gift – Paul Porvaznik – Business Litigator

Joint Owner of Checking Account Must Prove Exclusive Right to Funds by Elevated Burden of Proof – IL Appeals Court

Gataric v. Colak, 2016 IL App (1st) 151281 presents a collection tug of war between a judgment creditor and a third party concerning funds in a joint bank account. The salient issue is what level of proof the third party must meet in order to rebut the presumption that the bank account funds belong not to the third party, but to the judgment debtor.

The plaintiff judgment creditor served a third-party citation on the judgment debtor’s bank who then froze the account. The respondent, a joint account holder, intervened and asserted she was the account’s sole owner and the debtor was only added for “convenience” purposes.

The trial court sided with the plaintiff, and found the respondent failed to prove by clear and convincing evidence that she was entitled to all funds in the account and did not intend to gift the joint account funds to the debtor at the time the account was opened. The court granted the creditor’s turnover motion and defendant appealed.

Held: Affirmed.

Reasons:

The defendant argued that she was only required to prove her rights to the joint account by a preponderance of evidence – a less exacting burden than the clear and convincing evidence standard applied by the trial court. To meet the preponderance standard, the claimant must prove that her allegations “more likely than not” occurred. The common mathematical description of the preponderance standard is that there is a 51% chance that plaintiff’s version of events happened as opposed to defendant’s.

The third party in Gatarik argued that she alone set up the joint account as a convenience account. She claimed to add the judgment debtor as a joint account holder simply to facilitate the repayment of a short-term loan.

Under Illinois law, joint bank account holders are presumed to have equal access to account funds and a creditor of only one holder can attach the account. The burden shifts to the non-debtor account owner to establish what part of the account belongs to him/her.

When a garnishee (i.e. a bank or bank account holder) answers that a judgment debtor holds money in a joint bank account, this establishes a prima facie case that the money in the account belongs to the judgment debtor. The burden then shifts to the garnishee to prove what part of the funds belong exclusively to him/her.

When deciding who owns joint bank account funds, the court examines: (1) who exercised control of the funds, (2) who made contributions to the account and from what source and in what amount, (3) who paid taxes on the account’s earnings, and (4) the purpose for which the account was established. (¶¶ 19-20)

Here, the trial court found, after hearing live testimony, that the citation respondent didn’t establish by clear and convincing evidence that she was the sole owner of the account funds and that the account was a mere convenience account.

Since the respondent couldn’t show that the trial court misapplied the law or the facts, her appeal failed. As a result, the trial court’s turnover order related to the account funds was upheld.

Afterwords:

In situations where two or more people are claiming rights in frozen bank account funds, it is incumbent on the non-debtor to establish by clear and convincing evidence his/her dominant right to the funds.

The clear and convincing evidentiary burden falls midway between preponderance of evidence (the most relaxed burden) and beyond a reasonable doubt (the most severe) on the proof spectrum.

Plaintiff Loses Bid to Repossess Dog Gifted to Ex: Illinois Replevin, Personal Property and Gift Law Basics

Koerner v. Nielsen, 2014 IL App (1st) considers the parameters of an inter vivos gift (a gift made during a giver’s lifetime) as they pertain to the question of who owns a dog after the break-up of a romantic relationship.

The plaintiff gave her then-boyfriend (the defendant) a dog (a Stig) for Christmas. About fourteen months later, the parties’ broke up and the defendant moved out, taking the dog with him. Plaintiff filed a replevin suit to get the dog back.

A two-day bench trial culminated in a judgment for the defendant. Plaintiff appealed.

Held: Affirmed. Plaintiff made a gift of the dog to the defendant, defendant accepted the gift, and plaintiff failed to show that the gift was revoked.

Under Illinois personal property and gift law, where a defendant asserts that he owns something based on a gift from a plaintiff, he must prove, by clear and convincing evidence, donative intent: that the owner departed with “exclusive dominion and control over the subject of the gift” and delivered the property to the donee (the party claiming he is the gift’s recipient).

Donative intent is determined at the time of the transfer of property, and is based on what was done or said at the time of transfer, not at some later date. The delivery element of a gift is satisfied where the parties live together (like here).

A gift in contemplation of marriage (e.g. an engagement ring) is a conditional gift. If the condition (the marriage) never materializes, the property reverts back to the gifting party.

The court rejected plaintiff’s argument that she never delivered the dog to the defendant. The plaintiff claimed that since she maintained insurance on the dog at all times and was listed as the owner on the dog’s registration papers, she never relinquished control of the dog.

The court found “documentary title is not conclusive of ownership” and noted that all that is required is that the donor part with exclusive dominion and control.

Since the plaintiff could point to no evidence that showed the gift of the dog to defendant was conditional on a later marriage or continuing the relationship, the court found that the defendant conclusively established that the dog was an unconditional gift to him and that he was the rightful owner.

Take-away: This case is post-worthy for its discussion of a somewhat arcane legal topic (in the sense that inter vivos gifts are not often the subject of published opinions) in a commonplace fact setting.

The case holds practical relevance for lawyers and non-lawyers alike as it highlights the potential complications that arise when romantic cohabitants break up and there is no formal marital union to neatly divide their personal property upon dissolution.

Illinois Replevin Law: Who Gets to Keep (Broken) Engagement Ring?

The (diabolical?) Joey Greco (I think that’s the ‘Cheaters’ Host’s name) would love this one. In Carroll v. Curry, 912 N.E.2d 273 (2nd Dist. 2009), the plaintiff filed a replevin suit against his ex-fiancée (defendant) seeking the return of an engagement ring that he previously bought.

The couple was engaged to be married for several years until the defendant broke it off after she accused the plaintiff of cheating. After kicking plaintiff out of their home, the defendant refused to return the ring since plaintiff’s infidelity caused the relationship to end. Plaintiff filed a replevin suit to get the ring back and eventually moved for summary judgment. The trial court granted the motion and the defendant appealed.

Held: Affirmed. Plaintiff gets the ring back.

Siding for the plaintiff, the Court noted that replevin is a strict, statutory proceeding that does not look at the concept of “fault.” This means a court will not look at the underlying reasons why someone refuses to return an item of personal property.

The primary purpose of the replevin statute is to test the right of possession of personal property and place the successful party in possession of the property. 735 ILCS 5/19-101.

A replevin plaintiff must prove he is (1) lawfully entitled to possession of property, (2) the defendant wrongfully detains the property and (3) refuses to deliver the possession of the property to the plaintiff.

“Wrongful” in the replevin context doesn’t mean immoral or “bad.” It’s wrongful in the legal sense; meaning one person has a superior right to an object over the other.

Normally, the replevin plaintiff must make a demand for return of the item. However, where a demand would be pointless (“demand futility”), the plaintiff is excused from the demand requirement.

The Second District described an engagement ring as a gift in contemplation of marriage. The plaintiff here bought the ring to induce defendant to marry him. The gift of the ring was contingent on defendant following through with the marriage. Since defendant was the one that terminated the engagement, the contingency (marriage) didn’t occur and defendant no longer had a claim to the ring: “the party who fails to perform on the condition of the gift has no right to property acquired under such pretenses.”

The court then rejected the defendant’s argument that plaintiff’s infidelity was the reason for the break-up. Delving into fault-based inquiries, the court said, would mire it in examining parties’ subjective motivations as opposed to objectively deciding who has a better claim to possession of an object.

Take-aways:

– Replevin is narrowly focused on the question of a party’s right to possession;

– The replevin calculus doesn’t concern itself with questions of who’s at fault or the cause of a dispute;

– Occasionally, where there is fraud or unjust enrichment, equitable considerations can factor in a replevin case. Here, however, since the plaintiff paid for the ring, there was no unjust enrichment in allowing him to reclaim it.

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