Caine v. NationsBank, N.A.

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

8
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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