This is an action by two nieces and a nephew of the decedent to compel the executrix to pay over to them the proceeds of decedent's account in a credit union. The executrix resists upon the ground that she is the individual owner of the account.
Decedent, Mrs. Escobedo Sarreals Posey, was employed by the State of New Jersey in Trenton. She was a member of the "Mercer Department of Labor and Industry Credit Union" (credit union). On April 6, 1948 she designated a friend, Marie E. Copeland, to receive the amount credited to her account with the credit union at her death. Thereafter, on May 20, 1950, decedent executed a will in which she named Mrs. Copeland executrix. Paragraph Fourth of the will provides:
"Fourth: I give, devise and bequeath to my beloved nieces, Satia Sarreals and Sonia Sarreals, and to my beloved nephew, EsPriela B. Sarreals, Jr., all the shares of stock which I may own at the time of my death in the Mercer County Credit Union located in the Trenton Trust Building, Trenton, New Jersey, to be divided equally among them, and should any of my said nieces and nephew predecease me, I give, devise and bequeath the distributive share which such deceased niece or nephew would have received if living at the time of my death to my dear friend, Marie E. Copeland."
Mrs. Posey died on July 12, 1963, and her will was probated in the Union County Surrogate's office on September 16, 1963. Mrs. Copeland qualified as executrix. She collected the sum of $2,053.11 credited to decedent's account with the
credit union, including $553.11, the proceeds of a life insurance policy payable to the credit union for the account of decedent. She took this sum for her own use. The nieces and nephew all survived decedent and are still living. The executrix failed to answer their inquiries. The nieces and nephew learned the facts from the credit union. They demanded that their legacies be paid over to them, but the executrix has refused and still refuses. The legatees seek an order to compel the executrix to pay over. The matter is submitted on a stipulation of facts.
The issue is whether the designation of Mrs. Copeland as beneficiary of the credit union shares of decedent constituted a perfected gift and prevails over the legacies in the will.
The naming of a beneficiary to receive a credit union account at the death of the owner is an arrangement between the member and the credit union governed by statute. In 1948 the governing statutory provision was L. 1938, c. 293, § 20, which has continued unchanged as N.J.S.A. 17:13-45. It reads:
"The amount credited to the account of any member in any such credit union, less any obligation to it for the payment of which such amount shall have been pledged, may upon the death of such member be paid by such credit union to any person who shall have been designated by such member during his lifetime to receive the same at his death; and such designation shall be made by an instrument in writing filed by such member during his lifetime with such credit union and accepted by such credit union; and in the event of such payment the release or acquittance to such credit union of such person so designated or his heirs, executors, administrators or assigns shall operate to discharge such credit union of and from any liability to the heirs, executors, administrators and assigns of such deceased member; but such member shall, during his lifetime, have full control of his membership account and may assign, pledge or withdraw the same or may change or withdraw any such designation."
The effect of this statute and the designation of a beneficiary pursuant to it does not appear to have been passed upon in any reported case.
The legatees contend that the designation of a beneficiary is inoperative as a gift inter vivos. They also contend that it
is invalid as a gift effective at death because it does not comply with the statutory requirements for testamentary disposition of property contained in N.J.S. 3A:3-2 et seq. They rely on Stevenson v. Earl, 65 N.J. Eq. 721 (E. & A. 1903).
The executrix contends that under the statute the designation of a beneficiary constitutes a completed gift inter vivos and should be sustained by analogy to provisions in the Banking Act. In the alternative, she contends that the contract between the credit union and the decedent was a contract for the benefit of a third party effective upon death, and is taken out of the requirements of the Wills Act as is a policy of life insurance. She relies upon In re Koss, 106 N.J. Eq. 323 (E. & A. 1930).
The statutory provisions permitting the naming of a beneficiary to receive a bank account upon the death of the depositor (N.J.S.A. 17:9A-217) do not apply to credit unions. A credit union is not a banking institution as defined in N.J.S.A. 17:9A-1(2). Credit unions are governed by chapter 13 of Title 17 of the Revised Statutes, which is complete and separate from provisions applicable to banks and other financial institutions. A credit union is a membership organization in which the members buy shares and from which they may borrow. N.J.S.A. 17:13-26. The member's account consists of shares purchased plus profits credited, less charges for losses. N.J.S.A. 17:13-40.
A credit union is also not a savings and loan association. The provisions of N.J.S.A. 17:12A-48.2, similar to N.J.S.A. 17:9A-217, are therefore also inapplicable. Cf. Chary v. First Savings ...