In Fletcher v. Whitaker, a brother withdrew $25,000 from a joint bank account while the owner of the funds (decedent) was still alive. No. 02-17-00138-CV, 2018 Tex. App. LEXIS 8329 (Tex. App.—Fort Worth October 11, 2018, no pet. history). The parties to the joint account were the decedent and his sister in law. The brother was the decedent’s agent under a power-of-attorney document and had the authority to do banking transactions. That relationship also meant that the brother owed fiduciary duties to the decedent. The decedent’s sister in law sued the brother for conversion of the funds he withdrew from the account. The trial court determined in a bench trial that the brother wrongfully exercised dominion and control over the money to the exclusion of, or inconsistent with, the sister in law’s rights. The brother appealed.
The court of appeals first discussed a conversion claim, which is the wrongful exercise of dominion and control over another’s property in denial of or inconsistent with one’s rights. The court mentioned that money is subject to conversion only when it can be identified as a specific chattel but not if it is an indebtedness that can be discharged by the payment of money. “To qualify as a specific chattel, the money must be (1) delivered for safekeeping, (2) intended to be kept segregated, (3) substantially in the form in which it is received or in an intact fund, and (4) not the subject of a title claim by its keeper.” Id. The brother, however, apparently did not raise an issue about whether the sister in law could assert a conversion claim due to the fact that she was only seeking money.
Rather, the brother contended that the evidence was insufficient to show that he unlawfully and without authorization assumed or exercised control over the sister in law’s property to the exclusion of, or inconsistent with, her rights as owner. He argued that the sister in law did not own the funds because the decedent was the sole source of them and the withdrawal was legal and authorized because the power of attorney allowed the brother to undertake banking transactions.
A bank employee testified that the sister in law was a joint owner and that each joint owner on the account had “full rights to access” the funds. The court concluded that this was some evidence that the sister in law had the right to possess the joint account’s funds. Regarding whether the brother unlawfully and without authorization assumed and exercised control over the funds to the exclusion of, or inconsistent with, the sister in law’s rights, the court noted that the brother admitted that when he withdrew the money, he knew (1) that the account was a joint account with right of survivorship, (2) that the sister in law had full access to the account, and (3) that she would own the funds when the decedent died. The brother further admitted that he used the power of attorney to withdraw the money to ensure that the sister in law did not get the money and that he deposited the check into his own checking account. There was no evidence that the brother had used the funds for the decedent’s care. The brother did not dispute that he breached a fiduciary duty by withdrawing the money and using it for his benefit. The court of appeals affirmed the trial court’s judgment and held the trial court could have reasonably concluded that when the brother withdrew the money from the joint account, the brother was not acting in the decedent’s interests but was using the power of attorney to wrongfully exercise dominion and control over the money to the exclusion of, or inconsistent with, the sister in law’s rights.
Interesting Note: The court of appeals’s opinion affirming the trial court’s judgment was based on the assumption that a party to a joint account had the authority to possess the funds in the account. This is only partially true. It is true that either party to a joint account has the authority to withdraw or encumber the account. Tex. Est. Code §113.251; In re Marriage of McNelly, No. 14-13-00281-CV, 2014 Tex. App. LEXIS 5193, 2014 WL 2039855 (Tex. App.—Houston [14th Dist.] May 15, 2014, pet. denied); McConathy v. McConathy, No. 05-95-01036-CV, 1997 Tex. App. LEXIS 1592 (Tex. App.—Dallas April 1, 1997, no writ) (not design. for pub.); Fain v. Texas Commerce Bank N.A., No. 05-95-01085, 1996 Tex. App. LEXIS 5860 (Tex. App.—Dallas December 4, 1996, writ denied). Therefore, a third party can rely on the fact that a party to an account has authority to dispose of the funds. Fain, 1996 Tex. App. LEXIS 5860. But, that does not answer the question: between the parties to the account, who owns the funds?
Joint accounts are considered “multiple-party accounts.” Tex. Est. Code §113.004. A “party” to such an account is defined as “a person who, by the terms of the account, has a present right, subject to request, to payment from a multiple-party account.” Id. at Tex. Est. Code §113.002. “During the lifetime of all parties to a joint account, the account belongs to the parties in proportion to the net contributions by each party to the sums on deposit unless there is clear and convincing evidence of a different intent.” Id.; see Bechem v. Reliant Energy Retail Servs., LLC, No. 14-13-00729-CV, 2014 Tex. App. LEXIS August 5, 2014 (Tex. App.—Houston [14th Dist.] August 5, 2014, no pet.). A party’s net contribution is “the sum of all deposits made to that account by or for him, less all withdrawals made by or for him which have not been paid to or applied to the use of any other party, plus a pro rata share of any interest or dividends included in the current balance.” Id.
For example, in Nipp v. Broumley, the case involved whether an estate or the son of the decedent owned funds that were in CDs that the son withdrew days before the decedent’s death. 285 S.W.3d 552 (Tex. App.—Waco 2009, no pet.). Walterine Broumley purchased three CDs. They were payable to her or Terry Broumley, her son. Eight days before her death, Terry cashed in all three CDs, worth about $76,000. Walterine Broumley’s daughter, Nipp, learned about the existence of the CDs while caring for her mother. After Nipp discovered that the CDs were not listed on the estate’s inventory, she filed suit seeking a declaration that the CDs were property of the estate and an order requiring Terry to reimburse the estate for their value. The trial court ruled for Terry after a bench trial. Nipp appealed. The court of appeals noted that it was undisputed that Mrs. Broumley was the sole source of the funds in the CDs, and therefore, she retained beneficial ownership of these funds at the time of the withdrawal unless Terry Broumley could prove that she gifted these funds to him. The court determined that there was not sufficient evidence to support a gift: the mother retained control over the funds until the date Terry withdrew them. Thus, the court concluded that no reasonable factfinder could have formed a firm belief or conviction that an immediate and unconditional divestiture of his mother’s ownership occurred on the occasion of their last conversation regarding her intentions about the CDs. Therefore, the court reversed the trial court’s judgment and rendered that the funds from the CDs were the property of the estate. Indeed, a party who withdraws money from a joint account without permission from the true owner may be criminally charged and convicted of theft. See Gurrola v. State, No. 08-01-00107-CR, 2003 Tex. App. LEXIS 8913 (Tex. App.—El Paso October 16, 2003, pet. ref’d) (court affirmed niece’s conviction for felony theft from withdrawing aunt’s funds from joint account).
So, regarding a bank’s liability to the account owners, it has the right to rely on a joint account holder’s right to withdraw money from the account. However, as between the parties to a joint account, those parties own the funds in the account according to their contributions to the account. So, if party A to a joint account withdraws funds that were deposited by Party B, without the Party B’s consent, Party A commits theft. In the case above, it was undisputed that the decedent contributed the funds in the account. While he was alive, the sister in law did not have a right to withdraw those funds for her own benefit without the consent of the decedent. So, there is a good argument that the trial court erred in finding that the brother converted funds owned by the decedent as against the sister in law. The claim of conversion would properly belong to the decedent’s estate because, at the time of the conversion, the decedent was the sole party who had right to possess his money.
Alternatively, this is a perfect example of why Texas needs a tortious interference with inheritance claim. The brother tortiously interfered with the sister in law’s right to obtain the decedent’s funds once the decedent died. Unfortunately, the Texas Supreme Court ruled that Texas does not recognize such a claim in any circumstance even if that leaves people who are damaged by others with no remedy.