## Facts

- Tillie A. Flinn executed a notarized durable power of attorney naming her nephew, James C. Flanders, and/or his wife, Martha E. Flanders, as attorneys-in-fact.
- Flinn held 12 certificates of deposit (CDs) at Capitol Federal with a total value of about $194,000.
- Martha presented the durable power of attorney, five CDs, and a letter stating Flinn wanted the five CDs cashed.
- Capitol Federal disbursed the proceeds by issuing five checks totaling $135,791.34 (net of early-withdrawal penalties); the checks did not indicate any representative capacity.
- Flinn was found dead later that day; the death certificate listed the time of death after the disbursement.
- The attorneys-in-fact spent the proceeds, and the estate could not recover the funds from them.
- The estate alleged Flinn was incompetent when she executed the power of attorney and that the attorneys-in-fact misappropriated the funds; it sued Capitol Federal for paying out the CDs.

## Issues

1. Whether, when presented with a facially valid durable power of attorney, a financial institution has a duty under the Kansas Uniform Durable Power of Attorney Act or common law to investigate the principal’s competency or the circumstances of the transaction.
2. Whether a financial institution must determine that the principal is alive (i.e., not deceased) before honoring an attorney-in-fact’s request to withdraw the principal’s funds.

## Decision

- The Kansas Supreme Court affirmed summary judgment for Capitol Federal.
- The court held that the Kansas Uniform Durable Power of Attorney Act did not impose a duty on the bank to investigate the principal’s competency or to inquire into transaction circumstances when the bank relied in good faith on a facially valid durable power of attorney.
- The court also held the bank had no duty to determine whether the principal was deceased before honoring the withdrawal request, absent actual knowledge of death.

## Legal Principles

- Under Kansas durable power of attorney statutes, a financial institution may rely on a facially valid durable power of attorney and is not required to investigate the principal’s competency or possible misconduct by the attorney-in-fact if the institution acts in good faith.
- A financial institution has no duty to verify the principal’s death status before honoring an attorney-in-fact’s request, absent actual knowledge that the principal has died.
- Common-law negligence principles do not create an investigatory duty that would expand or conflict with the statutory scheme governing durable powers of attorney.

## Conclusion

The court concluded that Capitol Federal was statutorily protected in honoring withdrawals based on a facially valid durable power of attorney and, without actual knowledge of the principal’s incapacity, revocation, or death, the bank had no legal duty to investigate competency, suspicious circumstances, or whether the principal was deceased.


Bank IV, Olathe v. Capitol Fed. Sav. & Loan Ass’n, 250 Kan. 541, 828 P.2d 355 (1992)