Caine v. NationsBank

Present: 	All the Justices
SUSAN FREIER CAINE
v. 	Record No. 002615 	OPINION BY JUSTICE ELIZABETH B. LACY
September 14, 2001
NATIONSBANK, N.A.
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
F. Bruce Bach, Judge
In this appeal, we consider whether a financial
institution breached its statutory or contractual duties when
it allowed one party to a joint account to add unilaterally
another party to the account.
Because the trial court decided this case on demurrer, we
will state as true all material facts alleged in the motion
for judgment. 	Robinson v. Matt Mary Moran, Inc., 259 Va. 412,
414, 525 S.E.2d 559, 561 (2000). 	In May 1989, Dr. Andrew A.
Freier opened a joint checking account in his name and that of
his daughter, Susan Freier Caine, at Sovran Bank, N.A., the
predecessor to NationsBank, N.A. (the bank). 	The signature
card, signed by both parties, indicated that survivorship
rights attached to the account.
In 1998, when Dr. Freier's health was deteriorating, his
wife, Amy Kelly Freier, sought to be added to the account to
allow her to pay bills. 	Although told by a bank employee that
the signatures of all parties to the account would be
required, Mrs. Freier returned a new signature card to the

bank which identified Caine, Dr. Freier, and Mrs. Freier in
the title of the account, but contained the signatures of only
Dr. and Mrs. Freier.
Upon receipt of the new signature card, the bank's branch
manager visited Dr. Freier at his home to discuss the card and
concluded that Dr. Freier did not intend to remove Caine from
the account. 	The manager asked Dr. Freier to again sign the
signature card, which he did on January 14, 1998. 	The bank
determined the new signature card was sufficient to add Mrs.
Freier to the account. 	From January 2 through February 3,
1998, Mrs. Freier wrote thirty-five checks totaling
$100,181.13 on the account, including one check for $75,000.
This check was written, cashed, and deposited to her own
account on January 27, 1998, the day Dr. Freier died.
Caine filed a motion for judgment against the bank
seeking $100,181.13 plus interest, asserting that the bank
breached its contract with her when it recognized Mrs. Freier
as a party to the joint account.1 The trial court sustained
the bank's demurrer, holding that Code § 6.1-125.6 authorized
the "unilateral addition of a new owner to a multiple-party
account." 	On appeal, Caine asserts that neither Code § 6.1-
125.6 nor the joint account's contract terms authorized Dr.
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Freier to add Mrs. Freier to the account without Caine's
consent.
The trial court's decision was based on its construction
of Code § 6.1-125.6. 	That statute provides:
The provisions of § 6.1-125.5 as to rights of
survivorship are determined by the form of the
account at the death of a party. 	This form may be
altered by written order given by a party to the
financial institution to change the form of the
account or to stop or vary payment under the terms
of the account. 	The order or request must be signed
by a party, received by the financial institution
during the party's lifetime, and not countermanded
by other written order of the same party during his
lifetime.
Caine argues that, as applied to an existing joint account
with survivorship, the plain meaning of the phrase "the form
of the account" refers to whether the account is one with or
without survivorship rights. 	Thus, Caine asserts that the
ability to change "the form of the account" unilaterally
pursuant to Code § 6.1-125.6 is limited to changing the
survivorship rights attached to a joint account. 	We disagree.
Code § 6.1-125.5 sets out three categories of multiple-
party accounts – joint accounts, P.O.D. accounts, and trust
accounts – and details the specific survivorship rights of
each and the conditions under which such rights attach. 	Code
§ 6.1-125.6 states that the "form" of the account on the date
1 Caine's motion for judgment also contained an
alternative claim that was voluntarily dismissed with
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of a death of one of the parties is the operative "form" for
determining which of the survivorship rights established in
Code § 6.1-125.5 applies. 	The word "form" is not otherwise
defined, but in this context it refers to the type of
multiple-party account and is not limited to whether
survivorship rights attach to the account.2 Therefore, the
trial court was correct when it rejected Caine's position that
Code § 6.1-125.6 limits the "form" of the account "to the
characterization of an account as being with or without
survivorship provisions."
However, in determining the effect of Code § 6.1-125.6,
the trial court did not consider our decision in Jampol v.
Farmer, 259 Va. 53, 524 S.E.2d 436 (2000).3 In Jampol, we
considered whether certain P.O.D. accounts had been
effectively converted to non-P.O.D. accounts. 	We held that
the language of Code § 6.1-125.6 regarding written
notification of such a change in the form of the account
merely prescribed a permissive method that a party could use
to alter the form of the account. 	Id. at 58-59, 524 S.E.2d at
prejudice and is not at issue in this appeal.
2 We also note that rights of survivorship may be affected
by "clear and convincing evidence" of intent and such evidence
is not restricted to "the form" of the account. 	Code § 6.1-
125.5.
3 The trial court's holding was rendered less than one
month after the decision in Jampol and the case was not
discussed or cited by either the parties or the court.
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439. 	Thus, the language referring to a unilateral change in
the account form was not the source of that authority, but
rather one means of exercising such authority. 	Therefore, the
trial court's holding in this case that Code § 6.1-125.6
"authorizes the unilateral addition of a new owner and sets
forth the method by which this change must be made" is
incorrect.
Jampol is not dispositive of the issues in the instant
case, however. 	First, adding a party to an existing joint
account is not strictly a change in the "form" of the account.
Furthermore, in Jampol, there was no challenge to the ability
of the party to change the form of the accounts; the dispute
was between individuals claiming an interest in the proceeds
from the accounts at issue. 	Here, the claim is against the
financial institution for improperly accepting the change in
the form of the account, not against another individual
regarding competing claims to the proceeds of the account.
Therefore, the question remains: 	is a financial institution
liable to a party to a joint account for recognizing a third
party to the joint account added without the consent of all
parties to the account?
Resolution of this issue requires examination of
relevant statutory and contractual provisions. 	The contract
between the bank and the parties to the joint account in this
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case consists of the Retail Signature Card and the Rules and
Regulations Governing Retail Accounts. 	These documents do not
expressly address the addition of a party to an existing joint
account. 	However, the contract does provide that "[e]ach
owner appoints all other owners as his or her agent to
endorse, deposit, withdraw and conduct business for the
account." 	(Emphasis added). 	The bank argues that this agency
appointment is "broad in scope" and together with the Act
"must be construed to include the addition of a party to the
account." 	Conversely, Caine argues that the phrase "conduct
business for the account" refers only to "ministerial" and
"transactional" matters and does not extend to altering the
parties to the account.
The contract is subject to Chapter 2.1 of Title 6.1,
Multiple-Party Accounts, Code §§ 6.1-125.1 to 125.16 (the
Act), and thus cannot contravene the provisions of the Act.
Fleming v. Bank of Va., 231 Va. 299, 305, 343 S.E.2d 341, 344
(1986). 	Although the Act does not expressly provide the
method by which a party may be added to a joint account,
neither does the Act forbid a party to an account from
unilaterally adding another party to the account. 	Both the
Act and the contract afford the financial institution broad
protection from liability for carrying out the requests of a
party to a joint account relative to that account while also
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vesting a party to the joint account with extensive powers to
deal with the account without the concurrence of other parties
to the account. 	These dual provisions, broad authority to act
and protection of the financial institution, further the
policies underlying the purpose of the Act. 	See Barbara M.
Rose, Legislative Comment, Multiple-Party Accounts: 	Does
Virginia's New Law Correspond with the Expectations of the
Average Depositor?, 14 U. Rich. L. Rev. 851, 859-60
(1980) (stating that the Act protects financial institutions
and leaves litigation of disputes over the legitimacy of
actions taken to the parties to the account).
For example, the Act authorizes financial institutions to
pay all sums in a joint account on request of any party to the
account, regardless of the parties' beneficial ownership
interests in the account. 	Code §§ 6.1-125.9 to -125.10. 	In
the absence of written notice to the contrary, such payments
may be made without any resulting liability to the financial
institution. 	Code § 6.1-125.13. 	Similarly, Paragraph 7 of
the Rules and Regulations Governing Retail Accounts provides
that funds in the joint account may be withdrawn by any party
to the account and "will be a complete release of the Bank for
any payment so made."
Like the contract, the Act also imposes an agency
relationship on parties to a joint account. 	The Act provides
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that each party to an account acts as "agent in regard to the
ownership interest of the other party." 	Code § 6.1-125.15:1.
Although directed to a party's ownership interest in the
account, the Act's imposition of an agency appointment is
consistent with affording a party to such an account broad
powers over the account.
It is clear that under both the contract and the Act,
actions by a party to a joint account, whether taken
unilaterally or as an agent for another party to the account,
can significantly impact the rights of such other parties.
Thus, a contractual provision recognizing or authorizing the
unilateral addition of a party to a joint account directly or
through an agency relationship is consistent with the purposes
of the Act.
Considering the contractual agency provisions in the
context of the Act and the entire contract, we find no support
for limiting the authority granted to one party to "conduct
business for the account" on behalf of another party to
ministerial acts as Caine suggests. 	This provision is
sufficiently broad so as to include the ability of one party
to the account to act as the agent of other parties to the
account when adding a new party to the account.
Accordingly, we conclude that the bank did not breach its
contract with Caine in recognizing Mrs. Freier as a party to
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the joint account based on the signature card executed by Dr.
Freier on January 14, 1998. 	Therefore, for the reasons
expressed in this opinion, the judgment of the trial court
will be affirmed.
Affirmed.
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