Contract Law Controls Relationship Between Joint Bank Account Owners

December 15, 2023 | Jennifer Harrington

In re Estate of John E. Johnson, No. 22-1801 (Iowa Ct. App. Nov. 8, 2023).

On November 8, 2023, the Iowa Court of Appeals reversed the district court’s directed verdict in a surviving spouse’s case against her husband’s estate. The surviving spouse alleged she was entitled to one-half of the price her husband paid to purchase CDs with funds from joint accounts. The court found that the district court improperly applied a tort standard instead of a contract standard to the claim. The court ruled that, on remand, the district court is to consider the intent of the parties when the joint accounts were created. If the presumption of equal shares is not overcome, the surviving spouse will be entitled to her proportional share.


John and Peggy were married in 1980. Throughout their marriage, John and Peggy had joint bank accounts. In 2015, John purchased a $40,000 CD. The purchase funds came from a previous CD solely owned by John, but the funds passed through a joint account. In 2016, John purchased a $70,000 CD. The purchase funds came from a joint savings account that held funds from the sale of John’s real property five-years prior. John’s child from a prior marriage, Rebecca, was named as joint owner on both CDs. Both CDs matured in 2017, and John placed the funds into an individual checking account payable to Rebecca at his death.

John died in 2018. His will left all his property to his three daughters. Rebecca promptly petitioned to probate her father’s will after his death. Peggy chose to take her elective share. She also filed a claim against the estate for one-half of the purchase price of the two CDs ($55,000). Peggy claimed that John had taken more than his proportional share of the joint account funds when purchasing the CDs. The estate disputed the claim, arguing that the purchase funds for the CDs went through the joint accounts but not from the joint accounts.

A hearing was held on Peggy’s claim, and the estate moved for a directed verdict, which the district court granted. In its ruling, the trial court held that for conversion there had to be ownership by the plaintiff greater than that of the defendant and there was no evidence that Peggy had greater ownership in the accounts than the estate. The court dismissed the case. Peggy appealed, arguing the court applied the wrong legal standard.


In reversing the district court’s decision, the appellate court agreed with Peggy that the district court applied the wrong legal framework. The court acknowledged that a tort conversion claim requires a plaintiff to show an ownership or other possessor right greater than that of the defendant. However, the court found that Peggy did not bring a tort conversion claim. Instead, her claim was based upon a loss of a proportional interest of the bank accounts. That type of conversion claim is different. It is controlled by contract law, not tort law. It does not require the establishment of a greater ownership or possessory right.

The court explained that joint owners of bank accounts are presumed to hold equal shares. However, ultimately the parties’ intent controls. Intent is established at the time the bank accounts are opened. It is not established by their use of the accounts over the years. If the presumption of equal shares is not overcome, one owner will be liable to the other owner when they withdraw more than their proportional share. The court determined that the intent of the parties at the time the accounts were opened remained a fact question. Because the district court applied the wrong legal framework, the court remanded the case to the district court for further proceedings.