Untitled Texas Attorney General Opinion ( 1991 )

QBffice of toe 1ZIttornep 4Seneral
%tate of ZEexae
DAN MORALES
ATrclRmY
CESERAL
March 26.1991
Mr. John R. Hale Qpinion No. DM-10
Commissioner
Credit Union Department Re: Termination of a depositor’s interest in a joint
914 East Anderson Lane account by deletion of the depositor’s name at the
Austin Texas 78752-0278 direction of another joint owner (RQ-2190)
Dear Mr. Hale:
You ask if section 440 of the Texas Probate Code authorizes a joint owner of
a joint account established with a Texas financial .institution to “terminate the
interest of another joint owner” by delivering a written order to delete the names of
one or more of the other joint owners. Section 440, to which your letter refers,
states:
The provisions of Section 439 of this code to rights of
survivorship are determined by the form of the account ate the
death of ~aparty. Notwithstanding any other provision of the law,
this form may be altered by written order given by a party to the
#nancial institution to change the form of the account or to stop or
vnry payment under the tetms 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.
(Emphasis added.)
At issue is the scope of the emphasized language.
Section 440 is part of chapter XI of the Probate Code. That chapter governs
“nontestamentary transfers,” including joint accounts established with financial
institutions (whether or not there is a right of survivorship). See H.B. 329, Acts
1979, 66th Leg., ch. 713 at 1740, 1756. Section 438 of the Probate Code provides
that during the lifetime of all the parties to a joint account, it belongs “to the parties
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Mr. John R. Hale - Page 2 (DM- 10 1
in proportion to the net contributions by each to the sums on deposit, unless there is
clear and convincing evidence of a different intent.” Section 439 of the code
specifies the manner in which a right of survivorship to a joint account is
established*
The three provisions, sections 438, 439, and 440 of the Probate Code, are
limited in their application. Section 437 of the code states:
The provisions of Sections 438 through 440 of this code that
concern beneficial ownership as between parties, or as between
parties and P.O.D. [after-death] payees or beneficiaries of
multiple-party accounts, are relevant only to controversies
between these persons and their creditors and other successors,
and have no bearing on the power of withdr& of there persons
as determined by the tern of account contracts. (Emphasis
added.)
Our reading of the three provisions, together with section 437 above, convinces us
that section 440 concerns only a party’s directive as to *rights of survivorship.” The
power given by section 440 to “change the form” is not bestowed upon “one or more
of the parties” as is the power of withdrawal allowed by section 444. The section 440
power may be exercised only by “a party,” and the written order or request to make
the change must be received by the financial institution during that party’s lifetime
and not countermanded by “the same party during his lifetime.‘* See also Prob.
Code 5s 443,448 (protection of financial institutions and discharge from claims).
he Texas Supreme Court observed in Stauffer v. Henderson, 801 S.W.Zd 858 (Ten EN),
that se&m 439 of tbe Texas Probate Code, “Iike the other provisionsof chapter XI adopted in 1979”
was derived from artide VI, part 1, of the Uniform Probate Code. 8 U.LA. 519 ef seq., (1983). The
pro+ion of the Uniform Probate Code corresponding to section 440 of the Texas code is section
6-105. (Section VI of the Uniform Probate Code was extensively revised in 1989, but only provisions
adopted in 1969 influenced the Texas statutes.)
tie bilI analysis prepared for the legislature by the House Judiciary Committee that drafted
the 1egisIation says of section 440:
The ‘owner’ of an account providing for rights of survivorship may alter those
rights by written notice to the fmancial institution. House Committee on
Judiciary, Bill Analysis, C.S.H.B. 329,66th Leg. (1979).
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Mr. John R. Hale - Page 3 (DM- 10 1
The phrase, “this form,” in the second sentence of section 440 refers to “the
form of the account at the death of a party” by which rights of survivorship are to be
determined. That language gives “a party” unilateral power to “change the form of
the account or to stop or vary the payment under the terms of the account” only as
to rights of survivorship (ie., to stop or vary payment to particular beneficiaries)
which otherwise would be controlled by the original terms of the account contract.
Cj McCarty v. First State Bank & Trust Co,, 723 S.W.2d 792 (Tex. App.--
Texarkana 1987), modifieci, 730 S.W.2d 656 (Tex. 1987) (section 440 notice). The
“notwithstanding any other provision of the law” language of section 440 does not
suggest otherwise, in our opinion. It is intended to prevent application of the law
governing the formalities by which testamentary transfers must be made, and should
be read with sections 441 and 4.50. Those sections reiterate that provisions of
deposit agreements and certain other instruments directing that money be paid to a
designated person after the death of the owner are “deemed to be nontestamentary”
and not invalidated by other provisions of the code. Cf- Prob. Code 50 451, 455
(community property). Section 440 cannot be used by one joint owner to effect
termination of the interest in the account of another joint owner.3
Thus, in answer to your specific question, section 440 does not authorize
one owner of a joint account to unilaterally “change the form of the account” so as to
compromise the interest of another joint owner. See American Nat’1 Bank of
Beaumont v. Sneed’s Shipbuildine. Inc., 703 S.W.2d 336 (Tex. App.-Beaumont
1985, no writ) (unilateral amendment of joint deposit arrangement); Bus. & Comm.
Code 8 4.103 (variation by agreement of bank deposit terms). Seegenerally Stauffer
v. Henderson, supra; 9 Tex. Jur. 3d Ranks and Other Financial Institutions 5 14 at 23
(1980) (national banks and application of state law); 14 Tex. Jur. 3d Contracts
$9 244 et seq. at 426 (1980); Joint Tenancv With Rizht Of Survivorship (“JTWROS”)
Accounts in Texas: Caveat Deoositor!, 51 Tex. B.S. 455 (1988); Monev. Monev,
\wh ‘vorshin, 47 Tex.
B.J. 237 (1984).
3A brief submitted to this office argues for a different answer, suggesting that approximately
the same result can be achieved if one depositor withdraws the funds and deposits them in another
account. This argument overlooks the language and scope of section 440. Cfi First Fed. Sav. & Loan
Ass’n v. Ritenour, 704 S.W.Zd 895 (Tex App.--Corpus Christi 1986, writ ret’d n.r.e.) (attempt to place
“hold” on joint owner’s pokier to withdraw funds); Wright v. Commercial and Sav. Bank, 464 A.2d
1080 (Md. App. 1983) (attempt to delete name of joint owner of account); Annotation, Liabilitv of
Bank to Joint Deoositor for Removal of Name from Account at Reauest of Other Joint Deoositor, 39
A.L.R. 4th 1112.
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Mr. John R. Hale - Page 4 (DM- 1 o )
You ask a second question about other possible methods of permitting the
deletion of a party’s name from a joint account, but because of its general and
hypothetical nature we are unable to address it.
SUMMARY
Section 440 of the Texas Probate Code does not allow a
party to a joint account to unilaterally terminate the interest of
another joint interest. It permits a change in the contractual
terms of the account only as to the disposition to be made of
that party’s interest in the account following his death.
Very truly yours,
DAN MORALES
Attorney General of Texas
WILL PRYOR
First Assistant Attorney General
MARY KELLER
Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY (Ret)
Special Assistant Attorney General
RENEA HICKS
Special Assistant Attorney General
SUSAN GARRISON
Acting Chairman Opinion Committee
Prepared by Susan Garrison
Assistant Attorney General
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