Joint Account Withdrawal Rights: Limits of Authority Among Co-Depositors

In February 2002, Dominador withdrew P980,000.00 from the joint account and deposited it into his own savings account with the same bank. Evangeline discovered the withdrawal about a year later and demanded the return of the money. When Dominador refused, she filed a complaint for sum of money and damages.

Dominador claimed the money was his compensation for managing Evangeline's business and properties. He alleged that Evangeline's common-law husband had promised to pay him P1,000,000.00 for his services and had deposited funds into the joint account for that purpose. The trial court ruled in Dominador's favor, but the Court of Appeals reversed, ordering him to return the amount.

The Issue

The central question was whether Evangeline was entitled to the return of the amount Dominador withdrew from their joint "OR" account.

The Supreme Court's Ruling

The Court denied Dominador's petition and affirmed the Court of Appeals' decision with modification. The Court held that while a joint "OR" account allows any co-depositor to withdraw funds without the other's consent as far as the bank is concerned, the relationship between the co-depositors is governed by their agreement and the purpose of the account.

Co-ownership of the account. The Court explained that co-depositors are joint owners of the account. Under Article 485 of the Civil Code, the shares of co-owners are presumed equal unless the contrary is proved. The common banking practice is that each named account holder has an undivided right to the entire balance, and any of them may deposit or withdraw funds without the consent of the other.

Limits on withdrawal authority. However, the Court emphasized that this right is not unbridled. As between the account holders, their rights against each other depend on their agreement, the purpose for which the account was opened, and how it will be operated. In this case, the account was opened for a specific purpose: to facilitate the transfer of funds for Evangeline's business projects. Dominador admitted that he could withdraw funds only if there was a need to meet Evangeline's financial obligations arising from those projects.

At the time of the withdrawal, there was no project being undertaken for Evangeline. Dominador's claim that the money belonged to him as compensation was rejected for lack of competent evidence. The Court noted that he failed to prove that Evangeline's common-law husband promised to pay him P1,000,000.00 or that such amount was deposited into the account for his benefit.

Burden of proof. The Court reiterated that in civil cases, the party asserting an affirmative claim must prove it by preponderance of evidence. Dominador failed to meet this burden. His claim for compensation under the principle of quantum meruit was also rejected because it was not raised as an affirmative defense or counterclaim in his answer, and defenses not raised in the answer are deemed waived.

Modification of the award. The Court modified the amount to be returned. Since Dominador had contributed P100,000.00 to the account at the time it was opened, and there was no proof that this amount had been withdrawn before the contested withdrawal, he was entitled to a deduction of that amount. Thus, he was ordered to return P880,000.00, plus legal interest at six percent per annum from the filing of the complaint until full payment.

Practical Takeaways

• A joint "OR" account gives each co-depositor the right to transact with the bank independently, but this does not mean the funds can be used for personal purposes without the other depositor's consent.
• The purpose of the account matters. If an account is opened for a specific purpose, such as funding a particular project or business, withdrawals outside that purpose may be challenged by the other co-depositor.
• Keep records of contributions. Co-depositors who contribute funds to a joint account should document their contributions, as the law presumes equal shares unless the contrary is proved.
• Raise all defenses and counterclaims in the answer. Claims not pleaded in the answer, such as compensation for services, may be deemed waived and barred.
• Banks are generally protected when honoring withdrawals from "OR" accounts, but the withdrawing depositor may still be liable to the other co-depositor for misuse of funds.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.