Paradis v. Greater Providence Deposit Corp.

• Decision Date: 27 December 1994
• Docket Number: No. 93-29-A,93-29-A
• Citation: 651 A.2d 738
• Parties: Maurice C. PARADIS v. GREATER PROVIDENCE DEPOSIT CORPORATION et al. ppeal.
• Court: Rhode Island Supreme Court

Page 738

651 A.2d 738

Maurice C. PARADIS v. GREATER PROVIDENCE DEPOSIT CORPORATION et al.

No. 93-29-Appeal.

Supreme Court of Rhode Island.

Dec. 27, 1994.

William M. Dolan, III, Theodore Orson, John S. Burns, Providence, for plaintiff.

Clinton L. Poole, Providence, for defendant.

OPINION

LEDERBERG, Justice.

This case came before the Supreme Court on the appeal of the estate of Michael Montecalvo from the denial of his motion for the disbursement of funds in the receivership proceedings of Greater Providence Deposit Corporation and Greater Providence Trust Company (hereafter Greater Providence). ¹ The issue before us is whether funds held in a joint account can be used to offset a defaulted loan to one of the parties named in the account if the party in default made no contribution to the account. The Superior Court held that Greater Providence properly set off funds held in the joint account of Michael Montecalvo (Montecalvo) and his daughter Sandra S. Celona (Celona) against a loan to Celona even though the funds were contributed solely by Montecalvo, who retained control of the account. We affirm.

FACTS AND PROCEDURAL HISTORY

The facts in this case are not in dispute. On July 10, 1987, Montecalvo opened a joint passbook savings account (1987 account) in his and his daughter's names. Both signed a signature card that stated that the account was "payable to either or survivor" of "Michael Montecalvo or Sandra S. Celona." Montecalvo's initial deposit of $10,000 on July 10, 1987, was followed by an additional deposit of $10,000 about one month later. No additional deposits, besides interest, were made into the 1987 account, and Montecalvo asserted that all the funds deposited were solely his.

Montecalvo opened a second joint account in June 1989 (1989 account) in the names of "Michael Montecalvo or Sandra Celona." Neither Montecalvo nor Celona signed the signature card of that account because it was opened as a result of a telephone solicitation by Greater Providence. The 1989 account was funded by a $5,000 transfer from the 1987 account.

Montecalvo asserted that he retained possession of the passbooks of both accounts at all times, that he made all the deposits and withdrawals, that his Social Security number was used as the tax identification number for both accounts, and that interest earned from both accounts was reported on his federal income tax returns. He explained that he had added Celona's name to the accounts to avoid probate in the event of his death.

Independently from those two accounts, Celona had secured a mortgage from Greater Providence, and in April 1990 she defaulted on the loan. In March 1991 Greater Providence used funds in the joint accounts as a setoff against Celona's outstanding indebtedness. In response to a complaint by Maurice C. Paradis, then Director of the Department of Business Regulation of the State of Rhode Island (DBR), Greater Providence was placed under the receivership of the DBR with the DBR's Acting Associate Director and Superintendent of Banking, Edward D. Pare, Jr., as receiver on June 5, 1991. In October 1991 Montecalvo filed a "motion for relief from automatic stay" in the receivership action in order to commence suit against Greater Providence for wrongful seizure of the funds that Montecalvo claimed were his property. After a hearing on the motion, Montecalvo received permission from the Superior Court to file an independent action against Greater Providence or, in the alternative, to file a motion for the disbursement of funds in the receivership action. Montecalvo chose to file a motion for disbursement of funds in March 1992, seeking disbursement of funds from both the 1987 and the 1989 accounts. Following a hearing, the Superior Court denied the motion on December 23, 1992, and Montecalvo appealed the denial of his motion to this court pursuant to G.L.1956 (1985 Reenactment) § 9-24-1. Montecalvo died during the pendency of his appeal. In March 1994 this court granted a motion to substitute Sandra S. Celona, who was appointed executrix of her father's estate, as a party to this appeal.

THE ISSUE ON APPEAL

The issue on appeal is whether the Superior Court erred in allowing Greater Providence to set off funds deposited by Montecalvo in a joint account in the names of Celona and Montecalvo against a debt incurred by Celona alone. Counsel for the DBR argued that the joint-account signature card constituted a contract between Greater Providence and the depositors and that the contract clearly permitted such a setoff and therefore should be enforced. Montecalvo, on the other hand, contended that the contract terms were ambiguous and that the joint accounts created only a rebuttable presumption of joint ownership. Consequently, Montecalvo argued, extrinsic evidence should be admitted to prove that he was the sole owner of the funds in the joint accounts and that the setoff by Greater Providence was therefore improper. We agree with the arguments made on behalf of the DBR.

THE DEPOSIT CONTRACT

The rights and obligations of a bank and its depositors in regard to funds on deposit are governed by the terms of the contract entered into at the time the relationship is established. Griffin v. Centreville Savings Bank, 93 R.I. 47, 52, 171 A.2d 204, 207 (1961); see Westerly Community Credit Union v. Industrial National Bank of Providence, 103 R.I. 662, 668, 240 A.2d 586, 589 (1968). In Griffin, this court held that when the joint depositors accepted and retained a passbook containing rules and regulations, such rules and regulations constituted the depositors' contract with the bank. 93 R.I. at 53-54, 171 A.2d at 207. Moreover, the absence of an express consent to such rules and regulations does not conclusively establish that no contractual relationship arose. Id. at 53, 171 A.2d at 207. In the instant case, the pertinent terms and conditions were printed on the back of the signature card rather than in the passbooks. Both Montecalvo and Celona executed the signature card for the 1987 account that stated, in bold letters, "THE UNDERSIGNED ARE SUBJECT TO TERMS AND CONDITIONS ON REVERSE SIDE. PLEASE REVIEW TERMS AND CONDITIONS." We are of the opinion that upon execution of the signature card by Montecalvo and Celona, the terms and conditions stated thereon became part of the contract between the signatories and the bank.

Although neither Montecalvo nor Celona signed the signature card of the 1989 account, there was an oral agreement during a telephone solicitation to open a joint account. Because the terms and the conditions of the 1989 account were identical ² to those of the 1987 account, the voluntary execution by Montecalvo and Celona of the 1987 account signature card was sufficient to charge them with constructive knowledge of and implied consent to the terms and conditions of the 1989 account.

In reviewing the contract between depositors and Greater Providence, we are guided by well-settled rules on the interpretation of contracts. In particular, a court must find that a contract is ambiguous before it can exercise judicial construction of the contractual terms. W.P. Associates v. Forcier, Inc., 637 A.2d 353, 356 (R.I.1994). If the court finds that the terms of a contract are clear and unambiguous, the...