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Estate of Lewis v. Rosebrook

Court of Appeals of Michigan

July 16, 2019

ESTATE OF ROBERT G. LEWIS, by KATHY J. LEWIS, Personal Representative, Plaintiff-Appellant,
CAROL L. ROSEBROOK, Defendant-Appellee.

          Montcalm Probate Court LC No. 2017-032635-CZ

          Before: Swartzle, P.J., and M. J. Kelly and Tukel, JJ.

          SWARTZLE, P.J.

         In Michigan, two or more parties can establish and deposit funds in a banking institution in a joint account with the right of survivorship. In doing so, the parties create a joint tenancy in the account. Under MCL 487.703, the banking institution is shielded from liability for any withdrawal of funds made by a co-owner of the account, at least in the absence of prior written notice that withdrawals are not permitted. This statutory shield does not, however, also serve as a sword for the withdrawing co-owner to pierce the non-withdrawing co-owner's rights. Instead, the withdrawing co-owner must take the funds from the account as a co-owner and, therefore, must use the funds in a manner consistent with the other co-owner's rights.

         Here, the parties had three joint accounts with the right of survivorship. The parties had equal ownership of the accounts and had equal rights to access and use the funds. While the parties were both still living, defendant transferred substantially all of the funds from the joint accounts to her own personal accounts. In doing so, she acted in her own personal capacity, rather than in her capacity as a co-owner in the joint tenancy, and this was unlawful. For the reasons set forth below, we reverse in part the judgment of the probate court and remand for further proceedings.

         I. BACKGROUND

         This case involves the actions of both Robert Lewis and his daughter, Kathy Lewis. To avoid confusion, we refer to Robert Lewis by his last name and to Kathy Lewis as his daughter or simply as plaintiff.

         Carol Rosebrook and Lewis were a couple for approximately 24 years, living and socializing together, though they never married. They had several joint and individual financial accounts, three of which are relevant here. In 2001, 2003, and 2009, the parties opened joint accounts with the right of survivorship at Old Kent Bank (later Fifth Third Bank) and Sidney State Bank. All three accounts were funded primarily, if not exclusively, by Lewis. The couple used the funds to pay their ordinary day-to-day expenses, sometimes consulting each other and sometimes not, depending on the nature and amount of the expense. As the probate court concluded, "In all respects these accounts were held and used equally by both parties."

         Lewis was diagnosed with a serious illness in 2013, and in October 2016, he moved into a care facility. The couple ended their relationship in late January 2017, and they agreed to a 30-day period to sort out their affairs. Immediately after the split, Lewis and his daughter went to Fifth Third Bank and asked that the bank "freeze" the joint accounts. They maintain that they were told that the accounts could not be "frozen, "[1] and they left the bank without withdrawing any funds or closing the accounts.

         Over the next two weeks, Rosebrook transferred approximately $255, 000 from the three accounts to accounts solely in her own name; this total represented substantially all of the funds in the three accounts. At the time, she was a cotrustee of the Robert G. Lewis, Sr., Trust. Rosebrook also had the power to act on Lewis's financial behalf under a durable power of attorney. Lewis did not authorize or otherwise agree to the transfers, nor did he even know that the funds had been removed until he went to one of the banks and tried to access an account.

         In May 2017, while Lewis was still living, the probate court appointed his daughter as his conservator. Lewis was mentally competent but, as a result of his physical condition, he needed assistance with his financial affairs. On Lewis's behalf, his daughter sued Rosebrook, alleging claims of conversion, breach of fiduciary duty, constructive trust, and oral trust over the funds that Rosebrook transferred from the joint accounts. Lewis died in October 2017 and subsequently his estate, with his daughter as the personal representative, became the plaintiff in this case.

         The probate court held a bench trial. Plaintiff maintained that the accounts were established merely for Lewis's convenience or, at most, for the payment of mutual household expenses, and that Lewis did not intend to gift all of the funds in the accounts to Rosebrook. Plaintiff also argued that Rosebrook's statutory authority to withdraw funds from the accounts as a joint-account holder did not necessarily give her the right to retain those funds irrespective of Lewis's interest in the funds. In contrast, Rosebrook argued that, as a joint-account holder, she had "complete and unlimited rights" to all funds in the accounts, even to the exclusion of Lewis during his lifetime.

         The probate court issued a written opinion and entered judgment in favor of Rosebrook. The probate court concluded that the parties held the accounts as joint tenants with the right of survivorship under MCL 487.703. The probate court further concluded that there was not reasonably clear and persuasive proof to overcome the statutory presumption that title and access to the funds were intended to be shared jointly. Although Lewis testified during his deposition that the accounts were set up for his own convenience, the probate court noted Lewis's testimony that he wanted to take care of Rosebrook and that he gave her the proverbial "keys to the safe" by setting up the joint accounts. In fact, the relationship was a relatively long one, and the financial arrangements were created and maintained in different years and at different institutions. At all times, both parties had equal access to and equal use of the funds in the joint accounts. Moreover, Lewis was a successful businessman, and the accounts were established long before he became ill or needed assistance with his finances. In fact, while he later became physically frail, he appears to have retained his mental competency well past the filing of this lawsuit. Given all of this, the probate court concluded that these were not financial accounts set up jointly for Lewis's mere convenience.

         With regard to the parties' respective interests, Rosebrook testified that they considered the funds in the joint accounts as "our money." The evidence presented at trial showed that both parties freely used the funds in the accounts to pay for their personal and mutual needs. Although they discussed larger withdrawals before making them, Rosebrook did not need Lewis's permission to access the accounts, and she regularly used the accounts to pay bills and her own expenses. Rosebrook even maintained that Lewis established the accounts as part of a plan for their retirements.

         The probate court concluded that Rosebrook and Lewis were co-owners of the accounts and had equal interests in them. The probate court reasoned that, because Rosebrook had the right to make withdrawals and transfers, and her rights were not limited to matters of Lewis's convenience, Rosebrook had the absolute right to withdraw and retain all of the funds from the joint accounts, notwithstanding any right Lewis had to the funds as a joint tenant. Similarly, had Lewis withdrawn all of the funds when he and his daughter went to the bank after the couple broke up, he would have been entitled to keep all of the funds and Rosebrook would have had no recourse, according to the probate court. Therefore, the probate court held that plaintiff's claims were without merit.

         Plaintiff ...

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