Case Title: Walnut Valley State Bank v. Stovall

Citation: 223 Kan. 459, 574 P.2d 1382

Docket Number: 48,306

State: kansas

Court: Kansas Supreme Court

Date: 1978-02-25T00:00:00Z

Document:
223 Kan. 459 (1978)
574 P.2d 1382
WALNUT VALLEY STATE BANK, a Corporation, Appellant,
v.
MERLE J. STOVALL and EMMA M. STOVALL a/k/a EMMA M. MEDLIN, Appellee, and TOWANDA STATE BANK, Garnishee, Defendant.
No. 48,306

Supreme Court of Kansas.
Opinion filed February 25, 1978.
Morgan Metcalf, of Coutts, Coutts & Metcalf, of El Dorado, argued the cause and was on the brief for the appellant.
No appearance by the appellee.
The opinion of the court was delivered by
OWSLEY, J.:
This is an appeal from an order dissolving a garnishment. The decision of the trial court was affirmed by the Kansas Court of Appeals. See, Walnut Valley State Bank v. Stovall, 1 Kan. App.2d 421, 566 P.2d 33. This court granted review.
Plaintiff first contends the trial court should have dismissed the appeal from the county court to the district court. The basis of the motion to dismiss was the failure to pay the docket fee prior to the hearing of the appeal and failure to provide surety on the appeal bond. Plaintiff also claims prejudicial error in the admission of certain evidence. Each of these points was considered by the court of appeals. The court of appeals concluded they were not grounds for reversal. We adhere to its opinion on these points.
The remaining issue is one of first impression. It involves the right and the extent of the right of a judgment creditor to garnishee a joint tenancy bank account to satisfy a judgment against one of the joint tenants. The court of appeals found such an account may be garnished by the creditor to the extent of the debtor's equitable interest in the account.
The facts relative to this issue are as follows: Plaintiff obtained judgment against defendants Merle J. and Emma M. Stovall. *460 Thereafter, the Stovalls were divorced and Emma married Archer B. Medlin. The Medlins established a joint checking account at the Towanda State Bank and each of them signed the bank signature card. Thereafter, and upon application of plaintiff, an order of garnishment was issued to the garnishee, which answered stating that Emma had a checking account with that bank in the amount of $411.52. Three days later, Emma moved to vacate the order of garnishment, which motion was overruled by the county court. Emma appealed to the district court, which heard the matter and entered judgment sustaining the motion to vacate and to set aside the order of garnishment, and assessed cost to plaintiff.
The trial judge issued his opinion letter to counsel, which contained his findings of fact as follows:
Through statutory enactment the legislature has sought to limit the creation of joint tenancy agreements unless by clear and convincing evidence the parties to the agreement show the intent to create such an estate. (K.S.A. 58-501). A joint tenancy bank account gives any party on the account a complete power of disposal. Upon death the survivor or survivors take all, even against lawful heirs of the decedent. Financial advisers not versed in the intricacies of the law have convinced many unlearned persons that a joint tenancy agreement is the answer to estate planning. While a joint tenancy has many laudable uses, it is not a panacea. Many injustices have resulted through use of the device. Upon proper showing we have imposed constructive trusts on property in the hands of a surviving joint tenant in order to avoid unintended results. (Winsor v. Powell, 209 Kan. 292, 497 *461 P.2d 292; Agrelius v. Mohesky, 208 Kan. 790, 494 P.2d 1095; Grubb, Administrator v. Grubb, 208 Kan. 484, 493 P.2d 189.)
We have considered the cases cited at 11 A.L.R.3d 1465 and recognize there is support for the position that none of the funds in a joint tenancy account can be garnished, as well as support for the position that all the funds can be garnished. Any argument in support of either of these positions may be eliminated by reference to K.S.A. 58-501(c):
The statute specifically provides the right to levy on personal property to the extent of the "interest of a judgment debtor." We must construe the phrase "interest of a judgment debtor." The court of appeals has stated the phrase means the equitable interest in joint tenancy property. Its affirmance of the trial court's decision is based on the trial court's finding of fact that the judgment debtor had no equitable interest in the joint tenancy account. We do not believe the solution is that simple. We are concerned with the ownership of a joint tenancy bank account between two or more joint tenants and the burden of proof if such ownership is challenged. In Miller v. Miller, 222 Kan. 317, 564 P.2d 524, we considered the ownership of a joint tenancy property conveyed by a father to himself, his son, and his daughter-in-law. We said:
The statement in Miller, "[t]hat Jessie paid the entire purchase price is immaterial," is too broad. It would appear that when a party to a joint tenancy attempts to prove an intent to own joint tenancy property other than equally between the parties the issue of who provided the purchase price would be material. Support for this statement is found in Schierenberg v. Hodges, 221 Kan. 64, 558 P.2d 133, where we said:
Severance of the joint tenancy into a tenancy in common between a husband and wife gives rise to a rebuttable presumption of equal ownership; that is, the husband and wife each own one-half of the account. Such a presumption is created on the theory of donative intent. In Norcross v. 1016 Fifth Avenue Co., Inc., 123 N.J. Eq. 94, 196 A. 446 (1938), the court explained the theory in this manner:
.... .... .... .... .... ...
A similar result has been reached in Michigan. In Murphy v. Michigan Trust Co., 221 Mich. 243, 190 N.W. 698 (1922), the Supreme Court stated:
In accord, Czajkowski v. Lount, 333 Mich. 156, 52 N.W.2d 642 (1952); Sussex v. Snyder, 307 Mich. 30, 11 N.W.2d 314 (1943); Darst v. Awe, 235 Mich. 1, 209 N.W. 65 (1926).
In United States v. Third Nat. Bank & Trust Co., 111 F. Supp. 152, 156 (M.D. Pa. 1953), the court stated:
See also, American Oil Co., Ap., v. Falconer et al., 136 Pa. Super. 598, 605, 8 A.2d 418 (1939).
We believe this presumption of equal ownership should prevail in the absence of proof of ownership in some other proportion. Anyone attacking equal ownership should assume the burden of proof. If the debtor can demonstrate that he has an interest less than an equal share of the account the burden is upon him to come forward with such evidence. By the same token the debtor's cotenant may come forward and demonstrate an ownership greater than the interest created by operation of the presumption upon severance. If it is within the power of the creditor-garnisher to demonstrate the debtor has an ownership greater than that of the other cotenant, the garnisher is entitled to claim the greater share upon proper proof.
The trial court found the garnishment must be dissolved because the wife had no interest in the account. Yet the record indicates she wrote nearly all the checks on the account and made numerous deposits, including the proceeds of a $483.18 loan taken out and signed by her and her present husband. The finding of the trial court that Emma Stovall had no interest in the account seems to stem from the fact the garnisher could not prove exactly what her interest was in the account at the time of the *464 garnishment, rather than from the fact she had absolutely no interest in the account. Without the presumption of equal ownership and applying the rule established by the court of appeals, the garnisher of a joint tenancy account can be defrauded by a debtor and the debtor's cotenants by the act of commingling deposits and withdrawals to the point that no one can determine the origin of the proceeds of the account at the time of garnishment.
We hold that a garnishment upon a joint tenancy bank account severs the joint tenancy, creating a tenancy in common. A rebuttable presumption of equal ownership between the cotenants remains intact. The burden of proof on a claim the account is owned other than equally between the cotenants lies with the party asserting such claim. If married persons wish to avoid the effect of this rule they may maintain their property separate from that of their spouses and receive the protection of K.S.A. 1977 Supp. 23-201, et seq.
We reverse the decision of the court of appeals on the issue of garnishment of joint tenancy accounts and remand the case to the trial court with directions to grant a new trial in accord with rules of law established herein.
Affirmed in part and reversed in part with directions.