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How to Handle Adverse Claims on Deposit
By: John E. Burrus, Esq.

What are a bank’s rights and obligations when it receives notice of an adverse claim to a deposit? For example, if a bank receives notice of a claim that deposited funds actually belong to someone other than the account owner, what action should the bank take? If it places a hold on the account, it may be exposed to liability for wrongful dishonor of checks drawn on the account, and this liability can include damages for defamation and even punitive damages under certain circumstances. If it permits the funds to be withdrawn, it faces potential liability to the adverse claimant. 

In Colorado there is a statute which deals directly with this issue. C.R.S. §11-6-107 states that a bank may refuse to recognize an adverse claim to deposited funds unless the bank receives either a restraining order, injunction or other appropriate court process or an indemnity bond from the claimant in form and amount and with sureties acceptable to the bank. There is no stated limitation on the amount of the bond which the bank can require, but it is likely that a court would interpret the statute as requiring the bank to accept a bond in an amount which an ordinary banker under similar circumstances would find acceptable. 

The statute makes one exception to its application. If the disputed account is in the name of a fiduciary “designated as such by words indicating the deposit. . . is held for the benefit of” the adverse claimant, and if there are reasonable grounds to believe that the fiduciary is about to misappropriate funds (based on the affidavit of the claimant), then the statute has no application. This does not necessarily mean that the bank under there circumstances should automatically honor the claim, but only that the statute cannot be used to justify the bank’s refusal to honor the claim. In this situation it would usually be appropriate for the bank to utilize an interpleader action. An action in interpleader would require the bank to commence litigation against the parties who dispute ownership and deposit the disputed funds into court. 

The statute also has application to claims to securities or other property held by the bank for another person. 
 
Contact John E. Burrus at jeb@bsblaywers.com

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