Legal Memorandum: Payment by Negotiable Instrument

Issue: In North Dakota, how should a church expansion fund pay out funds when a depositor dies?

A note is a negotiable instrument which is a promise, other than a Certificate of Deposit, to pay a sum certain to the order of the payee or the bearer.  N.D. Cent. Code § 41-03-04 (1999).  Thus, if the individuals submitting funds to a church expansion fund are “loaning” those funds to a church expansion fund , funds would be payable to the payee of the note.  In the event of the note payee’s death, funds would be payable according to the North Dakota Probate Code.  See id. § 30.1-01-01 et seq. 

The opening of a savings account establishes a contractual relationship between the depositor (as creditor) and the bank (as debtor).  Schlichting, Banking Law, § 252.01.  Usually, a savings account is opened when an individual or individuals execute a signature card and/or account agreement.  Id.  The many types of savings accounts include joint survivor accounts, payable on death accounts, and trust accounts.  Id.  For sample signature cards and account agreements for joint survivor accounts, payable on death accounts, and trust accounts see Banking Law, id. at § 253.01.  The account agreement incorporates applicable state law regarding account ownership and beneficiary designations.   

The savings account agreement must comply with applicable state law.  North Dakota law applicable to financial institutions provides as follows with respect to certain types of accounts:

Deposits made by a person as executor, administrator, guardian, conservator, or in any other representative capacity or official position, with any banking association, are payable to him as […]

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