Fleet Bank Connecticut, N.A. v. Carillo

691 A.2d 1068, 240 Conn. 343, 1997 Conn. LEXIS 78

• Court: Supreme Court of Connecticut
• Decided: April 15, 1997
• Docket: 15494
• Status: Published

Opinions

Opinion

PETERS, J.

The sole issue on this appeal is whether a judgment creditor may enforce a statutory right to a bank execution, pursuant to General Statutes § 52-367b,¹ against the entire balance of a joint bank account to which both a judgment debtor and his nondebtor spouse have contributed funds. The plaintiff, the Cadle Company, as assignee of a money judgment obtained by Fleet Bank Connecticut, N.A. (Fleet),² against Charles Carillo, filed a motion for a turnover order seeking to compel the Collinsville Savings Bank (Collinsville) to relinquish the proceeds of a bank account held jointly by Charles Carillo and his wife, Carol. Carol Carillo, after intervening as a defendant,³ opposed the motion. The trial court granted the motion over her opposition, and she appealed this judgment to the Appellate Court. We transferred the appeal to this court pursuant to Practice Book § 4023 and General Statutes § 51-199 (c) and now affirm the judgment of the trial court.

The facts are undisputed. In 1992, Fleet obtained a $58,077.20 money judgment against Charles Carillo. It subsequently assigned that judgment to the plaintiff. Pursuant to § 52-367b, which authorizes execution against a bank account held by a natural person, the plaintiff obtained a bank execution against a Collinsville bank account held jointly by Charles Carillo and the defendant. The joint account contained approximately $4500, of which the defendant allegedly contributed 70 percent and Charles Carillo allegedly contributed 30 percent.⁴ After the defendant warned Collinsville that she would hold it liable for releasing any of the funds in the account, Collinsville refused to comply with the plaintiff’s bank execution. To compel compliance, the plaintiff then filed a motion for a turnover order in the Superior Court. See General Statutes §§ 52-356b and 52-356c.

After successfully moving to intervene, the defendant filed an opposition to the plaintiffs motion. She contended that, because she was not the plaintiffs debtor, her co-ownership of the account shielded its proceeds, or at least those proceeds for which she claimed sole responsibility, from the plaintiffs execution. The trial court rejected this argument. It relied on Masotti v. Bristol Savings Bank, 43 Conn. Sup. 360, 653 A.2d 836 (1994), aff'd, 232 Conn. 172, 653 A.2d 179 (1995) (per curiam), and the authorities cited therein for the proposition that each coholder of a joint account may be considered an “owner” of the entire account for purposes of a third party creditor’s right to execute against that account in satisfaction of one coholder’s debt. The trial court concluded that Charles Carillo’s ownership rights in the entire account gave the plaintiff, as his creditor, a coextensive right to execute against the account funds in their entirety.

On appeal, the defendant challenges the trial court’s conclusion on three principal grounds. First, she contends that the court’s reliance on Masotti resulted in a misapplication of the statute governing joint accounts; General Statutes § 36a-290;⁵ and conflicted with an earlier opinion construing that statute. See Grodzicki v. Grodzicki, 154 Conn. 456, 226 A.2d 656 (1967). Next, she analogizes to the law of real property, claiming that a joint account, like a joint estate, devolves into a tenancy in common once one coholder’s creditor executes a money judgment against the account. Finally, she contends that, in furtherance of principles of fairness and public policy, the trial court should have undertaken an equitable accounting of the funds in the joint account in order to ensure that only those funds that Charles Carillo himself had contributed were subjected to the plaintiffs bank execution. We find these arguments unpersuasive and, accordingly, affirm the judgment of the trial court.

As the plaintiff’s right to execute against the Carillos’ bank account is statutory in nature, our analysis necessarily begins with the text of the bank execution statute. Section 52-367b authorizes a judgment creditor to execute “against any debts due from any banking institution to a judgment debtor who is a natural person, except to the extent that such debts are protected from execution . . . .” (Emphasis added.) Protection from execution is derived from certain exemption statutes not relevant here. The critical question in this case, therefore, is one of statutory construction, namely, whether the entire balance of the joint account constitutes a “debt due” from Collinsville to Charles Carillo.⁶

In undertaking this inquiry, we proceed “according to well established principles of statutory construction designed to further our fundamental objective of ascertaining and giving effect to the apparent intent of the legislature. ... In seeking to discern that intent, we look to the words of the statute itself, to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation and common law principles governing the same general subject matter.” (Citation omitted; internal quotation marks omitted.) Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 581, 657 A.2d 212 (1995).

Neither the language of § 52-367b, its legislative history,⁷ nor the policy or circumstances surrounding its enactment⁸ reveals whether the entire balance of a joint bank account constitutes a “debt due” to one coholder. Contrary to the plaintiffs contention, the definitional section of the postjudgment procedures statutes is similarly uninstructive. See General Statutes § 52-350a. Although § 52-350a (16) defines “property” broadly to encompass “any real or personal property in which the judgment debtor has an interest which he could assign or transfer, including . . . any present or future right or interest, whether or not vested or liquidated [and] any debt, whether due or to become due,” it does not specify what constitutes an “interest,” “right,” or “debt.” While it is reasonable to infer from this language the legislature’s intent to allow a judgment creditor to execute against all forms of a judgment debtor’s assets, it would be unreasonable to infer an intent to encompass property in which a judgment debtor lacks any cognizable interest whatsoever.

Section 36a-290 comes closer to defining the property rights of a coholder in a joint account. That section provides that, when an account is created in the names of two or more people, “such account is deemed a joint account, and any part or all of the balance of such account, including any and all subsequent deposits or additions made thereto, may be paid to any of such persons during the lifetime of all of them . . . (Emphasis added.) General Statutes § 36a-290 (a).⁹ Thus, under this statute, a bank is authorized to release up to the entire balance of a joint account to each and any coholder who so demands. In our view, this authorization not only provides protection for payor banks but also recognizes a sufficient property interest in each coholder to warrant characterizing all such deposits as a “debt due” to each coholder sufficient to trigger a third party creditor’s statutory right to execute against the entire balance of the joint account.

Our recent consideration of § 36a-290 in the context of a third party creditor’s setoff rights confirms this view. In Masotti v. Bristol Savings Bank, 232 Conn. 172, 653 A.2d 179 (1995), we affirmed, per curiam, a trial court opinion holding that coholders of a joint account have sufficient ownership interests in the account so that a creditor of any one coholder may exercise setoff rights against the account in its entirety. See Masotti v. Bristol Savings Bank, supra, 43 Conn. Sup. 360. In Masotti, a husband and his nondebtor wife had established joint bank accounts at Bristol Savings Bank (Bristol). Bristol was also the husband’s creditor. When the husband defaulted on his debt, Bristol exercised setoff rights against the entire balance of the joint bank accounts, subtracting from the account funds accordingly. Although Bristol eventually renegotiated with the husband and returned the funds, the nondebtor wife sued Bristol for conversion, claiming that her partial interest in the accounts shielded them from the bank’s actions.

The trial court in Masotti rejected the nondebtor wife’s argument and affirmed Bristol’s setoff rights. Citing § 36a-290 (then General Statutes § 36-3), the court held that for purposes of a creditor’s setoff rights, “[t]he coholders of a joint account are considered owners of the entire account and either may withdraw.” (Emphasis added.) Masotti v. Bristol Savings Bank, supra, 43 Conn. Sup. 364. As a result of the husband’s property interest in the accounts, the trial court held that Bristol had lawfully exercised its setoff rights against the entire account balances, despite the nondebtor wife’s concurrent interest therein. On appeal, we explicitly “adopt[ed] the trial court’s well reasoned decision as a statement of the facts and the applicable law on these issues,” concluding further that the decision “thoroughly canvassed the applicable legal principles in a manner consistent with the statute governing joint accounts [§ 36a-290] . . . Masotti v. Bristol Savings Bank, supra, 232 Conn. 174-75; see also United States v. First Bank, 737 F.2d 269, 270 n.2 (2d Cir. 1984) (“[u]nder Connecticut law, [coholders] of a joint account are each considered owners of the entire account, with access to the entire amount therein”).

Our affirmance of Masotti's treatment of § 36a-290 controls our resolution of this case.¹⁰ The setoff that was at issue in Masotti involved “[t]he equitable right to cancel or offset mutual debts or cross demands, commonly used by a bank in reducing a customer’s checking or other deposit account in satisfaction of a debt the customer owes the bank.” (Emphasis added.) Black’s Law Dictionary (6th Ed. 1990) p. 1372; see Normand Josef Enterprises, Inc. v. Connecticut National Bank, 230 Conn. 486, 494, 646 A.2d 1289 (1994). If each coholder of a joint account has a sufficient property interest in the account to permit a bank creditor to exercise a right of setoff against a mutual debt that encompasses the entire joint account, it follows that each such coholder has a sufficient property interest to permit a judgment creditor to exercise a bank execution, pursuant to § 52-367b, against the entire account. In both cases, a coholder’s property interest in the joint account exposes that account, in its entirety, to the creditor’s collection powers, in the absence of statutory or common law protections not present here.¹¹

The defendant contends that Masotti cannot control this case because to deploy its reasoning here would result in a misapplication of § 36a-290. Relying on Grodzicki v. Grodzicki, supra, 154 Conn. 456, she claims that § 36a-290 “confers no [inter vivos] ownership rights whatever” in the coholders of the account. With respect to funds that a coholder has not himself contributed, she contends that § 36a-290 confers only the right to withdraw, and not the right to own, and, therefore, that a creditor cannot attach those funds with respect to which a debtor has only withdrawal rights.¹² Because Grodzicki addressed issues other than the rights of third party creditors, we are unpersuaded of its relevance in the circumstances of this case.

In Grodzicki, one coholder withdrew funds from a joint account to which she had been the sole contributor. Her fellow coholder then sued for conversion, claiming an ownership interest in the funds upon their deposit. We rejected this argument, holding that § 36a-290 (then § 36-3) “does not determine the respective rights of the parties inter vivos” such that one coholder may claim community property rights in funds deposited by another.¹³ Grodzicki v. Grodzicki, supra, 154 Conn. 463. In a conflict between coholders, therefore, § 36a-290 does not serve to convert the deposits made by one coholder into an inter vivos gift to another coholder.

Grodzicki did not address the issue presented in this case and foreshadowed in Masotti, namely, whether a judgment debtor has sufficient property rights in joint account funds contributed by another coholder to allow his creditor to execute against those funds. Although the defendant correctly observes that one coholder may not invoke § 36a-290 to establish inter vivos ownership rights against another coholder,¹⁴ Grodzicki does not hold that a judgment creditor may not invoke § 36a-290 to establish that a coholder has sufficient rights in a joint account to constitute a “debt due” in the amount of its entire balance.

The defendant poses two additional challenges to the trial court’s holding. First, she analogizes to the law of real property, contending that a joint account, like a joint tenancy, converts into a tenancy in common once a creditor executes a levy against one coholder’s interest. See, e.g., New Haven Trolley & Bus Employees Credit Union v. Hill, 145 Conn. 332, 335, 142 A.2d 730 (1958). She claims that the creditor’s levy then “attach[es] to the interest of the debtor but not the interest” of the nondebtor coholder. We are unpersuaded. As the defendant herself acknowledges, we previously have refused to apply the strictures of real property law to the law of joint accounts; see McLaughlin v. Estate of Cooper, 128 Conn. 557, 561, 24 A.2d 502 (1942) (joint bank account “does not create a joint estate in the technical sense of the term”); and she has provided no persuasive reason for us to depart from this precedent in this case.¹⁵

Finally, the defendant contends interstitially, throughout her brief, that principles of policy and “underlying fairness” militate against exposing to a creditor’s bank execution funds that a debtor has not himself contributed. She endorses, instead, a system of judicial accounting, under which a trial court would be required to make an equitable determination of the ownership of joint account funds, so as to shield from a bank execution those funds that the judgment debtor has not contributed. In advancing this proposition, the defendant fails to address the evidentiary and administrative burdens that it would impose upon the trial court.¹⁶ Moreover, the defendant fails to offer any persuasive argument why, having agreed to assume the risk of unlimited withdrawals by the coholder of the joint account if the coholder decides voluntarily to honor his debts, she is entitled to shelter from the risk that the coholder of her joint account may be compelled to respond to legal process to pay such debts. Park Enterprises, Inc. v. Trach, 233 Minn. 467, 472, 47 N.W.2d 194 (1951).¹⁷ Because these public policy arguments, to the extent they have any validity, challenge the statutes governing bank executions and joint bank accounts and the effects thereof, they are better directed to the legislature. See Harvey v. Travelers Indemnity Co., 188 Conn. 245, 253, 449 A.2d 157 (1982).

The judgment is affirmed.

In this opinion CALLAHAN, C. J., and NORCOTT and MCDONALD, Js., concurred.

1 General Statutes § 52-367b provides in relevant part: “Execution against debts due from banking institution. Natural person as debtor, (a) Exempt debts. Execution may be granted pursuant to this section against any debts due from any banking institution to a judgment debtor who is a natural person, except to the extent such debts are protected from execution by sections 52-352a, 52-352b, 52-352c, of the general statutes revised to 1983, 52-354 of the general statutes revised to 1983, 52-361 of the general statutes revised to 1983 and section 52-361a, as well as any other laws or regulations of this state or of the United States which exempt such debts from execution. . . The defendant, does not seek protection from the exemption statutes or any other state or federal law.

2 Although Fleet, is the named plaintiff, we will refer to the Cadle Company as the plaintiff because it, is the assignee of Fleet’s rights against Charles Carillo.

3 Because only Carol Carillo has appealed, we will refer to her as the defendant.

4 In accord with this position, 30 percent of the proceeds of the account have already been released to the plaintiff.

5 General Statutes § 36a-290 currently provides in relevant part: “Joint deposit and share accounts, (a) When a deposit account has been established at any bank, or a share account has been established at any Connecticut credit union or federal credit union, in the names of two or more natural persons and under such terms as to be paid to any one of them, or to the survivor or survivors of them, such account is deemed a joint account, and any part or all of the balance of such account, including any and all subsequent deposits or additions made thereto, may be paid to any of such persons during the lifetime of all of them or to (he survivor or any of the survivors of such persons after the death of one or more of them. Any such payment constitutes a valid and sufficient release and discharge of such bank, Connecticut credit union or federal credit union, or its successor, as to all payments so made.

“(b) The establishment of a deposit account or share account which is a joint, account under subsection (a) of this section is, in the absence of fraud or undue influence, or other clear and convincing evidence to the contrary, prima facie evidence of (he intention of all of the named owners thereof to vest title to such account, including all subsequent deposits and additions made thereto, in such survivor or survivors, in any action or proceeding between any two or more of the depositors, respecting the ownership of such account or its proceeds. . . .”

In 1994, this section underwent technical modifications. See Public Acts 1994, No. 94-122, § 131.

6 A distinction must be made between the banking “debt” owing from Collinsville to Charles Carillo and the judgment “debt” owing from Charles Carillo to the plaintiff. In the typical banking relationship, a depositor is considered the “creditor,” while a bank is considered the “debtor.” “[A] bank is indebted to its account holders for the amount of the funds that they have deposited.” Frigon v. Enfield Savings & Loan Assn., 195 Conn. 82, 87, 486 A.2d 630 (1985); Wawrzynowicz v. Wawrzynowicz, 164 Conn. 200, 202, 319 A.2d 407 (1972); State v. Vars, 154 Conn. 255, 262, 224 A.2d 744 (1966). Thus, the term “debt,” as it is used in the bank execution statute, refers to the amount Collinsville owed Charles Carillo as a result of the joint bank account. To the extent that this money is legally due Charles Carillo, it satisfies the “debt due” requirement of General Statutes § 52-350a (16) and may be executed against in satisfaction of Charles Carillo’s judgment “debt” to the plaintiff.

7 Prior to the enactment of § 52-3671), a judgment creditor’s right to execute against a judgment debtor’s bank account was governed by what is now General Statutes § 52-367a. See Public Acts 1981, No. 81-352, § 2. The legislative history of § 52-367a, however, is similarly unenlightening on the present issue.

8 Section 52-367b was enacted out of concerns that its predecessor, § 52-367a; see footnote 7; provided inadequate notice to natural person judgment debtors whose bank accounts were subject to execution. Accordingly, § 52-367b contains notification requirements that § 52-367a does not contain. See, e.g., General Statutes § 52-367b (d) (notice to debtor). Although these concerns illuminate the motivation behind the adoption of this section, they shed no light on whether the scope of the term “debt” was intended to encompass bank accounts held jointly with a nondebtor.

9 Prior to 1994, this section contained technically, but not substantively, different language. See Conn. Joint Standing Committee Hearings, Banks, 1994 Sess., p. 107, remarks of Gayle F. Fierer, chief administrative attorney, department of banking.

10 The defendant contends that Masotti is distinguishable on the ground that Bristol’s setoff rights against the joint account derived from contract and common law principles, wTiile in this case, the plaintiffs execution rights derive from statute. We discern no meaningful distinction. With regard to Bristol’s alleged contractual rights, the trial court, in Masotti explicitly-acknowledged that the nondebtor wife claimed never to have seen or signed a copy of a contract giving Bristol setoff rights against the joint account. Masotti v. Bristol Savings Bank, supra, 43 Conn. Sup. 363. More importantly, the trial court’s holding in Masotti does not depend solely on these contractual rights but also on its determination that the debtor’s interest in the joint account was sufficient, to expose the account, in its entirety, to Bristol’s claim of setoff. Id., 364. We conclude, accordingly, that whatever contractual rights Bristol may have had against the nondebtor wife were, by themselves, nondispositive and, thus, do not undermine the precedential force of Masotti.

The fact, that Bristol’s rights in Masotti derive from common law while the plaintiffs rights in this case are statutory is equally insignificant. Both sets of rights are simply the vehicles by which a creditor may access bank accounts owned by its debtor.

11 The defendant conceded that the account neither was exempt from execution under our statutes; see General Statutes § 52-367b (citing to relevant exemption statutes); nor served a special or limited purpose that might otherwise have protected it from a judgment creditor. See Rosa v. Colonial Bank, 207 Conn. 483, 494-95, 542 A.2d 1112 (1988).

12 The defendant finds support for this position in United States v. National Bank of Commerce, 472 U.S. 713, 105 S. Ct. 2919, 86 L. Ed. 2d 565 (1985), in which the Internal Revenue Service sought to execute an administrative levy against a joint account. The court determined that, under Arkansas law, a coholder of a joint account has only withdrawal and not ownership rights in funds he has not himself contributed. Id., 723 and 741 (Powell, J., dissenting). We have not been provided with an analysis of Arkansas state law sufficient to persuade us that we should adopt the reasoning used in National Bank of Commerce in construing Connecticut statutes and precedents governing joint accounts.

13 In so holding, we determined that the two primary objectives of § 36a-290 were: (1) to authorize banks to release any or all funds to each coholder of a joint account upon demand; Grodzicki v. Grodzicki, supra, 154 Conn. 461; and (2) to establish a presumption of ownership in surviving joint account holders upon the death of a fellow coholder. Id., 463.

14 Indeed, we recognized as much in Masotti. See Masotti v. Bristol Savings Bank, supra, 232 Conn. 174 n.1.

15 In the alternative, the defendant urges us to adopt the rationale of General Statutes § 12-343, which recognizes that, for purposes of succession taxation upon a coholder’s death, a joint account may be treated as fractionally divided among coholders. There are two problems with this argument. First, the defendant did not present it in her trial brief and failed to raise it later in a motion for articulation. See Practice Book § 4051. Pursuant to the rules of practice, we are not bound to consider a claim not appropriately raised in the trial court. Practice Book § 4061. Second, and more substantively, the defendant has failed to present any textual or historical evidence to suggest that the terms of a specialized succession tax statute such as § 12-343 should be extrapolated to embody a universally applicable legislative policy in favor of fractional ownership of joint property held inter vivos.

16 For example, who would bear the burden of proving the ownership of the funds, the coholder or the third party creditor? Would parol evidence be admissible for such proof? What evidentiary presumptions, if any, would be applicable? If a presumption of partial ownership applies, how much of the funds would a court presume belong to each coholder? What principles should govern intermediate withdrawals and deposits? How would the court dispose of funds for which neither party could account? These and other issues point up the burdensome nature of judicial accounting and underline why “courts should not encourage parties to do their bookkeeping in court when [by establishing a joint bank account] they have virtually declared that they do not wish to be inconvenienced by any strict accountability as between themselves.” Park Enterprises, Inc. v. Trach, 233 Minn. 467, 472, 47 N.W.2d 194 (1951).

17 It bears emphasis that a debtor who coholds a joint account, holds himself or herself out to the rest of the world as the co-owner of the funds in that account. To shield some or all of those funds from execution would penalize creditors who, in making lending decisions, justifiably viewed the funds as an available source of collateral. See General Statutes § 36a-291 (authorizing any coholder of joint account, by delivering a passbook and bank order, to pledge entire account as security for that coholder’s loan).