Opinion ID: 2101837
Heading Depth: 1
Heading Rank: 2

Heading: Joint Account Presumptions

Text: The issues in this petition to transfer require us to interpret the Indiana's Non-Probate Transfer Act (the NPTA) and, in particular, presumptions that arise under it. Ind. Code § 32-4-1.5-4(a) states: [s]ums remaining on deposit at the death of a party to a joint account belong to the surviving party or parties as against the estate of the decedent unless there is clear and convincing evidence of a different intention at the time the account is created. The Bank asserts that this provision creates a statutory presumption that, upon the death of a party to a joint account, the funds held in the joint account belong to the surviving party. The Bank argues that to successfully rebut this presumption, Ind. Code § 32-4-1.5-4(a) requires clear and convincing evidence of a contrary intent existing at the time the account was created. Accordingly, a party challenging the presumption of survivorship must meet its burden of proof without the aid of a presumption of undue influence. The Bank argues that the Court of Appeals' application of the NPTA frustrates the legislature's clearly-expressed intent and imposes an unreasonable burden upon widowed survivors to prove the intent of the deceased spouse. In response, Rogers argues that the Court of Appeals paid proper deference to the legislative burden of proof contained in the NPTA and that the Court of Appeals properly recognized the existing presumptions: (1) the presumption of trust and confidence that attaches to the husband and wife relationship and (2) the presumption of undue influence by the spouse in the dominant position. As a result of these presumptions, Rogers asserts, a constructive trust is created to prevent the dominant spouse from benefitting from the proceeds and to preserve the proceeds for the estate of the subordinate spouse. Because the NPTA is in derogation of the common law, it must be strictly construed. Thus, Rogers would have us conclude that the legislature only chose to heighten the burden of proof for someone challenging the right of the survivor to the proceeds of the account, but did not intend to destroy the common law of constructive trust as it applied to joint accounts. Rogers' argument can be traced to the common law where the courts generally would presume the existence of undue influence in a confidential relationship. As stated by this Court: There are certain legal and domestic relations in respect to which the law raises a presumption of trust and confidence on one side and a corresponding influence on the other. The relations of attorney and client, principal and agent, husband and wife, and parent and child belong to this class and there may be others. Where such a relation exists between two persons and the one occupying the superior position has dealt with the other in such a way as to sustain a substantial advantage, the law will presume that improper influence was exerted and that the transaction is fraudulent. Westphal v. Heckman (1916), 185 Ind. 88, 93-4, 113 N.E. 299, 301. See also Shapiro v. Rubens, 166 F.2d 659 (7th Cir.1948) (applying Indiana law); Rochester v. Levering (1885), 104 Ind. 562, 4 N.E. 203; Hall v. Indiana Dept. of Rev. (1976), 170 Ind. App. 77, 351 N.E.2d 35; Hunter v. Hunter (1972), 152 Ind. App. 365, 283 N.E.2d 775; Keys v. McDowell (1913), 54 Ind. App. 263, 100 N.E. 385; McCord v. Bright (1909), 44 Ind. App. 275, 87 N.E. 654; Huffman v. Huffman (1905), 35 Ind. App. 643, 73 N.E. 1096. Particularly in situations where the husband stood to benefit from the transaction, historically the relationship of husband and wife put transactions between them within the presumption of undue influence. McCord v. Bright, 44 Ind. App. at 288-89, 87 N.E. at 659. This was because the wife was generally considered dependent on her husband (the trust of the wife in the honor, good faith and love of her husband is generally so perfect that in all business affairs she depends upon him, and suffers herself to be controlled by his judgment. Huffman v. Huffman, 35 Ind. App. at 646, 73 N.E. at 1097.) The presumption of undue influence allowed the party with the burden of proof, usually the dependent spouse, to make a prima facie case. Keys v. McDowell, 54 Ind. App. at 269, 100 N.E. at 387. As a result, the burden of going forward shifted to the dominant party to establish that he acted in good faith, that he did not take advantage of his position, and that the transaction was fair and equitable. Rochester v. Levering, 104 Ind. at 568, 4 N.E. at 207; McCord v. Bright, 44 Ind. App. at 288, 87 N.E. at 659. Even where the presumption of undue influence existed, however, a constructive trust would be imposed only where the facts demonstrated actual or constructive fraud. Westphal, 185 Ind. at 99, 113 N.E. at 301. The evidence to establish the constructive trust had to be so clear and convincing as to lead to but one conclusion. Shapiro v. Rubens, 166 F.2d at 666. In contrast to the common law is the legislatively-enacted NPTA which became effective January 1, 1977. The section in question here, Ind. Code § 32-4-1.5-4(a), states that absent clear and convincing evidence of a different intention at the time the account is created, funds remaining at the death of one party belong to the survivor. The Bank asserts that this statutory provision supersedes the common law and requires that joint accounts presumptively belong to the survivor. Rogers contends that the statute does not change the common law of constructive trust, but rather only heightens the burden of proof for the party challenging the right of the survivor to the proceeds of the joint account. In developing the NPTA, the Indiana Probate Code Study Commission recognized the underlying assumption is that most persons who use joint accounts want the survivor or survivors to have all balances remaining at death. Unif.Probate Code § 6-104(a), 8 U.L.A. (1983) (quoted by Indiana Probate Code Study Commission in commentary following Ind. Code § 32-4-1.5-4). See also Matter of Guardianship of Walters (1986), Ind. App., 460 N.E.2d 1011, 1013; Rogers v. Rogers (1982), Ind. App., 437 N.E.2d 92, 96. A party may alter the presumption of survivorship, however, by providing the financial institution with a written order containing an alternate instruction. Ind. Code § 32-4-1.5-5. As stated above, at common law a presumption of undue influence arose upon transactions between parties with certain relationships and, as a result of the presumption, the burden of proof shifted to the spouse who benefitted from the transaction to establish the integrity of the transaction. In contrast, under the NPTA statutory scheme, a presumption arises in favor of the survivor, regardless of the relationship between the decedent and the survivor. This statutory presumption requires that a party challenging the survivor's right to the joint account proceeds establish that the decedent did not intend for the survivor to receive the funds. Consequently, the common law presumption of undue influence contradicts the statutory presumption of survivorship because the presumption of undue influence shifted the burden of proof to the survivor of a joint account and this shift in the burden of proof is not contemplated by the statutory scheme. The legislative enactment of the survivorship presumption by unmistakable implication replaces the common law presumption of undue influence. It follows that the common law presumption of undue influence arising between parties with certain relationships no longer exists under the NPTA. We hold that Ind. Code § 32-4-1.5-4(a) creates the presumption that a survivor to a joint account is the intended receiver of the proceeds in the account. In order to defeat this presumption, a party challenging the survivor's right to the proceeds must present clear and convincing evidence that the decedent at the account's creation did not intend the joint tenant to receive the proceeds or that the intent of the decedent changed before death and the decedent by written order informed the financial institution of this change. Ind. Code §§ 32-4-1.5-4(a), 32-4-1.5-5. Consequently, the burden of proof remained with Rogers to establish by clear and convincing evidence that Banko did not intend for Nadine to receive the funds held in the joint accounts.