Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-03161/USCOURTS-ca10-90-03161-0/pdf.json

Parties Involved:
Sharon Bridges
Appellant
The Central Bank and Trust Company,
Appellee
David Tull
Not Party
Elva Tull
Not Party

Document Text:

PUBLISH 

UNITED STATES 

TENTH 

COURT OF APPEALSROBERT t. HOECKER 

Clerk 

CIRCUIT 

SHARON BRIDGES, 

Plaintiff-Appellant, 

ELVA TULL, DAVID TULL, 

Plaintiffs, 

v. 

THE CENTRAL BANK AND TRUST COMPANY, 

f/k/a/ The Central State Bank of 

Hutchinson, Kansas, 

Defendant-Appellee. 

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No. 90-3161 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF KANSAS 

(D.C. No. 89-4099-S) 

Submitted on the briefs: 

Steven M. Dickson, of Dickson & Pope, P.A., Topeka, Kansas, for 

Plaintiff-Appellant. 

Gerald L. Green, of Gilliland & Hayes, P.A., Hutchinson, Kansas, 

for Defendant-Appellee. 

Before McKAY, SEYMOUR, and EBEL, Circuit Judges. 

Appellate Case: 90-3161 Document: 01019728814 Date Filed: 02/22/1991 Page: 1 
EBEL, Circuit Judge 

We are asked to determine whether a bank issuing a 

certificate of deposit to co-owners, which was unilaterally 

pledged by one of the co-owners, is liable for redeeming the 

entire value of the CD in foreclosure of the instrument as a 

perfected security. The district court found that issuing bank 

properly honored the lender's demand for payment. We affirm. 1 

The Central Bank and Trust Company ("Central Bank") issued a 

certificate of deposit to five indi viduals, "John c. or Elva E. 

Tull or David K. Tull or Francis I. Tull m;: Sharon c. Bridges" 

(emphasis added), stamped on its face: "as joint tenants and not 

as tenants in common, with full rights of survivorship." R. tab 

18 ex. A. Subsequently, one of these co-owners, Francis I. Tull 

("Jack " Tull), unilaterally pledged the certificate of deposit as 

security for a personal loan from Superior National Bank 

("Superior"). Superior perfected its security interest in the 

certificate of deposit through possession of the instrument. Jack 

Tull defaulted on his loan from Superior and filed for bankruptcy. 

The bankruptcy court granted Superior relief from the automatic 

stay so that Superior could foreclose on its security interest in 

1 After exam1n1ng the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P . 

34(a); lOth Cir. R. 34.1.9. The case is therefore ordered 

submitted without oral argument. 

2 

Appellate Case: 90-3161 Document: 01019728814 Date Filed: 02/22/1991 Page: 2 
the proceeds of the certificate of deposit. Superior presented 

the instrument to Central Bank for payment, accompanied by the 

bankruptcy court order lifting the stay as to this foreclosure. 

Central Bank redeemed the CD, and the remaining co-owners brought 

this action against Central Bank for breach of contract and 

conversion. 

The district court granted summary judgment in favor of 

Central Bank, reasoning: 

A certificate of deposit is an instrument, 

K.S.A. 84-9-lOS(i), and thus is personal property which 

may be pledged as collateral for a secured loan. See 

K.S.A. 84-9-102(a). The CD in this case was made 

payable to "John C. or Elva E. Tull or David K. Tull or 

Francis I. Tull or Sharon C. Bridges. " Under 

K.S.A. 84-3-116, an instrument made payable to "A or B" 

may be negotiated by either party without consent of the 

other. Thus, notwiths·tanding the stamp denoting joint 

tenancy, Jack Tull, as an alternate payee, could pledge 

the entire CD as collateral. Any issue concerning 

Superior's interest in the CD was presumably resolved by 

the bankruptcy court order of April 30, 1987, which 

found that Superior was a perfected secured party and 

was entitled to take possession of the proceeds of the 

CD. Once Superior secured the court order confirming 

its perfected security interest in the CD, Superior was 

entitled to exercise its self-help remedies under 

K.S.A. 84-9-502(1). 

Bridges v. The Central Bank & Trust Co., No. 89-4099-S, 

1990 WL 62172, Memorandum and Order at 4-5 (D. Kan. April 27, 

1990) (citations omitted) ("Order"). 

We review • . • summary judgment orders de DQYQ, 

applying the same legal standard used by the district 

court under Rule 56(c) of the Federal Rules of Civil 

Procedure. Summary judgment should be granted only if 

"there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a 

matter of law." Fed. R. Civ. P. 56(c). When applying 

this standard, we are to examine the factual record and 

reasonable inferences therefrom in the light most 

3 

Appellate Case: 90-3161 Document: 01019728814 Date Filed: 02/22/1991 Page: 3 
favorable to the party opposing summary judgment. 

However, the nonmoving party may not rest on his 

pleadings; the party must set forth specific facts 

showing that there is a genuine issue for trial. 

Abercrombie v. City of Catoosa, 896 F.2d 1228, 1230 (lOth Cir. 

1990)(citations omitted). 

In this appeal, the appellant, one of the original co-owners 

of the CD, attempts to create tension between the explicit 

language in Kan. Stat. Ann. § 84-3-116(a) (1983) 2 and the tenet of 

property law that a joint tenancy is severed and converted to 

tenancy in common upon any disturbance of the "four unities" which 

define this property interest. See Hutchinson Nat'l Bank & Trust 

v. Brown, 12 Kan. App. 2d 673, 753 P.2d 1299, 1300-01 (1988). 3 

Under the interpretation relied on by the district court, which we 

2 Section 84-3-116(a) provides: "Instruments payable to two or 

more persons. An instrument payable to the order of two or more 

persons . • . if in the alternative is payable to any one of them 

and may be negotiated, discharged or enforced by any of them who 

has possession of it." 

3 Appellant argues under a variety of visages that the 

certificate of deposit should be considered to have been held in 

tenancy in common even prior to Jack Tull's pledge of the CD to 

Superior. Appellant's purpose is clear: to have the pledged 

interest be 20% rather than 100% of the CD's value. However, the 

stamp on the face of the document, stating unambiguously that the 

instrument is held in joint tenancy, with a right of survivorship 

rather than in tenancy in common, belies that argument. This 

stamp is sufficient to satisfy the requirement of Carter v. Carter 

(In re Carter), 6 Kan. App. 2d 934, 636 P.2d 227, 230-31 (1981), 

that under Kan. Stat. Ann. § 58-501 the evidence of intent to 

create a joint tenancy must be clear at the time the instrument is 

created. " (S]imply using the word 'or' between the names of the 

owners of a certificate of deposit is not sufficient to satisfy 

(section 58-501]." Id. at 230. See also Wood v. Davies (In re 

Wood}, 218 Kan. 630, 545 P.2d 307, 309-10 (1976)(the words "as 

joint tenants with right of survivorship, and not as tenants in 

common" are "magic " words which show intent to create joint 

tenancy). 

4 

Appellate Case: 90-3161 Document: 01019728814 Date Filed: 02/22/1991 Page: 4 
believe to be sound, the specific directive of section 84-3-116(a) 

supersedes the fragility of the joint tenancy form of ownership. 

Thus, Jack Tull's pledge of the instrument, whether or not it was 

held in joint tenancy, was effective pursuant to Kansas statutory 

enactment of section 84-3-116 of the Kansas Uniform Commercial 

Code. See also Birmingham Trust Nat'l Bank v. Herren (In re 

Herren), 10 Bankr. 252, 255 (Bankr. N.D. ~a. 1981); Miller v. 

Merchants Bank, 138 Vt. 235, 415 A.2d 196, 199 (1980). 

The district court distinguished this case from the holding 

of the Kansas Court of Appeals in Hutchinson National Bank, in 

which the pledge of a certificate of deposit ostensibly held in 

joint tenancy by a married couple severed the joint tenancy and 

created tenancy in common. · The district court found that because 

the instrument in Hutchinson National Bank referred to the joint 

tenants in the conjunctive, 4 the specific directive of section 

84-3-116(a) did not apply. Order at 4 n . 1. We agree. 

Appellant offers Walnut Valley State Bank v. Stovall, 

223 Kan. 459, 574 P.2d 1382 (1978), as contrary authority. 

However, the district court correctly pointed out that Walnut 

Valley is inapposite because it deals with garnishment of a joint 

bank account, rather than foreclosure of a perfected security 

4 The court in Hutchinson National Bank noted that the 

certificate of deposit at issue in that case "was issued, at [the 

customer's] request, in the names of Harry and his wife, Ida, as 

joint tenants." Hutchinson Nat'l Bank, 753 P.2d at 1300 (emphasis 

added). 

5 

Appellate Case: 90-3161 Document: 01019728814 Date Filed: 02/22/1991 Page: 5 
interest in an instrument consensually pledged as collateral for a 

loan. Order at 4. 

In addition, Kan. Stat. Ann . § 9-1205 (1982) 5 buttresses the 

provisions of the Kansas Uniform Commercial Code's § 84-3-116 and 

relieves Central Bank of liability. Section 84-3-116 provides 

that one of two or more parties denominated in the alternative has 

the capacity to unilaterally pledge an instrument, and 

section 9-1205 provides that a bank is not liable for payment on 

the order of any individual owner of a joint account. Just as 

Central Bank would have no liability for cashing the CD in 

question on Jack Tull's unilateral demand, it was not liable for 

cashing the CD on Superior's demand in foreclosure of the CD as a 

perfected security, legitimate pursuant to section 84-3-116. 

In summary, the distilled question before us today is whether 

an instrument arguably held in joint tenancy and nominated in the 

alternative under Kansas law can be effectively unilaterally 

pledged in full by one of the co-owners as security for a loan and 

later redeemed by the secured creditor in foreclosure. The answer 

given by the district court was correct: such instrument properly 

5 Section 9-1205 provides: 

Joint accounts. Deposits may be made in the names 

of two or more persons, including minors, payable to 

e i ther or any of them, or payable to either or any of 

the survivors or the sole survivors, and such deposits 

or any part thereof or any interest thereon, may be paid 

to or on order of any of said persons whether the other 

or others be living or not; and the receipt, order, or 

acquittance of the person so paid shall be v alid and 

sufficient release and discharge to the bank for any 

payment so made. 

6 

Appellate Case: 90-3161 Document: 01019728814 Date Filed: 02/22/1991 Page: 6 
can be so pledged and the issuing bank is not liable for honoring 

presentment of the instrument by a foreclosing secured creditor. 

The judgment of the United States District Court for the District 

of Kansas is AFFIRMED. 

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