Court Opinion

ID: 9845611
Source: CourtListenerOpinion
Date Created: 2023-09-24 03:25:08.587807+00
Date Added: 2024-06-11T09:16:16.086083
License: Public Domain

Judge DUBOFSKY,
dissenting.
I respectfully dissent to Part I of the majority opinion.
Apparently Colorado belongs to an extremely small minority of states that by statute permits a bank to setoff an entire joint deposit against a private debt of any joint obligation. See Teselle, Banker’s Right of Setoff, 34 Okla.L.Rev. 40 (1981) (Colorado stated to be the only state with this statutory provision).
When, absent a clear statutory right, banks have asserted a right of setoff against non-debtor accounts, the courts have refused to allow it. 10 Am.Jur.2d Banks § 667 (1963). In Commercial Discount v. Milwaukee Western Bank, 61 Wis.2d 671, 214 N.W.2d 33 (1974) the court stated:
“[I]t is the well settled rule that if a bank actually knows that' sums deposited in the account of one of its debtors belongs to a third person, it cannot apply such funds against the debtor’s obligation to it. A bank is also denied the right of setoff where it has knowledge of circumstances sufficient to necessitate inquiry concerning the sums.”
The primary reason other states have restricted a bank’s maximum right of set-off against a non-debtor joint depositor is lack of mutuality of obligation. This principle requires that the owners of the account from which the money is seized are the same persons that owe the obligation to the bank. See 10 Am.Jur.2d Banks § 667 (1963). It is a basic contractual notion that a person who is not liable or has not agreed to be responsible for a debt cannot be deemed to owe it. Therefore, it is wrong to seize money from a party who has not agreed to the debt.
In Susman v. Exchange National Bank, 117 Colo. 12, 183 P.2d 571 (1947), the court *10recognized the fundamental inequity of allowing a party to seize funds from a debtor account in which the funds were not the debtor’s. In Susman, the debtor had an account in his name in the bank in question but the money in the account belonged to a non-debtor third party. The garnishing creditor initiated an action to seize these funds, and there was an objection on the basis that the funds did not belong to the debtor. Consistent with the law in other jurisdictions, see Musker v. Gil Haskins Auto Leasing, Inc., 18 Ariz.App. 104, 500 P.2d 635 (1972), the court held that the garnishing creditor had no right to seize the funds of a third party only because they were located in the debtor’s account.
Even if this joint account were analogized to joint tenancy law, the bank would not be entitled to seize the property of the non-debtor. Joint tenants are seized of the entire estate for the purposes of tenure and survivorship but of only an undivided part or interest for the purposes of forfeiture or immediate alienation. 20 Am. Jur.2d Co-tenancy and Joint Ownership § 7 (1965).
There are also serious questions as to the constitutionality of § 11-6-105, C.R.S. (1987 Repl.Vol. 4B) and § 15-15-113, C.R.S. (1987 Repl.Vol. 6B) on both substantive due process, see Kaiser Aetna v. United States, 444 U.S. 164, 100 S.Ct. 383, 62 L.Ed.2d 332 (1979), and procedural due process grounds. See Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.E.2d 556 (1972). The statute permits the seizure of property (money) by a bank from an account holder who does not owe the money. In my view, when the bank seizes money from an innocent party under the statute, the person’s substantive due process rights are violated.
Here, the bank claims it would be too difficult and too time consuming to disclose the various legal ramifications of opening a joint account. I strongly disagree with this position and would impose such a duty on the bank.
Furthermore, I take exception to the bank’s failure to make disclosure to plaintiff at the time the loans were guaranteed by her son. In the past two decades, both the General Assembly and the judiciary have undertaken efforts to protect the uninformed consumer from the technical and complex aspects of borrowing money from commercial lenders which hold superior bargaining positions. The main emphasis has been on disclosure and fair dealing. See 15 U.S.C. § 1601, et seq. (1982); § 5-1-101, et seq., C.R.S. Indeed, under some circumstances, a lender is deemed to have a fiduciary duty to its customer. See Bair v. Public Service Employee’s Credit Union, 709 P.2d 961 (Colo.App.1985); Dolton v. Capitol Federal Savings & Loan Ass’n, 642 P.2d 21 (Colo.App.1981).
Here, there was no disclosure of the consequence of a joint account when it was opened or when the bank loan was made. The practical effect of the joint account remaining in the bank during the pendency of the loan was to make plaintiff the guarantor of her son’s business loan. Typically, the commitment of a guarantor must be written. See § 38-10-112(l)(c), C.R.S. (1982 Repl.Vol.16A). Also, generally, the terms of a loan may not be arbitrarily altered without the prior consent of the guarantor. See Cooper Investments v. Conger, 775 P.2d 76 (Colo.App.1989).
In summary, the preferred position of banks in our society has resulted in an application of different rules in imposing liability and seizing assets of joint obligors. In my view, absent a complete disclosure of the right of setoff, this statutory privilege to appropriate the funds of a joint account depositor (a) circumvents the acceptable procedures for collecting debts, (b) is contrary to the sound public policy of protecting against overreaching by those in superior bargaining positions, and (c) violates the due process clause of the United States Constitution.
Accordingly, I would reverse the dismissal of plaintiff’s negligence claim and would remand for further proceedings on that claim.
In light of my dissent on Part I, I do not reach Part II and Part III of the majority opinion.