Monday, February 21, 2022
Mississippi Supreme Court: No Liability For Bank That Reasonably Relied On Apparent Authority Of Attorney Over Conservatorship
In Newsome v. Peoples Bancshares Inc., the Mississippi Supreme Court "affirmed the dismissal of claims against a bank in connection with a conservatorship because substantial evidence supported the findings that an attorney possessed apparent authority to authorize disbursements from the conservatorship account."
In 2010, Marilyn Newsome was appointed conservator of her daughter, Victoria Newsome, stemming from a medical malpractice claim. The Mississippi chancery court ordered that a portion of Victoria's settlement proceeds be deposited in a separate account for all costs related to constructing a special needs home for Victoria. The chancery court then placed McNulty (the attorney who petitioned to open the conservatorship) in charge of overseeing the construction.
Shortly after, Marilyn went to the Bank and set up the conservatorship account, which she designated herself as the sole authorized signor for the account. For the disbursements, McNulty drafted and filed the order, delivered it to the bank, and the Bank issued the cashier's check pursuant to the order—without Marilyn's signature. Marilyn later brought suit against the McNulty, the Bank, and others. Marilyn and McNulty ultimately settled, but Marilyn pursued her claim against the Bank.
The Mississippi chancery court found that "the Bank reasonably relied on McNulty's apparent authority to its detriment, and it dismissed Marilyn's claim against the bank.
The elements to determine the existence of apparent authority under Mississippi Law are as followed:
- acts or conduct by the principal indicating the agent's authority
- reasonably relied by a third party upon those acts or conduct; and
- detrimental change in position by the third party as a result of such reliance
The Mississippi Supreme Court ruled that McNulty "possessed apparent authority under Mississippi law to act on Marilyn's behalf were factually supported."
See Mississippi Supreme Court: No Liability For Bank That Reasonably Relied On Apparent Authority Of Attorney Over Conservatorship, Probate Stars, February 10, 2022.