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Practical Issues in the Common Deposit Account Context


Legal insight

June 2020

Christina Kapourani, M.Sc. (mult.), Pgcert, PhD Cand.

(Republishef from www.lawnet.gr)

Summary: In modern transactions it is common for two or more persons to hold a "joint account" with a bank, usually a deposit account with several beneficiaries, on which each beneficiary can act autonomously, depositing or withdrawing money or giving orders for transfers. In the context of maintaining such an account, a number of issues may arise concerning the relationship between the beneficiaries themselves, the relationship between the beneficiaries and the bank or even with third parties. Can, for example, a third party creditor of a beneficiary seize the total amount of the account? Can the bank set off any counterclaim it has against a beneficiary of the account against the total amount of the deposit in the joint account? This article highlights the most important of the issues that may arise in the context of this relationship. 

1. Introduction

A joint account is a contract between a bank and its contracting customers for the deposit of money into an account, provided that the account can be used, without the involvement of the others, either by one or more of the so-called 'joint holders', or by several of them, or by each of them individually. In other words, each of the joint beneficiaries may use the account, regardless of whether the money deposited in the joint account actually belongs to that joint beneficiary. Thus, for example, an entrepreneur may open a joint account with the company's treasurer so that the latter can make all the necessary collections and payments to the company's staff or suppliers. In this case, the cashier can make use of the account (deposits, withdrawals, transfers), whereas in reality the money in the account belongs to the entrepreneur. On the other hand, the bank is obliged to fulfil its obligations from the deposit to any of the alleged co-beneficiaries who request it, regardless of whether they are the actual owner of the money. 

2. The relations between the joint account holders

Each joint account holder may therefore withdraw even the entire amount in the joint account. What happens, however, if this amount actually belongs to another joint account holder?

The claims of the joint holders against each other will be settled by their internal agreement. Thus, in the above example, if the cashier takes over the entire amount of the joint account, the businessman would be able to turn against him and claim it because, under their internal agreement, the cashier could only carry out the day-to-day business transactions of the business through the joint account and could not appropriate the entire amount for his personal use. In this case, the relationship between the trader and the cashier is a relationship of mandate, under which the former has instructed the latter to carry out transactions in the account in order to facilitate the operation of the business. However, where parents open a joint account with their child who is studying in another city, the relationship between them is a donative one, since their intention is that their child should use the money deposited in the account for his or her daily needs. If there is no agreement between them, then the money deposited in the joint account is considered to belong to all of them equally (e.g. if there are two joint beneficiaries, 50% to each of them). 

The relationship between the joint account co-owners is therefore determined on the basis of the agreement between them, which may be a partnership, loan, mandate, donation, etc. Except that, irrespective of the relationship that may exist between the joint beneficiaries, the bank is obliged to fulfil its obligation to return the deposit to any of them who so requests. Thus, in the above case, where the cashier has taken over the entire deposit, the businessman cannot take action against the bank, but only against his cashier on the basis of their internal relationship. 

3. Rights of the heirs of the deceased co-owner

Joint account agreements usually contain a clause whereby, in the event of the death of a beneficiary, the deposit is automatically transferred to the other surviving joint beneficiaries. This is what has come to be known as the 'death clause' (Article 2 of Law 5638/1932). Consequently, if this clause is included in the contract, in the event of the death of a joint beneficiary, his heirs have no right to the joint account, but the amount deposited in the account passes to the other joint beneficiaries and is exempt from inheritance tax. 

On the contrary, if the agreement does not contain the above condition, then the heirs of the deceased joint beneficiary do not become joint beneficiaries of the account upon the death of the latter and, therefore,  they cannot take action against the bank (because there can be no change in the person of the depositor without the latter's consent), they may, however, claim from the other joint holders of the account the amount of the deposit attributable to the deceased. 

Suppose, therefore, that A, B and C are joint beneficiaries of a joint account. If the condition in Article 2 has been imposed, after the death of A, the amount of the account belongs exclusively to B and C, and the heirs of A have no claim against the bank, nor against B and C. On the other hand, if the above condition is not met, then A's heirs will of course not be able to take action against the bank, but they will be able to take action against B and C and claim the amount due to A, the amount of which will be determined on the basis of the agreement between A, B and C. 

Finally, it is worth pointing out that, if the relationship between the co-owners is a donation, the heirs of the deceased co-owner, who have a right of legal succession, can claim part of the amount under the relevant provisions on the intestacy of intestate gifts of the Civil Code, even if the above 'death clause' had been inserted.

4. Seizure of the account by a co-owner's creditor

What happens if the lender of one of the joint account co-owners imposes a foreclosure in the hands of the bank? According to the law, it is permissible to seize the deposit in a joint account, however, against the seizers it is presumed that it belongs to all the joint account holders in equal shares. Thus, in the above example of a joint account between A, B and C, if a creditor of A seizes the account in question in the hands of the bank, then the bank will only attach in his favour and pay him 1/3rd of the amount deposited in the account. 

The following question logically arises: if the amount deposited in the joint account in question is in fact wholly owned by B and C, can they take action against either the seizing creditor or A in order not to lose their money? The true beneficiaries in the above example, because of the operation of an irrebuttable presumption in favour of the garnishee creditor that the seized amount belongs equally to the joint creditors, cannot take action against the garnishee creditor by claiming that the seized amount does not in fact belong to the latter's debtor, they can only take action against the joint creditor-debtor on the basis of their internal relationship and claim restitution of the amount.

5. Set-off of the bank's counterclaim against the amount in the account

In contrast to attachment, which, as stated immediately above, presumes for the creditor imposing the attachment that the joint account is owned by all the beneficiaries in equal shares, and, consequently, in the case of a joint account with two co-beneficiaries he can only attach ½ of it, in the case of the set-off which the bank makes, things are different. First of all, the question of set-off may arise where the bank holding the joint account has a claim against one of the joint holders of the account. For example, in the above example of a joint account between a cashier and a businessman, the bank holds an outstanding claim against the cashier under an existing mortgage loan agreement between them. The question arises: Can the bank offset its claim against the claim on the joint account and, if so, up to what amount? On the basis of the most recent decisions of our courts, in particular the Supreme Court, the bank can set off its claim against its obligation under the joint account and, indeed, without the restrictions on attachment mentioned above. In other words, suppose that the bank has a claim against the cashier under the mortgage loan agreement for EUR 200 000 and that the joint account held by the businessman and the cashier has EUR 150 000 deposited in it. The bank will be able to deduct from the joint account the entire amount of EUR 150 000, and not only EUR 75 000 (i.e. 1/2 of the total), as would be the case if a third party had imposed a seizure on the cashier.  

The view that used to prevail in case law, i.e. that in this case as mentioned above for the seizure should also apply, i.e. that the account should be deemed to belong to all co-owners in equal parts, seems to have been definitively abandoned by our courts. It continues, however, to be supported by part of the theory. In any case, it remains possible for the true beneficiary to take action against the co-beneficiary - the bank debtor on the basis of their internal relationship and claim the reimbursement of the set-off amount, in accordance with the special provisions on attachment set out above. 

6. Criminal offences in the context of the operation of the Joint Account

As we have already explained, in the context of the operation of a joint account, each joint account holder, regardless of whether he actually owns the money in the account, has the right to take over even the entire amount of the account and the bank has the obligation to deliver it to him. Thus, a cashier who is instructed to take over EUR 1 000 from the account to pay the debts of the company and, in breach of the instruction, takes over the sum of EUR 50 000, does not commit embezzlement by taking over that money. As our case law states: "By withdrawing money from a joint account, the money becomes the property of the beneficiary who made the withdrawal, regardless of whether or not he had the consent of the other joint holder of the money, because it is not considered foreign within the meaning of the law. Therefore, this withdrawal is not considered a punishable criminal act'.

7. Request to the bank for information

Very often, when a person passes away, his heirs engage in a struggle to discover the assets that the deceased possessed. While they will usually know how much property the deceased owned and where it is located, the same is not necessarily true of the accounts he or she held. The heir should request the bank to provide the relevant information (which accounts the deceased held and how much was in each of them) and provide the necessary legal evidence (e.g. If the deceased kept individual accounts exclusively in his/her own name, the matter is simple and the bank is obliged to provide the necessary information. In the case of a joint account, however, things may be more complex. Thus, if the condition in Article 2 mentioned above has not been imposed, in which case the heirs of the deceased can claim from the joint account holders the amount of the joint account that was due to them, the bank is obliged to provide them with the information requested. Conversely, if the above condition is met, in which case the heirs have no right, then there is a case of bank secrecy, since the heirs are in fact requesting information on the account of third parties without being able to establish a right of their own (i.e. of the other joint beneficiaries). However, even in this case the bank would still have to prove to the heirs that this condition had indeed been imposed, for example by showing the relevant joint account agreement. An exception will be made if the heir also has a right to a legal fate (spouse, children and parents), in which case, if he proves that a donation was made to the surviving joint account, he will be entitled to obtain the relevant information from the bank so that he can bring an action for annulment of the ineffective donation, so that the amounts in the joint account can also be calculated in order to determine the amount of his legal fate. 

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