Is a bank liable for releasing funds in violation of instructions from a valid power of attorney?
Recently, the life long husband of an elderly lady took his properly executed Durable Power of Attorney to their long time bank branch, and explained that his Wife had been diagnosed with Alzheimer's and dementia and should no long be allowed to withdraw or transfer funds from their joint accounts. A copy of the POA- and the medical records confirming the diagnosis- were left with the bank officer. About two weeks later, the elderly wife walked into the bank branch, accompanied by a much younger male of a different race and ethnicity. She withdrew over $30,000 from accounts that were joint with her husband. The funds were released to the elderly woman, in cash, without any question or notice to the POA husband. When the husband found out the funds had been withdrawn- in violation of his directions to the bank officers he discovered that some unknown person in a cab came to the house while he was at work and took the woman to the bank to get the money. He has not been seen since. The Husband confronted the bank, and was told that the teller who had released the funds had been fired! However, the bank has made no efforts to repay the funds. Isn't the bank liable for the funds withdrawn?
Expert Answer
Violation by a bank of proper instructions from a lawfully appointed Power of Attorney may very well leave the bank liable for any losses caused by its actions. In this case, once the bank was properly notified by the husband that his wife had become legally incompetent to make bank transactions, the bank was obligated to put into its computer system a "red flag" of some sort that would prohibit the wife from making any withdrawals. Each bank has its own procedure for making sure that the instructions are followed.
In this case, it sounds like one or more of several things might have happened: (1) The bank officer who received the information from the husband failed to properly put the red flag information into the bank's computer system; (2) The teller did not properly follow procedures when the wife came in to make the withdrawal; or (3) The bank's procedures were properly followed but were not designed well enough to catch the problem. If any of these situations resulted in the withdrawal occurring, then the bank is likely to be liable for the loss.
There is another possibility, however, and one which the husband might encounter if he takes legal action against the bank. That is, the bank might claim that the terms of the Power of Attorney document the husband brought did not make clear enough that the wife was not to be allowed to make transactions. Or, the bank might claim that the medical records were not sufficient, by themselves, to put the Power of Attorney in effect. The bank might contend that more formal documents from the wife's treating physician -- something that not only confirms the diagnosis but also states clearly that because of the condition the wife is no longer legally competent -- were required before the bank could stop the wife's access to her account.
As you can tell, this kind of situation can become legally complicated even if it seems simple and straightforward. The husband certainly can make a claim against the bank on his own, in a simple letter setting out the situation, asking that the bank refund him the money. But odds are he'll have to get the help from a lawyer before the bank will refund the money.