Newman v. Thomas: the Nebraska Supreme Court Requires Signed Writings for the Alteration of Payable on Death Accounts

• Publication year: 2022

37 Creighton L. Rev. 247. NEWMAN v. THOMAS: THE NEBRASKA SUPREME COURT REQUIRES SIGNED WRITINGS FOR THE ALTERATION OF PAYABLE ON DEATH ACCOUNTS

Creighton Law Review

Vol. 37

INTRODUCTION

Courts traditionally have been reluctant to recognize payable on death ("POD") accounts as a valid form of testamentary asset disposition.(fn1) In invalidating these types of conveyances, some courts have rejected the notion a POD account is a valid inter vivos gift or a valid substitute for a will.(fn2) However, many states have since created statutes that allowed an owner of a bank account to name a beneficiary to the account prior to the account owner's death.(fn3) One of the statutory prerequisites, in allowing account owners to name POD beneficiaries, was the requirement of a signed writing.(fn4) A signed writing notified the responsible financial institution there was a POD beneficiary added to the account.(fn5) Jurisdictions have taken varying approaches to interpreting the requirements for altering the beneficiary of a POD or joint bank account.(fn6) The majority of jurisdictions, which have adopted the pertinent part of the Uniform Probate Code, have ruled the alteration of testamentary accounts must contain a signed writing to adequately substitute for a will.(fn7) Notwithstanding this prevailing view, a minority of jurisdictions have found the statutory language for the alteration of POD and joint accounts only suggested a signed writing should be present, but that an oral request to alter an account sufficed.(fn8)

In Newman v. Thomas,(fn9) the Nebraska Supreme Court determined there must be clear evidence of a signed writing to add a POD beneficiary to a certificate of deposit that the account owner originally opened as a single party account.(fn10) The court stated the Nebraska statute, allowing for the alteration of POD accounts, required a signed writing in order to permit the alteration of a POD account, despite the seemingly permissive wording of the statute.(fn11) The court stated interpreting the language of the statute as permissive would destroy the intent of the statute, and interpreting the statute as not requiring a signed writing would effectively make the statute useless.(fn12) As such, the court opined interpreting the statute as permissive would produce a law that only contained "a non-binding legislative suggestion."(fn13)

This Note will discuss the Nebraska Supreme Court's correct determination that a signed writing was required to alter a non-POD single party account into a POD account.(fn14) This Note will first review the facts and holding of Newman.(fn15) Next, this Note will survey previous Nebraska decisions and other jurisdictions' decisions, which have examined the requirements for the alteration of POD and joint bank accounts.(fn16) Lastly, this Note will examine the court's decision in Newman and will present three arguments for why the Newman court correctly required a signed writing.(fn17)

First, this Note will show the Newman court was correct in its judgment because a signed writing adds certainty to who was the intended beneficiary of the account.(fn18) Second, this Note will demonstrate requiring a signed writing effectuates the intent of the legislature.(fn19) Finally, this Note will show the creation of a POD account from a single party account is treated the same as a modification of an existing multi-party bank account under the Nebraska probate statutes.(fn20) As a result, this Note will conclude, because there was no signed writing in Newman, the Nebraska Supreme Court was required to disregard the attempt to orally alter a single party non-POD account into a POD account.(fn21)

FACTS AND HOLDING

In Newman v. Thomas,(fn22) Henry Chamberlin ("Henry") opened a certificate of deposit account ("CD"), without a payable-on-death ("POD") beneficiary named for the account, at American National Bank in May 1997.(fn23) American National Bank used a standard form in completing Henry's account and, as was the bank's practice, American National Bank gave the original form to Henry and retained two copies of the form for record keeping purposes.(fn24) On April 16, 1999, Henry died leaving a will which named his sister, Ivorie Pearl Newman ("Ivorie"), as his personal representative.(fn25) Ivorie asked American National Bank to place the proceeds of Henry's CD in an estate checking account.(fn26)

After Henry's death, his friend, Alfrod Thomas ("Alford"), appeared at a branch office of American National Bank stating he was a POD beneficiary of the money in the CD account.(fn27) Alford alleged he had accompanied Henry to American National Bank so Henry could withdraw interest from the CD in January or February 1998.(fn28) Alford claimed during the same visit, Henry met with Patrice Smith ("Patrice"), an employee of American National Bank, and orally requested Alford's name appear as the POD beneficiary of the CD.(fn29) Alford also stated he witnessed Patrice type something on Henry's original form, and Henry signed at least one document during the meeting.(fn30) Henry's signature was on the original CD form in three places, but none of the signatures referenced Alford as the POD beneficiary.(fn31)

When Alford arrived at American National Bank to claim the proceeds from the CD, he showed the bank the original form for the CD Henry had retained, on which someone had typed Alford's name in the area designated for POD beneficiaries.(fn32) Additionally, someone had handwritten an "x" in the box that designated a "single party pay on death" beneficiary.(fn33) However, the space provided for the owner's initials was left blank.(fn34) Alford claimed Patrice had typed his name on the forms, but Patrice had no recollection of the meeting in January or February 1998.(fn35) Furthermore, American National Bank had no other documents stating Alford was the intended beneficiary of Henry's account.(fn36)

Upon realizing there were multiple claimants to the proceeds from the CD account, American National Bank froze the estate's checking account.(fn37) Ivorie filed a declaratory judgment against Alford and American National Bank in the District Court for Douglas County, Nebraska.(fn38) Before the court ruled on the declaratory judgment, American National Bank filed a motion to leave the funds with the court and for dismissal from the case.(fn39) Granting the motion, Judge Gary Randall dismissed American National Bank from the case.(fn40)

Ivorie moved for summary judgment against Alford arguing he offered no written evidence Henry's account belonged to him.(fn41) Prior to the court's decision, Alford filed an affidavit asking for a continuance because he wanted an expert to analyze the typewriter allegedly used to type his name on the POD account.(fn42) The district court inferred, by filing the affidavit, Alford wished to challenge Ivorie's motion for summary judgment.(fn43) Nevertheless, the district court granted summary judgment in Ivorie's favor, holding Henry needed to present signed written notice to American National Bank of his intention to change the CD to a POD account, which Henry had failed to do.(fn44) The district court stated the Nebraska Probate Code ("NPC") required Henry to provide signed written notice to American National Bank before adding Alford as a POD beneficiary to the account.(fn45)

Alford appealed the judgment to the Nebraska Supreme Court, which affirmed the district court's ruling.(fn46) Alford argued the district court erred in interpreting the NPC and in granting summary judgment to Ivorie.(fn47) Judge William Connolly, writing for a unanimous court, recognized two arguments made by Alford in his appeal.(fn48) First, Alford argued the district court erred in granting summary judgment primarily because the court misinterpreted and misapplied the applicable statutes of the NPC.(fn49) Alford believed the requirement of a signed writing was only optional and not mandatory.(fn50)

Addressing Alford's first argument, the Nebraska Supreme Court determined that interpreting the language of Nebraska Revised Statutes section 30-2724, a provision of the NPC, as permissive would make the statute meaningless because any method used for altering an account becomes possible, not just a signed written notice.(fn51) The court noted the primary ambiguity in the NPC provision was whether the word "may" in the statute provided a permissive method or a compulsory method for changing the type of account.(fn52) The court reasoned it must look to the legislative intent of a statute and interpret the statute in such a way as to best achieve its purpose.(fn53) In this case, the court concluded the word "may" in the statute allowed a party to change the type of account he had, but the party must have given signed written notice to his financial institution in order to effectuate the change.(fn54)

Second, Alford argued even if section 30-2724 was mandatory, the statute only applied to altering existing multi-party POD accounts and did not apply to changing a non-POD account into a POD account.(fn55) The Nebraska Supreme Court determined section 30-2723 defined the rights of a non-POD party, and section 30-2724 included the language of section 30-2723.(fn56) Section 30-2723 covered "non-POD single party accounts," stating funds within a single party account that did not have a POD designation, were not affected by the death of the account...