Whose Safety Deposit Box Is It Anyway?

February 11, 2019 at 9:19 am Leave a comment

On a gray and dreary Upstate New York Monday Morning, it’s the little things in life that get me going so I’m as happy as a Patriot fan to be able to talk about one of those bothersome account issues with big implications if you don’t know what you’re doing. You should be familiar with Section 675 of New York’s Banking law which establishes a presumption that all the money in a joint account belongs to all the account holders.

Let’s say a couple opens up a safety deposit box. They both sign your standard agreement. Years go by when all of a sudden your credit union receives an information subpoena requesting about the husband’s accounts. It appears that right around the time the joint account was opened, he was in the middle of some litigation and now owes a judgment worth millions of dollars. The sheriff issues an order to claim the proceeds of the safety deposit box but our couple argues that the proceeds belong to the wife who was not the subject of the lawsuit. She explains that the husband’s name was simply put on the safety deposit box paperwork for convenience. Who’s right and does it really matter? (Remember, that the same legal framework applies to joint accounts as well so it’s worth it to read on and refresh yourself on the basics of joint account ownership.)

This is pretty much the issue that had to be decided by New York’s Appellate Division in the recent case of New York Community Bank v. Bank of Am. N.A. New York Community Bank obtained a money judgment against Eri Chitrik and his d/b/a when they found out that he and his wife had a safety deposit box pursuant to an information subpoena they sent to Bank of America, they commenced a turnover proceeding pursuant to New York CPLR 5225[b]. Fortunately for us the dispute forced the appellate division to grapple with this question: Whether a presumption of joint tenancy with rights of survivorship in a safety deposit box also extends to its contents where only one of the persons who rented the box is a judgment debtor?

The court answered that the same presumption of joint ownership that applies to joint accounts also applies to this safety deposit box. First, the account agreement signed by both parties stipulated that access to the box was under the control of both parties. In addition, pursuant to the bank’s procedures, both husband and wife had to show appropriate identification.

Even though opening up a joint account establishes a presumption of joint access to funds this presumption can be overcome. For instance, the couple could have produced evidence that the husband was never allowed to access the funds and that the money placed in the account was purely for the wife’s benefit. But the key thing to keep in mind is that it was incumbent on the couple to demonstrate why this wasn’t a true joint account as opposed to putting the burden on the creditor to demonstrate that it was. In this case, once the court determined that the safety deposit box was a joint account, the couple had insufficient evidence to demonstrate otherwise.

Although the case is straightforward, there are some great operational takeaways which I know have come up in telephone calls to our compliance hotline over the years. First, your credit union have clear-cut procedures for opening up safety deposit boxes as well as unequivocal language detailing what type of account is being opened. This will avoid a lot of confusion down the line. Second, an information subpoena presumptively applies to any joint account belonging to the debtor. This means that all the money in the account can be turned over to the creditor. Third, information subpoenas are by far the most common operational issue with which credit unions and banks have to deal with on a daily basis. Properly handled, they do not expose your credit union to liability. This case is a good example. Although New York Community Bank is technically suing Bank of America, the lawsuit is between the account holders and their creditors each contending they should have access to the contents of the safety deposit box being held by Bank of America.

Entry filed under: Compliance, Legal Watch, New York State. Tags: , , .

CU’s Need CECL Guidance Now 4 Lessons from a “Massive” Mortgage Data Breach

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed

Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 598 other followers