Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 9

Bank's Duty of Care. Arnett Gertrude, a widow with no children, lived with her sister and her nephew Jack Scriber. When Gertrude was diagnosed with cancer, she added Scriber to her checking account as an authorized signatory and gave him power of attorney. Shortly before Gertrude died, Scriber wrote checks on the account to withdraw nearly all of the $600,000 in the account and transferred the funds into his account. After her death, the administrator of Gertrude's estate discovered the withdrawals. The administrator sued the bank for aiding Scriber in converting Gertrude's funds. The bank's defense was that Scriber had power of attorney over Gertrude's finances and had the power to write checks on the account, so the bank had to honor the checks that Scriber had written. The estate argued that the bank breached its duty to Gertrude to guard against such obvious misappropriation. The trial court held for the bank. Did the bank breach its duty to Gertrude? Discuss why or why not. [ Caudill v. Salyersville National Bank, S.W3d (Ky.App. 2010)]