BILL ANALYSIS Ó
AB 1624
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1624 (Gatto)
As Amended July 6, 2012
Majority vote
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|ASSEMBLY: |69-0 |(March 22, |SENATE: |36-0 |(August 9, |
| | |2012) | | |2012) |
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Original Committee Reference: JUD.
SUMMARY : Clarifies that a person's ownership interest in a
multi-party account is based on that person's net contribution
to the account and makes corresponding changes relating to
rights of survivorship with respect to withdrawn funds.
Specifically, this bill :
1)Provides that, during the lifetime of all parties, a
multi-party account belongs to the parties in proportion to
the net contributions of each, unless there is clear and
convincing evidence of a different intent.
2)Provides that if a party makes an excess withdrawal from an
account, the other parties to the account shall have an
ownership interest in the excess withdrawal in proportion to
the net contributions of each to the amount on deposit in the
account immediately following the excess withdrawal, unless
there is clear and convincing evidence of a contrary agreement
between the parties.
3)Provides that only a living party, or a conservator, guardian,
or agent acting on behalf of a living party, shall be
permitted to make a claim to recover the living party's
ownership interest in an excess withdrawal, as specified.
Specifies that a court may, at its discretion, and in the
interest of justice, reduce any recovery to reflect funds
withdrawn and applied for the benefit of the claiming party.
4)Defines "excess withdrawal," for purposes of the above, to
mean the amount of a party's withdrawal that exceeds that
party's net contribution on deposit in the account immediately
preceding the withdrawal.
The Senate amendments :
AB 1624
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1)Recast and clarify provisions relating to the ownership
interests of the other parties to an account when one party
makes an excess withdrawal, as defined, and specifies that
only a living party (or the conservator, guardian, or agent
thereof) shall be permitted to make a claim to recover the
living party's interest in an excess withdrawal.
2)Define "excess withdrawal," as noted above.
AS PASSED BY THE ASSEMBLY , this bill was substantially similar
to the version approved by the Senate.
FISCAL EFFECT : None
COMMENTS : This bill seeks to overturn Lee v. Yang (2003) 111
Cal. App. 4th 481, a decision that the author, supporters, and
California Law Revision Commission believe overturned the
long-standing interpretation of California's Multi-Party
Accounts Law (CAMPAL). First enacted in 1990, CAMPAL regulates
the ownership interests of parties to a joint account in a bank,
credit union, or other financial institution. As a general
rule, the ownership interest of non-married parties is based on
their respective net contributions to the account, unless a
written agreement or some other evidence indicates a different
intent. (The ownership interests of married couples are
additionally governed by community property principles and are
not affected by this bill.) If the net contributions to the
account cannot be determined, or if a different intent is not
indicated, the parties to the account are generally assumed to
have an equal interest in the account. Until 2003, it was
generally assumed that a party retained a proportional ownership
interest in any funds withdrawn by another party. However, in
Lee v. Yang, a California appellate court held, by a very strict
reading of the statute, that the ownership interest of the
parties only applied to the "sums on deposit" - a phrase that is
used in the relevant code section. To the court this meant that
once funds were withdrawn - and no longer "sums on deposit" -
they were no longer subject to the proportional interest rule.
Who, then, did own the withdrawn funds? According to the court,
the withdrawn funds are presumed to be a "gift" to the
withdrawing party, and the other party no longer holds any
ownership interest in those withdrawn funds.
One need only look at the facts of Lee v. Yang to appreciate the
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inequities that such a ruling could create and to understand why
the decision has led to demands that the Legislature overturn
the ruling. Lee v. Yang involved a couple that had created
joint bank accounts after they became engaged to be married, but
before they actually wed. Prior to the planned wedding date,
the relationship unraveled and the coupled decided to call off
the wedding. In addition to backing out of the wedding,
however, Janet Yang took the liberty to withdraw money from the
couple's three joint bank accounts. Holden Lee sued Yang (for
"conversion" among other things), his primary contention being
that he owned a portion of the funds that Yang had unilaterally
withdrawn from the bank accounts. (Lee v. Yang (2003) 111 Cal.
App. 4th 481, 484-486.) The trial court (applying Civil Code
Section 683 on joint tenancies instead of applying CAMPAL)
concluded that because the account was a joint tenancy each
party had a right to withdraw the funds. According to the trial
court, Lee had failed to establish that there was any agreement
restricting Janet Yang from withdrawing the funds. Although the
Court of Appeal held that the trial court had erred in applying
Civil Code Section 683 instead of CAMPAL, it nonetheless
affirmed the trial court's holding that Lee retained no
ownership interest in the withdrawn funds and therefore had no
grounds to recover. (Id. at 486-489.)
A dissenting opinion in Lee v. Yang dissent noted that Yang's
contractual right to withdraw funds did not give her a property
right to take and keep Lee's proportion of the funds. Property
rights in the funds were determined not by the contractual right
to withdraw, the dissent argued, but by a party's net
contribution to the account. The dissent concluded by noting a
likely consequence of the majority view: "A joint tenancy
account holder with an urgent need for cash, or merely harboring
a vengeful motive, can wipe out an entire account with impunity
unless the owner of the funds can prove that there had been a
prior, enforceable agreement restricting the power of the
withdrawal or the use of the funds." (Id. at 500-501.)
Persuaded that the dissenting opinion in Lee v. Yang more
accurately captured the intent of the existing statutory
framework, the California Law Revision Commission (CLCR) issued
a June 2004 report that recommended reversing the rule of Lee v.
Yang by making "clear that ownership of funds withdrawn from a
joint account is based on the proportionate contributions of the
parties to the account." The CLRC also recommended
clarification of the existing rule that withdrawal of funds from
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a joint account cuts off the right of survivorship in the
amounts withdrawn, but only "to the extent of the Ýwithdrawing]
party's net contribution to the account." In other words, since
a non-withdrawing party retains a proportional ownership
interest in withdrawn funds, the withdrawing party can only cut
off survivorship rights to the extent of the withdrawing party's
proportional interest in the withdrawn funds. (See Ownership of
Amounts Withdrawn from Joint Account, 34 Cal. L. Revision Com.
Reports 199 (2004).)
The Legislature has attempted to enact the CLRC recommendation
on two different occasions: AB 69 (Harman) of 2005 and SB 273
(Harman) of 2011. Both efforts failed in the Senate Judiciary
Committee due to concerns about the potential impact of
reversing Lee v. Yang, especially in situations where one party
signs on to a joint account in order to spend money for the
benefit of the other party to the account. In particular, the
most troubling scenario apparently involved a friend or relative
who becomes a signatory to a joint account in order to spend
money on behalf of an elderly person who no longer has the
capacity to manage his or her money. A friend who innocently
and in good faith withdraws and spends money on the other
party's behalf, but who does not keep meticulous records or
receipts, could potentially be liable to the heirs or estate of
the elderly person for the withdrawn funds. The author and
supporters of this bill concede this possibility and admit that
under the rule of Lee v. Yang the innocent friend would be
protected, since the elderly person (and thus the elderly
person's heirs or estate) would have no ownership interest in
the withdrawn funds. However, Lee v. Yang resolved the problem
only by creating the equally inequitable situation that would
allow one party to a joint account to unilaterally deplete the
account and leave the other party with no recourse. Moreover,
in the scenario raised in response to last year's bill, the
elderly person who relies upon another to withdraw and spend
money on his or her behalf also needs protection. Under Lee v.
Yang, the elderly person would have no legal interest, and
therefore no legal means of recovering the withdrawn funds
unless he or she could make a case under the state's elder
financial abuse laws. Under the rule proposed by this bill, the
elderly person would retain an ownership interest in the
withdrawn funds equal to the amount of his or her contribution,
unless the withdrawing party could convince a court that the
funds had been spent to benefit the elderly person.
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As introduced, this bill was identical to last year's SB 273.
However, in order to address the concerns noted above raised
about last year's bill, the author amended the bill to offer
some protection to the innocent friend or family member who
signs on to a joint account in order to spend money to benefit
another party to the account. Specifically, as most recently
amended the bill attempts to strike a balance by permitting a
living party to make a claim to recover an ownership interest in
the case of an "excess withdrawal" by another party - that is,
where a party withdraws an amount in excess of that party's net
contribution - while at the same time permitting a court, at its
discretion and in the interest of justice, to reduce recovery if
the funds withdrawn were applied for the benefit of the claiming
party.
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334
FN: 0004475