Both my wife and I have joint savings and checking accounts. My wife is a co-owner on her daughter's savings account, who also has a checking account. Apparently, her checking account was overdrawn, and her savings account was insufficient to cover the overdraft, but fees drove it negative. The bank then used the right of offset, and withdrew monies from my checking account via my wife. Is that legal as the offending checking account does not have my wife as a co-owner?
If your wife was an owner in any fashion on the account with her daughter, she had rights to all of the funds in that account. In a similar fashion, she also has complete liability for monies owed the bank based on that account.
Your wife also is an owner on an account with you. She also has the right to withdraw all of the funds from that account.
The bank is able to use her ownership rights in one account to offset the debt she has on the other. They were absolutely within their rights.
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If your wife was an owner in any fashion on the 