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Hackensack Anaesthesiology Associates, P.A. v. Fleet Boston Financial Corporation

BER-L-6173-02 (N.J. Super. Law Div. 2004) (Unpublished)

BANKS; JOINT ACCOUNTS; UCC—Under the UCC, a judgment debtor is presumed to own an entire joint account, subject to the right of the other holders to rebut that presumption.

A default judgment was entered in favor of a bank against a commercial customer’s manager. The judgment dealt with funds stolen by the manager. The bank then sought to recover the funds from a joint bank account belonging to the manager and his wife. It claimed that the wife knowingly used the stolen funds. In an earlier action, the bank also sought other relief in the Chancery Division, claiming that it was entitled to partial payment of its judgment against the couple from any surplus funds held in escrow from the recent sale of the couple’s home. The wife responded that the remaining funds belonged to her by virtue of a settlement she had made with the bank’s customer (from whom the funds had been stolen). That settlement required the couple to sell their home and pay the bank’s customer a percentage of the sales. The bank argued that this settlement had no effect on its claim.

The lower court held that the couple’s tenancy by the entirety ended once the property was sold. Therefore, the sale proceeds were subject to the bank’s lien because the couple converted its tenancy by the entirety to cash. As a result, in the present action, the bank asserted that the wife was estopped from claiming ownership of the escrowed funds because that issue had been resolved in the earlier Chancery Division action.

Under Articles 3 and 4 of the UCC, and under N.J.S.A. 12A:3-101, a judgment creditor of one account holder may execute against a joint bank account only to the extent of the debtor’s equitable interest in the joint account. A debtor is presumed to own its entire account, subject to the right of the other account holders to rebut that presumption. In addition, a debtor’s exercise of control over funds deposited in a joint account shows that the debtor was beneficial owner of at least part of the account. In the case at hand, the manager deposited most of the stolen funds into a joint account with his wife. She then used those monies to pay household expenses. Consequently, a reasonable juror could easily find that the wife exercised control over the stolen funds. Regardless of how much of these withdrawals might have come from funds actually deposited by the wife, the Court held that the bank had the right to garnish from the entire joint account.

The wife sought to defeat the bank’s claim by insisting that she, her husband, and the bank were joint tortfeasors in relation to the bank’s customer, and since she and her husband settled with the customer, she argued should be treated as a settling defendant and entitled to a dismissal of the case. The Court disagreed, holding that the couple and the bank were not joint tortfeasors. Joint tortfeasors are “two or more persons jointly or severally liable in tort for the same injury.” No evidence suggested that the bank acted together with the husband to damage the bank’s customer, jointly or severally. Although the bank had an independent obligation to its customer, its liability was not based on fault. Rather, it was based on public policy. Therefore, the wife was not shielded by her settlement.

In addition, in order to avoid issue preclusion, the wife had to demonstrate the she either lacked a full and fair opportunity to litigate the issue in a prior proceeding or that there were other circumstances justifying an opportunity to relitigate. She did not meet her burden. She already had a “full and fair opportunity” in the Chancery Division to litigate ownership of the escrowed funds. Lastly, the Court held that the bank’s judgment lien had priority over the wife’s claim to the remaining cash proceeds in the escrow.

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