In re Knox
Opinion of the Court
— Decree, insofar as appealed from, unanimously reversed, without costs, and petition dismissed as against respondent bank. Memorandum: Columbia Banking Federal Savings and Loan Association (Columbia) appeals from a judgment obtained by petitioner, the successor guardian of Robert Daniel Tyler, an infant. Paul E. Tyler, the infant’s father and former guardian, settled a negligence action on Robert’s behalf and received a. check payable to “Paul E. Tyler, Sr., guardian of property of Robert Daniel Tyler.” He indorsed the check and deposited it in his personal account with Columbia rather than in a trust account. Tyler subsequently used the funds to purchase an automobile and various household items. The Surrogate determined that Columbia was jointly and severally liable for misappropriation of the funds because its employees were negligent in failing to examine Tyler’s letters of guardianship, which dispensed with a bond providing that funds be deposited jointly with Columbia (SCPA 1708, subd 1). We find, to the contrary, that there is no basis for liability against Columbia. 11 When dealing with a fiduciary, a bank “is not bound to inquire whether the fiduciary is applying the fund to the purposes of the trust, unless the bank has some notice of threatened misappropriation, and, with that notice, aids the misappropriation” (Clarke v Public Nat. Bank & Trust Co., 259 NY 285,290). In the absence of such notice, the bank has a right to presume that the fiduciary will apply the funds to a proper purpose (Clarke v Public Nat. Bank & Trust Co., supra, p 289; Bischoffv
Case-law data current through December 31, 2025. Source: CourtListener bulk data.