ONCE 'AGGRIEVED,' JOINT TENANT ALLOWED TO SUE FOR INTERFERENCE

August 24, 2004

Steven P. Garmisa
Hoey & Farina Attorney
garmisa@hoeyfarina.com
1-888-425-1212

A co-owner might have a right to grab all the money in a joint account, but the "aggrieved" owner might have a remedy under section 4 of the Joint Tenancy Act, along with a common-law claim for tortious interference with contract. It depends on the terms of the agreement with the bank. Greeling v. Abendroth, 2004 WL 1683020 (4th Dist., July 23).

Everette Cooper set the stage by buying a $100,000 certificate of deposit from a bank. The certificate was payable to "Everette Cooper or Margaret Cooper or Patricia Greeling."

Margaret was Everette's wife, and Patricia was his daughter from a prior marriage. The certificate provided that the proceeds were payable to the co-owner who surrendered the document. According to the contract between Everette and the bank:

"When two or more persons are named as depositors on this certificate with the conjunction 'or' appearing between names, then such certificate shall be payable to any of the survivor or survivors of them and payment may be made upon surrender of this certificate to any of them during the lifetime of all, or to any survivor or survivors after the death of one or more of them."

A few weeks before Everette died, he delivered the certificate to Patricia. Shortly after Everette's death, Margaret and her son from a prior marriage -- Harry Joe Abendroth -- went to the bank. Although Patricia still had possession of the certificate, Abendroth allegedly convinced the bank to pay the proceeds to Margaret without requiring surrender of the certificate.

According to Abendroth, he told the Bank that Patricia still had possession of the certificate. The bank nevertheless paid the proceeds to Margaret -- after insisting that she sign an indemnity bond that said the certificate was "lost." Then Margaret used this money to buy a new certificate of deposit that was payable to herself, Abendroth and Debbie Brashears.

Margaret passed away, and Patricia filed a complaint against Abendroth (individually and as executor of Margaret's estate) under section 4 of the Joint Tenancy Act. 765 ILCS 1005/4.

The trial judge entered judgment against Abendroth, in both capacities, for half the principal and accrued interest in the new certificate. On appeal, Abendroth, referred to as "defendants," argued that Margaret, as a joint tenant, had a right to obtain all the proceeds of the original certificate. Also, according to Abendroth, Brashears was a necessary party.

The Appellate Court affirmed the judgment for Greeling. Here are some highlights of Justice Thomas R. Appleton's opinion (with various omissions not noted in the quoted text):

"On the authority of section 4 of the act, the trial court ordered defendants to pay plaintiff damages in the amount of one-half the value of the principal and accrued interest represented by the new certificate of deposit.

"That statute provides: 'If any person shall assume and exercise exclusive ownership over, or take away, destroy, lessen in value, or otherwise injure or abuse any property held in joint tenancy ... the party aggrieved shall have his civil action for the injury in the same manner as he would have if such joint tenancy ... did not exist.'

"In common law, one co-tenant of a chattel could not maintain an action against another co-tenant to gain possession of the chattel, even though the latter co-tenant was acting like the chattel's sole owner and excluding the former co-tenant from all use and enjoyment of it. The reason was that the common law deemed possession by one co-tenant as possession by both. By enacting section 4, the legislature modified the common law to give the economically injured co-tenant the same legal remedies that any other property owner would have.

"Like any other plaintiff in a 'civil action,' the plaintiff must be 'aggrieved,' that is, the plaintiff must 'suffer from an infringement or denial of legal rights.' If a co-tenant assumes and exercises exclusive ownership over the chattel pursuant to a contract binding on the other co-tenant, the latter co-tenant is not 'aggrieved' or 'injured' within the meaning of any recognizable legal theory.
"A joint-tenancy certificate of deposit is subject to the provisions of the contract between the bank and its depositor.

"If, as in the present case, the trial court construes a contract as a matter of law, our standard of review is de novo: we construe the contract without deference to the trial court's construction.
"The signers of the certificate of deposit, Everette and the bank, were the two contracting parties. Everette was the creditor, the bank was his debtor, and the non-negotiable certificate of deposit was evidence of the bank's contractual promise to him to repay the loan with interest. See Drenckpohl v. Barker, 253 Ill.App.3d 203, 210 (1993).

"On its face, immediately above the signatures, the certificate of deposit states: 'The undersigned agree to the additional terms and conditions stated on this certificate, especially including the additional terms and conditions stated on the reverse.' Because Everette and the bank intended to make the terms on the reverse side of the certificate of deposit part of the contract for payment of money, those terms are part of the contract, just like the terms on the front.

"According to the terms on the back of the certificate of deposit, if the conjunction 'or' appears between the names of the payees, 'payment may be made upon surrender of this certificate to any of them.' In context, the permissive word 'may' corresponds not to the surrender of the certificate of deposit but to the bank's discretion to pay one as opposed to all of the payees.

"In Drenckpohl, the 5th District construed three certificates of deposit containing the same boilerplate provisions as the one in this case. The conjunction 'or' likewise appeared between the payees' names.

"The Appellate Court stated as follows: 'The provision on the back of the certificates of deposit ... permits any one of the joint tenants to receive payment on the instruments by surrendering them to [the] bank. This provision conferred a benefit to each joint tenant as any of them could have received payment upon surrender of the certificates to [the] bank.'

"Again emphasizing the surrender of the certificates of deposit, the Appellate Court stated as follows: 'According to the terms incorporated into the certificates of deposit, Velma Drenckpohl was permitted to invade the corpus of the certificates of deposit to the detriment of the other joint tenants.... [She] was perfectly within her right as a joint tenant, under the terms of the certificates of deposit, to surrender the certificates of deposit for payment.'

"Defendants rely heavily on Drenckpohl, even quoting those passages. They argue that under the 'terms and conditions' on the reverse side of the certificate of deposit, Margaret, too, could 'surrender the certificate at any time and ... receive the entire proceeds.'

"To 'surrender' something means to 'give up the possession of, especially into the power of another': 'the act of redelivering the instrument to the obligor.' Defendants seem to forget that Margaret never surrendered the certificate of deposit.

"According to plaintiff, Margaret and Abendroth 'knew plaintiff had possession of [the certificate of deposit, and] yet they cashed it by falsely representing it as lost.' Defendants never really respond to that argument. They never explain how, under the 'terms and conditions,' which plainly contemplate a 'surrender of this certificate,' Margaret could cash the certificate of deposit while plaintiff still had possession of it.

"The law existing at the time and place of the contract is considered a part of the contract as if expressly incorporated therein, and Illinois law has long recognized that one may enforce a lost instrument. The instrument must be lost or destroyed, however, not in the hands of an alternate payee. Calling the certificate of deposit 'lost' was a fictional device to get around plaintiff's possession of it.

"To determine whether plaintiff was 'aggrieved' or 'injured,' we must consider whether she has any legal basis to complain of Margaret's end run around the requirement of surrendering the certificate of deposit. Because the benefit of the contract was direct rather than incidental to plaintiff and Margaret (just as direct, in fact, as it was to Everette himself), they were third-party beneficiaries of the contract. As such, they could sue for breach of the contract, even though they were strangers to both the contract and the consideration.

"Because a third-party beneficiary's rights extend no further than the contract, the promisor can assert against the beneficiary any contractual defense that the promisor could assert against the promisee, including the promisor's right to unilaterally waive a condition that benefits the promisor. If, however, the condition benefits other parties beside the promisor, each one so benefited must waive the condition.

"Even though, in the indemnity bond, Margaret represented to the bank that the certificate of deposit was lost, the bank knew it was not lost, for she and Abendroth had told the bank that plaintiff had possession of it. The bank paid Margaret anyway, intentionally relinquishing (so it would seem) its right to require the surrender of the certificate of deposit as a condition of payment.

"Because the certificate of deposit was prima facie evidence of the bank's continuing indebtedness, surrendering the certificate of deposit clearly would have benefited the bank. It would have benefited only the bank if the certificate had named only one payee. The certificate named three payees, however -- Everette, plaintiff and Margaret -- and while the certificate was in Everette's possession, requiring the surrender of it as a condition of payment just as clearly benefited him as that requirement benefited plaintiff after he handed the certificate over to her.

"The possessor of the certificate could control the payment. With the certificate in plaintiff's possession, the bank and Margaret could not waive the surrender of it as a condition of valid payment.

"Plaintiff is 'aggrieved' at defendants not because she has any interest in the specific funds the bank paid to Margaret. Everette's deposit with the bank merely created a debt, not an interest in any particular assets. Rather, plaintiff is 'aggrieved' at defendants because Margaret and Abendroth 'misdirected the [bank's] performance,' thereby interfering with a contractual relationship.

"Margaret and Abendroth knew, or were legally presumed to know, that plaintiff was a third-beneficiary of the contract, and to deprive her of the benefit of the contract, they induced the bank to dispense with the contractual requirement of surrendering the certificate.

"As plaintiff alleged in her third-amended complaint, Margaret and Abendroth 'intentionally ... interfered with [her] expectation that she would be entitled to the proceeds yielded by the ... certificate of deposit.'

"Instead of an expectation of payment, plaintiff now has an expectation of legal complications. The trial court could have reasonably found that Margaret 'injured' or 'lessened in value' plaintiff's economic interest in the certificate of deposit.

"We find further support for affirmance in the following language from In re Estate of Taggart, 15 Ill.App.3d 1079, 1086 (1973), in which the 5th District, construing section 4 of the act, stated: '[A] withdrawing joint tenant, in the absence of fraud, misrepresentation [or] overreaching ... is not legally accountable to the other joint tenant ... for funds ... withdrawn.' 'Overreaching' means 'to get the better of ... typically by unscrupulous and crafty methods.'

"One could reasonably conclude that cashing in the certificate of deposit on the false pretense that it was lost, with the intention of getting the better of plaintiff, fits the description of 'overreaching.'

"Defendants argue that even if plaintiff could recover from Margaret's estate, she cannot recover from Abendroth, for section 4 applies only to actions between co-tenants. Plaintiff alleged that Abendroth intentionally interfered with her contractual relationship with the bank, and for that injury to her economic interest, the common law provides a recovery.

"Defendants argue that as a joint tenant of the new certificate of deposit, Brashears was a necessary party and the trial court should not have entered the judgment without her joinder as a defendant. They argue she 'has an interest in the proceeds of that new certificate of deposit' and the court 'could not order that one half of those proceeds be turned over to plaintiff without affecting Brashears' interest therein.'

"That argument rests on an erroneous premise, namely, that the court required defendants to compensate plaintiff out of a particular account. The court 'granted judgment against defendants in the amount of $49,725, which [was] one-half the new certificate [of deposit].'

"The court also 'awarded judgment amounting to one-half the interest accruing to the entire [certificate of deposit].'

"The new certificate of deposit provided merely the measure of damages. It is not necessarily the res out of which defendants must pay the judgment. Consequently, Brashears wasn't a necessary party."

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