Wagner v. State

In a case that will likely have far-reaching implications in Maryland, on December 17, 2015, a hotly-divided Court of Appeals ruled that a party to a joint or multiple-party bank account may be found guilty of committing theft from that account.  The four judge majority opinion, authored by Judge Watts and in which Judge Greene, Judge Harrell (Retired, Specially Assigned) and Judge McDonald joined, held that Md. Code Ann., Fin. Inst. § 1-204(f) (“FI”) grants a party to a joint or multiple-party account the authority to access and withdraw funds in the account, but does not confer ownership of the funds in the account such that, as a matter of law, the party can be guilty of theft.  Judge Battaglia wrote a vigorous dissent, which Chief Judge Barbera and Judge Adkins joined, opining that a joint owner of an account does possess an ownership interest in the funds because, by its very nature, a joint account establishes each party’s right to all of the funds within the account. The dissent stated that the majority’s ruling creates a dangerous precedent, essentially converting a joint account into a convenience account for the purpose of criminalizing the Defendant’s actions.

In Wagner v. State, shortly after his wife’s death, a father (“Father”) added one of his daughters (“Daughter”) to his checking and savings accounts as a “joint owner.”  At trial, Father testified that he told Daughter “this is my money in there, but not hers” and that he specifically instructed Daughter that the only reason he was adding her as a joint owner on his account was so that she would be able to get his money out for him if he was not able to get it.   The detective assigned to investigate the case testified that over a nearly four year period, $251,645.83 was taken from the joint account through ATM withdrawals, cash withdrawals, and wire transfers to the daughter’s personal checking account and the bank accounts of companies that she owned.  Father testified that he had not authorized any of those transactions, and that he was not even aware that there was an ATM card issued on the joint account. 

Daughter testified in her own defense that Father received his bank statement every month and balanced his checkbook, so Father knew exactly “what he had” and “what he was using and spending.”  She further testified that all of the money taken out of the joint account was at Father’s request and with his authorization.

The circuit court found Daughter guilty of both theft and embezzlement (fraudulent misappropriation by fiduciary). Daughter was sentenced to eight years’ imprisonment, with all but eighteen months suspended, and was ordered to pay $122,355 in restitution to Father. 

On appeal, the split among the Court of Appeals centered on the interpretation of FI § 1-204(f); specifically, whether the statute confers an ownership interest to a party to a joint or multiple-party bank account, such that a joint owner could not be convicted of stealing his or her own property.  FI § 1-204(f) provides, in its entirety:

Unless the account agreement expressly provides otherwise, the funds in a multiple-party account may be withdrawn by any party or by a convenience person for any party or parties, whether or not any other party to the account.

The Majority opinion focused on the plain language of the statute, holding that, absent language in the account agreement expressly providing otherwise, FI § 1-204(f) only grants the authority to access the account and withdraw funds.  It does not, from the Majority’s view, bestow ownership of the funds in the account to a party or a convenience person to a joint or multiple-party account.   The opinion points out that FI § 1-204 is solely concerned with the relationship between the parties to a multiple-party account and the financial institution where the account is held, and not among the parties to the account themselves.  The Majority found significant that the word “ownership,” or any similar terms, are not used within the statute, and concluded that the plain language of FI § 1-204(f) only authorizes the act of withdrawal from a multiple-party account “nothing more and nothing less.”  Further, the Majority stated, equating the authority to withdraw with ownership “strains the clear language of FI § 1-204(f) beyond recognition.”

Although satisfied by its statutory interpretation, the Majority opinion included a lengthy discussion of FI § 1-204’s legislative history and the common law it was intended to abrogate. Specifically, FI § 1-204 was intended to change the common law principles applicable to multiple-party accounts following the death of an individual, and eliminate the need for the surviving parties to resort to extrinsic evidence to establish the donative intent of the deceased.  The Majority asserted  that neither the common law, nor FI § 1-204 or its legislative history, demonstrated an intent to affect ownership interests among living parties to a joint or multiple-party account,  or  to  otherwise  affect  any  agreement  that  may  exist  among  living  parties  concerning the ownership interest in funds in the account.  In addition, the Majority pointed to FI § 1-204(d), which addresses ownership of funds in a multiple-party account after the death of one of the parties.  That section provides that any funds in the account upon the death of a party shall belong to the surviving party or parties, unless another agreement exists.  Accordingly, the Majority reasoned, equating the right to withdraw funds from a multiple-party account to an ownership interest in those funds could allow one surviving party to withdraw all funds from the account upon the death of another party, and eliminate a third or more parties’ ownership rights to the funds in the account.  This interpretation, the Majority concluded, runs counter to FI § 1- 204(d)’s plain language and would effectively render that section meaningless and lead to inconsistent outcomes under FI § 1-204(f) and FI § 1-204(d).

Although the Majority opinion focused primarily on the theft conviction, the Defendant in Wagner v. State was also convicted of embezzlement (fraudulent misappropriation by fiduciary).  This conviction was upheld on appeal.  At the end of its opinion, the Majority stated, in a footnote, that Wagner v. State does not stand for the proposition that simply being a party to a joint or multiple-party account automatically makes that party a fiduciary.  The Majority maintained, instead, that whether a party to a joint or multiple-party account is a fiduciary in connection with funds in the account is a case-by-case determination.  The Majority clarified, in a successive footnote, that under this case’s circumstances, and in particular under the arrangement agreed to between Father and Daughter—that Daughter was to withdraw funds from the joint account only at Father’s direction and on his behalf—the evidence was sufficient to demonstrate that Daughter was a fiduciary in connection with the funds in the account.

Judge Battaglia immediately seized upon the obvious practical implication to the outcome reached by the Majority; specifically, that a joint owner to a multi-party account can now criminalize withdrawals from a joint account through parol evidence of oral agreements between the parties after-the-fact.  While recognizing Daughter’s appalling actions, and Father’s sympathetic plight, the Dissent astutely points out that family relationships are forever complicated.  The dissent further concluded that the Majority’s holding that a joint owner of an account can be found guilty of theft and embezzlement creates “a dangerous precedent” because of the high potential for criminal sanctions if a parent were to become disillusioned with a child who is a joint owner on a bank account.

The Dissenting opinion also took on the Majority’s application of FI § 1-204, stating that the type of account about which Father testified he intended to create, but did not, was a “convenience account” that is also provided for in FI §1-204.  Father established a joint account, which was not a convenience account, nor one that included any limitation on withdrawals in the account agreement itself.  As a result, Daughter could withdraw money from the joint account without the risk of being prosecuted for theft.  Under the Majority’s ruling, however, the Dissent argues that the parties’ joint account was converted into a convenience account for the purpose of criminalizing Daughter’s actions.

Further, the Dissent argued that the establishment of a joint account does not create a fiduciary relationship between the parties or confer fiduciary obligations upon any owner of the account to the other.  The mechanism for setting up such a fiduciary (“trust”) account is also provided in FI § 1-204, separate from that of a joint account.  In a trust account, the fiduciary relationship is established by the account agreement. Funds are accessible by the trustee, who is a party to the account and who is authorized to withdraw funds under 1-204(f).  The beneficiary of the trust account, however, does not possess a present right to withdraw funds from the account, but does stand to receive ownership of the account upon the death of all trustees.  As the Majority opinion envisions, imposing the fiduciary obligations of a trust account onto a joint account could allow any owner of a joint account to accuse another joint owner of violating his or her fiduciary duties - sufficient to be prosecuted for embezzlement - by withdrawing funds for his or her personal use.  This conclusion, the Dissent argues, runs counter to the statute, which specifically contemplates the type of trust relationship suggested by Father through the creation of a “trust account,” rather than a joint account.

The Dissenting opinion lead with a quote which similarly serves as a fitting close:

Great cases, like hard cases, make bad law. For great cases are called great, not by reason of their real importance in shaping the law of the future, but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment.   - Oliver Wendell Holmes, Jr.

 

Angela Grau is a litigation attorney at Davis, Agnor, Rapaport & Skalny.  For questions about this article or other questions regarding estate and trust litigation matters please do not hesitate to contact Angela at 410.995.5800.