestly, of the duty of inquiry as to the right of its depositors, even though fiduciaries, to check out their accounts.” Transport Trucking Co. v. First National *151Bank, 61 N.M. 320, 300 P.2d 476, 479. The Act relieves banks of their common law duty to inquire into the propriety of fiduciary transactions and permits them to indulge in the presumption that the fiduciary is acting lawfully and in accordance with his duties in withdrawing funds from the fiduciary account. General Insurance Co. of America v. Commerce Bank of St. Charles, Mo.App., 505 S.W.2d 454. In the words of the Nevada Supreme Court, “The Act was clearly meant to relax the standards of care owed by banks to principals and third parties when dealing with fiduciary accounts.” Guild v. First National Bank of Nevada, Nev., 553 P.2d 955, 958. See also Johnson v. Citizens National Bank of Decatur, 30 Ill.App.3d 1066, 334 N.E.2d 295; Sugarhouse Finance Co. v. Zions First National Bank, 21 Utah 2d 68, 440 P.2d 869; 5A Michie on Banks and Banking, p. 172 (1973).
SDCL 55-7-2(2) provides:
(2) “Fiduciary” includes a trustee under any trust, express, implied, resulting or constructive, executor, administrator, guardian, conservator, curator, receiver, trustee in bankruptcy, assignee for the benefit of creditors, partner, agent, officer of a corporation, public or private, public officer, or any other person acting in a fiduciary capacity for any person, trust or estate.
SDCL 55-7-4 provides:
A person who in good faith pays or transfers to a fiduciary any money or other property which the fiduciary as such is authorized to receive, is not responsible for the proper application thereof by the fiduciary; and any right or title acquired from the fiduciary in consideration of such payment or transfer is not invalid in consequence of a misapplication by the fiduciary.
SDCL 55-7-8 provides:
If a check is drawn upon the account of his principal in a bank by a fiduciary who is empowered to draw checks upon his principal’s account, the bank is authorized to pay such check without being liable to the principal, unless the bank pays the check with actual knowledge that the fiduciary is committing a breach of his obligation as fiduciary in drawing such check, or with knowledge of such facts that its action in paying the check amounts to bad faith. If, however, such a check is payable to the drawee bank and is delivered to it in payment of or as security for a personal debt of the fiduciary to it, the bank is liable to the principal if the fiduciary in fact commits a breach of its obligation as fiduciary in drawing or delivering the check.
I would hold that Patricia Streett was a fiduciary within the meaning of SDCL 55-7-2(2). She had signed a signature card for the Donald J. Smith Transportation account. One who is authorized to draw checks in the name of his employer is a fiduciary within the meaning of the Act. Johnson v. Citizens National Bank of Decatur, supra. Moreover, Smith knew that Ms. Streett had written checks on the account, - yet despite his claimed protest to Halverson he did not alert the bank of her alleged lack of authority to write checks. In addition, Ms. Streett had prepared invoices for Smith and had been certified by him as a proper person to sign the vehicle inspection report described above.
Although the Uniform Fiduciaries Act does not define the term “bad faith,” SDCL 55-7-3 states that “A thing is done ‘in good faith’ within the meaning of §§ 55-7-2 to 55-7-15, inclusive, when it is in fact done honestly, whether it be done negligently or not.” As the Utah Supreme Court stated in the Sugarhouse Finance Co. case, supra,
The statute does not define “bad faith.” However, it defines “good faith” as being done honestly, whether it is done negligently or not. “Bad faith” is the antithesis of good faith and has been defined in the cases to be when a thing is done dishonestly and not merely negligently. Davis v. Pennsylvania Co., etc., 337 Pa. 456, 12 A.2d 66 (1940). It is also defined as that which imports a dishonest purpose and implies wrongdoing or some motive of self-interest. National Casualty Co. v. *152Caswell & Co., 317 Ill.App. 66, 45 N.E.2d 698 (1943). 21 Utah 2d at 70, 440 P.2d at 870.
See also General Insurance Co. of America v. Commerce Bank of St. Charles, supra; Guild v. First National Bank of Nevada, supra; Griffin v. Town of Pine Bluffs, Wyo., 368 P.2d 132.
When measured against the definition of bad faith set forth in the above cited cases, it is clear that the bank’s conduct was not demonstrated by appellant’s evidence to have been motivated by dishonest purpose or motive of self-interest. True, as it ultimately developed, the bank benefited in the sense that the $29,728 deposit in the M & R Trucking account on November 21, 1974, was offset against the $23,000 worth of dishonored checks charged back against that account, but appellant’s evidence did not establish that Lee Viberg had knowledge at the time he assisted Ms. Streett with the transactions on November 21 that the two checks had been dishonored or that the M & R Trucking account was in fact in a badly overdrawn condition. Nor did appellant’s evidence establish that Mr. Lor-ang’s telephone call to Morgan Equipment was motivated by a desire to assist Ms. Streett in obtaining the $34,728 check for the purpose of wrongfully diverting into Halverson’s account money due Smith. Smith concedes on appeal that Halverson was entitled to $18,090 out of the $34,728 check. Ms. Streett was clothed with apparent authority to negotiate checks payable to Smith. She was authorized to draw checks on the Donald J. Smith Transportation account, and there is no evidence in the record to support a finding that the bank had actual knowledge that she was committing a breach of her obligation as fiduciary in drawing the check or that it had knowledge of such facts as to make it guilty of bad faith. Although the finger of suspicion can be pointed at the bank in the light of after-the-fact circumstances, when measured against the knowledge the evidence establishes that the bank had on November 21, 1974, appellant’s proof failed to present an issue of fact for the jury. Accordingly, I would affirm the judgment dismissing appellant’s complaint against the bank.