BANKS AND BANKING ‑- JOINT BANK ACCOUNTS ‑- SAVINGS AND LOAN ASSOCIATION
(1) If a joint savings and loan association invests its funds in promissory notes pursuant to RCW 33.24.150 and secures the notes by a pledge or assignment of a joint savings and loan account, it is necessary to have the signatures of all joint tenants on the note, and it is not sufficient that a single member sign as they are permitted to do for withdrawal.
(2) Assuming that a savings and loan association has only one signature on a note secured by a pledge of a joint account the members of which are husband and wife, the association's interest would be subject to the interest of the surviving tenant, and our community property law would not necessarily alter this conclusion.
(3) The conveyance or pledge of one of the parties to a joint account would not terminate the joint ownership with right of survivorship and convert it into a tenancy in common.
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January 30, 1957
Mr. R. W. Clingenpeel, Supervisor
Division of Savings and Loan
General Administration Building
Olympia, Washington Cite as: AGO 57-59 No. 10
Your letter of November 26, 1956, previously acknowledged requested the opinion of this office on certain questions which we paraphrase as follows:
If a savings and loan association invests its funds in promissory notes pursuant to RCW 33.24.150 and secures the notes by a pledge or assignment of a joint savings and loan account, is it necessary to have the signatures of all joint tenants on the note, or is it sufficient that a single member sign as they are permitted to do for a withdrawal?
Assuming that a savings and loan association has only one signature on a note secured by a pledge of a joint account, the members of which are husband and wife, what would its liability be in the event of the borrower's death and what effect would our community property law have in such event?
Would the conveyance or pledge of one of the parties to the joint account terminate the joint ownership with right of survivorship and convert it into a tenancy in common?
In answer to the first question, it is necessary that all joint tenants sign. With reference to the second question, the association's interest would be subject to the interest of the surviving tenants and our community property law would not necessarily alter this conclusion. We answer the third question in the negative.
The questions herein presented involve the power of right of a savings and loan association to act in accordance with RCW 33.24.150:
"An association may invest its funds in promissory notes secured by the pledge or assignment of the savings account of the borrowing member. Such a loan shall not exceed ninety percent of the [[Orig. Op. Page 2]] balance due to the member upon his savings account.
"It may invest its funds in loans upon the security of a savings account in any other savings and loan association doing business in this state, if the account is insured by a federal or state agency. Such a loan shall not exceed ninety percent of the amount of the account or ninety percent of the amount of the insurance thereon, whichever is the smaller."
When the account pledged or assigned is one created under the authority of RCW 33.20.030:
"Savings may be received by an association in the name of two or more members as joint tenants with right of survivorship. In such case, payment to either member discharges the association from liability upon the account and, upon the death of either of the joint tenants, the association shall be liable only to the survivor, or survivors."
The primary incident of joint tenancy, to-wit: Right of survivorship, was abolished in Washington by RCW 11.04.070 (1953 Supp.), except in three instances, one of which is where the right of survivorship has been revived by a specific statute, such as RCW 33.20.030.
The effect of RCW 11.04.070 (1953 Supp.) was to make all purported joint tenancies, tenancies in common, unless they were established is accord with one of the three excepted manners.
The contract by which two or more depositors establish a joint account with a savings and loan association is essentially as follows:
"I hereby apply for membership in the TACOMA SAVINGS & LOAN ASSOCIATION of Tacoma, Washington, and agree to the articles of Incorporation and bylaws, or any amendments thereto of said Association.
"If there are 2 or more signatures to this account we agree that it is a joint account, and owned by us as joint tenants, with the right of survivorship and not as tenants in common, and to be withdrawn in whole or in part by either one of us, so that the death or disability of either one shall not effect the right of the other to withdraw the entire amount, and the Association is authorized to permit withdrawals in accordance with this agreement."
Both RCW 33.20.030 and the savings and loan contract allow the association to pay any part or all of the account to a single joint depositor. This unqualified right of one joint depositor to withdraw all of the account is contrary to the common law principles of joint tenancy and in effect creates a joint tenancy somewhat [[Orig. Op. Page 3]] analogous to a common law joint tenancy. This position was well stated inMarble v. Jackson, a Massachusetts case, 139 N.E. 442, and adopted inHolohan v. Melville, 41 Wn. (2d) 380 at 395:
". . . By the express terms of these five deposits, either the husband or the wife had the right, during the lifetime of both, to withdraw any part or the whole of the fund on his or her single receipt or order, and thereby terminate the tenancy without the consent of the other, although both were living. This right violates the essential character of a joint tenancy or an estate by the entirety. The estate created by these deposits was at most analogous to a joint tenancy, and was not a joint tenancy in the accurate meaning of those words. . . ."
Our court, to our knowledge, has never ruled upon the subject of assignment and pledging of joint deposits as security, and in view of the interpretation given joint accounts in the Marble case and adopted by our court in theHolohan case,s upra, we believe it would be presumptuous and hazardous for this office to answer the aforementioned questions strictly in the light of common law rules regarding pledges and assignments by one member of a joint tenancy. (For the application of common law joint tenancy rules to pledges of joint accounts, seeIn Re Hoffman's Estate, 25 N.Y.S. (2d) 339.)
The contract entered into by the joint depositors and the association,supra, established first, a joint account, secondly, the right of survivorship, and thirdly, grants each the right of unlimited withdrawal. The last phrase provides:
". . . and the Association is authorized to permit withdrawals in accordance with this agreement." (Emphasis supplied.)
By the specific wording of the contract the joint depositors and the association agree that withdrawals may be made from the account in whole or in part. The agreement refers only to withdrawals and does not mention pledges and assignments, If the agreements were intended to include the right to assign and pledge as well as withdrawal funds, such provisions should have been specifically stated therein.
This question of the right of one depositor of a joint savings and loan account to assign the account was treated in Schwartz v. Sandusky County Savings & Loan Co., 30 N.E. (2d) 556, and it was stated in the syllabus by the court:
"A joint running stock account in a mutual savings and loan company, definitely limited to two named persons or the survivor, is not subject to assignment by one of such joint owners, in the absence of language in the contract granting such right, expressly or by implication."
[[Orig. Op. Page 4]]
In the body of the opinion the court further stated:
"The stipulation states that the account was a joint and survivorship account, but it nowhere appears to have granted any right of assignment by either joint depositor to any third person, nor to have carried any language which would impliedly grant such a right. The contract was created by appellant, according to the evidence, for the benefit of herself and her husband, Charles L. Schwartz, and for the survivor of those two persons and no one else. . . ."
The contract under consideration is essentially the same as the one considered in theSchwartz case, supra. It is the position of this office that the holding in the Schwartz case is sound and controls our determination of the first question. Therefore, it is our opinion that one joint depositor of a savings and loan account is limited to making withdrawals from the account and may not assign or pledge the funds of said account as security upon a note. It would be necessary to secure the signatures of all joint depositors in order for the association to obtain a valid pledge or assignment of the account.
With the exception of the community portion of the second question presented for our consideration, the court in the Schwartz case posed and determined essentially the same question as follows:
"Suppose, on the presentation of the passbook and the assignment from Charles L. Schwartz [assignor and joint depositor of the account], the loan company had paid the money to Wm. M. Schwartz [third party assignee of the account], and suppose Charles L. Schwartz [Assignor and joint depositor of the account] should die today, leaving Margaret F. Schwartz [joint depositor] as survivor in the joint account, where would the loan company stand? What would prevent Margaret F. Schwartz, under the contract of deposit, from claiming, as survivor, the balance of the account.
The court in the Schwartz case did not elaborate on this question or cite authority for its conclusion. However, considering the conclusion reached by the court in the aforementioned query in light of its holding that a joint depositor lacked authority to assign the funds in the account, the court must necessarily have reasoned that the purported assignment was void and transferred no interest in the account to the assignee.
The association in the second question would be in the position of the assignee in theSchwartz case by acting in accordance with RCW 33.24.150. Following the conclusion of the court in the Schwartz case, we conclude that the association in the second question, as [[Orig. Op. Page 5]] assignee or pledgee, would be subject to the interest of the surviving joint depositor, namely, his or her right to the entire account as the surviving joint depositor.
The fact that the joint depositors in the second question were husband and wife and the funds in the joint account were prior to deposit, community funds would not necessarily alter the conclusion heretofore reached. Community property and joint tenancy are two distinct legal doctrines governing the ownership of property. This question of the status of community property in a joint savings and loan account was treated by our court in Munson v. Haye 29 Wn. (2d) 733, 743, as follows:
"We agree with the New York courts that, when a deposit is made in the form prescribed by such a statute as Rem. Rev. Stat., § 3348 (3), a presumption arises that the interest of the depositors is that of joint tenants. And, on the authority ofNelson v. Olympia Fed. Sav. & loan Ass'n, 193 Wash. 222, 74 P. (2d) 1019, it might be said that a similar presumption arose when two or more persons jointly became members in a savings and loan association under Rem. Rev. Stat. (Sup.), § 3717-41 [now RCW 33.20.030, as amended]. (Both Nelson v. Olympia Fed. Sav. & Loan Ass'n, supra, andIn re Ivers' Estate, 4 Wn. (2d) 477, 104 P. (2d) 467, relied upon by appellant, deal with the right of survivorship. We are here concerned with the right of one member of a marital community to deprive the other of all right or interest in all or part of the savings and loan account while they are both alive.)
"The very strongest position that respondents can contend for is that when Mr. and Mrs. Munson 'jointly became members in an association,' a presumption arose, under the provisions of Rem. Rev. Stat. (Sup.), § 3717-41 [now RCW 33.20.030, as amended], that they were joint tenants. That presumption was met and destroyed when proof was presented that the funds deposited were community property. That fact being established, evidence that was clear, certain, and convincing was required to establish that Mr. and Mrs. Munson intended to change the status of community property by giving to either the right to appropriate all or any part of the account to his or her own use and to divest the other of all interest in the part so appropriated. In re [[Orig. Op. Page 6]] Slocum's Estate, 83 Wash. 158, 145 Pac. 204. The parties here signed nothing which indicated as intention to create a joint tenancy, and the statute relied upon makes no reference to joint tenancies.
"We see very little which could operate to raise a presumption of joint tenancy in this case; but we have preferred to meet the respondents' contention squarely and to say that, if there was such presumption, it ceased to exist as soon as evidence was introduced showing that the funds deposited were community property. There was no clear, certain, and convincing evidence that Mr. and Mrs. Munson intended to change the status of their community property by giving each of them the present right to appropriate all or any part of it to his or her own use and to divest the other of any right therein. . . ." (Emphasis supplied.)
The account agreement signed by the husband and the wife in theMunson case did not include any language indicating a joint deposit with the right of survivorship was intended. The account agreement herein set out clearly established that a joint deposit with right of survivorship was intended by the signers.
By virtue of such agreement we are of the opinion that it would constitute the clear, certain and convincing evidence required by theMunson case to show that a husband and wife so signing intended to change the status of their community property deposited in the joint account to the status of joint funds and designate themselves as joint depositors with right of survivorship.
Directing our attention to the third question, the common law rule is that joint tenants own the tenancy by the half and by the whole; each joint tenant is presumed to own a moiety of the joint tenancy and has a right to dispose of his one‑half interest in any manner he wishes, but has no power to dispose of the interest of his joint tenant. A disposal by a joint tenant of any portion of his moiety dissolves the joint tenancy and the joint tenancy is turned into a tenancy in common. Re McKelway, 116 N.E. 348, and Schouler, Law of Personal Property, § 163.
A common law joint tenancy stands upon four unities: Unity of title, possession, time and interest. Destruction of any one of the four unities transforms the joint tenancy into an ownership in common. Thus, when a joint tenant transfers any portion of his moiety in the joint tenancy to a third person, the unities of possession, title and interest are breached, resulting in the destruction of the joint tenancy. Schouler, Law of Personal [[Orig. Op. Page 7]] Property, § 160. But this rule regarding the transformation of a joint tenancy into a tenancy in common is based upon the principal that each joint tenant has the right to transfer all or any portion of his moiety to a third person.
In answer to the first question we determine that a joint depositor could not assign or pledge the joint account but was limited by contract with the association to withdrawal of funds in a joint account. Since there exists no right to pledge or assign by a joint depositor, any attempt to do so does not violate any of the four unities associated with a joint tenancy, and therefore the joint tenancy remains intact.
We hope this opinion will be of assistance to you.
Very truly yours,
JOHN J. O'CONNELL
Assistant Attorney General