FILED

United States Court of Appeals

Tenth Circuit

June 10, 2013

Elisabeth A. Shumaker

Clerk of Court

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

SUMMIT FINANCIAL RESOURCES,

L.P., 

Plaintiff - Appellant,

v.

KATHY’S GENERAL STORE, INC., 

Defendant - Appellee.

No. 10-3130

(D.C. No. 2:08-CV-02145-CM)

(D. Kan.)

ORDER AND JUDGMENT*

Before MURPHY, SEYMOUR, and HOLMES, Circuit Judges.

Summit Financial Resources, L.P. (“Summit”) appeals from the district court’s

entry of judgment, entered after a bench trial, in favor of Kathy’s General Store, Inc.

(“Kathy’s General Store”) on Summit’s claim that Kathy’s General Store was liable to

Summit as an account debtor. Summit argues that such liability arose because Kathy’s

General Store failed to remit payments to Summit on accounts that Summit had

purchased from Kathy’s General Store’s fuel supplier, Walthers Oil Co. and Walthers,

Inc. (collectively, “Walthers”). As the parties have framed it, the dispute centers on the

* This order and judgment is not binding precedent, except under the

doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,

however, for its persuasive value consistent with Federal Rule of Appellate Procedure

32.1 and Tenth Circuit Rule 32.1.
meaning of the financing agreement between Summit and Walthers, and specifically,

whether this agreement encompasses “pre-payment accounts.” We conclude that the

financing agreement does encompass such accounts and that Kathy’s General Store is

liable to Summit. We reverse the decision of the district court and remand with directions

to enter judgment in favor of Summit.

I

1

Kathy’s General Store is a combination service station, convenience store, and

clothing and gift shop in Holton, Kansas. Kathy’s General Store purchased fuel from

Walthers, a motor fuel distributor, from 1989 through the end of 2007. Around April or

May 2007, Kathy’s General Store began using Petroleum Card Services (“PCS”) to pay

Walthers for the fuel. Specifically, PCS would deposit all proceeds from credit card sales

made at Kathy’s General Store—e.g., from sales of clothing, gifts, jewelry, and cigarettes,

as well as fuel—into Walthers’s bank account. Given that the deposits covered more than

payments for fuel, this system frequently resulted in a credit balance in favor of Kathy’s

General Store that was often carried over from month to month. Thus, under this

arrangement, Kathy’s General Store usually ended up pre-paying for the fuel it purchased

from Walthers. Even prior to using PCS, Kathy’s General Store had maintained a credit

balance with Walthers for at least the five years prior to December 2007. 

1 This background section relies heavily on the detailed factual findings of

the district court, as set out in its May 5, 2010 Memorandum and Order. Neither party

challenges these facts on appeal; rather, they dispute the correctness of the district court’s

legal conclusions.

2
Around June 21, 2007, Walthers and Summit, a commercial lender, entered into

two financing agreements. Pursuant to the agreements, Summit purchased at least some

of Walthers’s accounts receivables and started making advances to Walthers. Summit

also took a security interest in all of Walthers’s accounts receivables. 

The financing agreements provided that an account had to meet specific criteria

before Summit would purchase it. In the language of the agreements, accounts that

qualified for purchase were deemed to be “Acceptable Accounts.” Aplt. App. at 144

(Financing Agreement, dated June 21, 2007). Section 14 of the agreements detailed the

criteria for Acceptable Accounts. The district court summarized the criteria as follows: 

(1) Walthers Oil must have the sole and unconditional good title to the

account and (2) the account had to be a bona fide obligation of the

account debtor for the amount identified by Walthers Oil and no

payments, deductions, credits or other modifications could have been

made to the account.

Id. at 107 (Mem. & Order, filed May 5, 2010). Notably, as relevant to this litigation, the

second enumerated paragraph of the district court’s description corresponds to the

substance of subsection (b) of Section 14 of the financing agreements, which provides:

The Account is a bona fide obligation of the Account Debtor for the

amount identified on the records of [Walthers] and there have been no

payments, deductions, credits, payment terms, or other modifications

or reductions in the amount owing on such Account . . . .

Id. at 150. 

At least once a week, and sometimes more frequently, Walthers would submit to

Summit a list of accounts for Summit to purchase. Walthers included its Kathy’s General

3
Store accounts on these lists of accounts.

On July 30, 2007, Kathy’s General Store received a Notice of Assignment

(“NOA”) from Walthers. The NOA explained that the terms of the financing agreements

“‘require[d] that payments on accounts receivable be made to [Summit]’ and directed

Kathy’s [General Store] ‘to make payment of all accounts receivable and all other

amounts owing to [Walthers] directly to [Summit],’” and provided an address for Kathy’s

General Store to send the payments to Summit. Id. at 108 (first alteration in original)

(quoting id. at 163 (NOA, dated June 15, 2007)). Further, the NOA instructed that all

questions should be addressed to Summit and provided a telephone number for this

purpose. Finally, the NOA stated that “the instruction to direct payment to Summit as set

forth in the NOA ‘may be changed or terminated only by written notice signed by

[Summit].’” Id. (quoting id. at 163). 

Instead of following any of the instructions in the NOA or seeking legal advice

concerning its obligations under the NOA, Kathy’s General Store contacted Walthers. 

Walthers advised Kathy’s General Store to disregard the NOA and to continue remitting

payments to Walthers. Pursuant to Walthers’s advice, Kathy’s General Store ignored the

NOA and did not pay any money to Summit. Walthers also did not pay any money to

Summit; indeed the district court found that it was “100% in default in submitting

payments to Summit.”2

 Id. at 109. In an attempt to receive the money it was due,

2 We note that the record reflects that in January 2008, Summit obtained a

(continued...)

4
Summit called Kathy’s General Store in August and October 2007, but had to leave two

messages requesting that someone from Kathy’s General Store call Summit back. From

the district court’s findings of fact, it appears that Summit’s messages were not returned. 

Summit finally reached someone at Kathy’s General Store on December 18, 2007, and

was advised that “Kathy’s [General Store] never owed Walthers . . . money,” and that, as

of that date, it had a $25,768 credit balance with Walthers. Id. at 110. That same month,

Kathy’s General Store switched fuel suppliers and stopped purchasing fuel from

Walthers. 

Invoking the district court’s diversity jurisdiction, 28 U.S.C. § 1332, Summit

instituted this suit against Kathy’s General Store in April 2008, alleging, inter alia, that

Kathy’s General Store owed Summit at least $582,077.85, in addition to pre- and postjudgment interest. In response, Kathy’s General Store asserted a counterclaim for

conversion. After a bench trial, the district court entered judgment for Kathy’s General

Store on Summit’s claims and for Summit on Kathy’s General Store’s counterclaim. 

Only Summit appealed.

2

(...continued)

preliminary injunction against Walthers and subsequently received a total of $63,715.70. 

It is unclear from the district court’s findings of fact and the parties’ briefing, however,

what relationship this money has to the amount owed to Summit from Kathy’s General

Store’s accounts compared to the amount owed to Summit on the other accounts it

purchased from Walthers. We leave it to the district court in the first instance to

determine what relationship, if any, this $63,715.70 has to the amount that Kathy’s

General Store owes to Summit and that Summit seeks in this litigation.

5
II

Summit raises only one issue on appeal: whether the district court erred in finding

that Kathy’s General Store was not liable to Summit because Kathy’s General Store’s 

accounts were “pre-paid” and thus were not “accounts receivable” under the statutory

definition.

When a party appeals from a bench trial, “we review the district court’s factual

findings for clear error and its legal conclusions de novo.” Roberts v. Printup, 595 F.3d

1181, 1186 (10th Cir. 2010) (quoting Lippoldt v. Cole, 468 F.3d 1204, 1211 (10th Cir.

2006)) (internal quotation marks omitted). We review “mixed questions of law and fact

. . . ‘under the clearly erroneous or de novo standard, depending on whether the mixed

question involves primarily a factual inquiry or the consideration of legal principles.’” Id.

(quoting Estate of Holl v. Comm’r, 54 F.3d 648, 650 (10th Cir. 1995)). Under diversity

jurisdiction, our task “is not to reach [our] own judgment regarding the substance of the

[state] law, but simply to ascertain and apply the state law.” Id. (quoting Wade v.

EMCASCO Ins. Co., 483 F.3d 657, 665 (10th Cir. 2007)) (internal quotation marks

omitted). Under Kansas law, which governs here, when a statute is plain and

unambiguous, we “give effect to the intention of the legislature as expressed rather than

determine what the law should or should not be.” Johnston v. Tony’s Pizza Serv., 658

P.2d 1047, 1049 (Kan. 1983); see Maxl Sales Co. v. Critiques, Inc., 796 F.2d 1293,

1296–97 (10th Cir. 1986) (relying on Johnston, and giving effect to the legislature’s

intention as expressed, with respect to a plain and unambiguous section of the Kansas

6
Uniform Commercial Code). 

III

Because of the way the district court resolved this case, and the way the parties

have framed it before us, we navigate this case as follows. First, we set out the district

court’s legal conclusions, the parties’ arguments, and the important concessions or

acknowledgments made by Kathy’s General Store. Next, we review Kathy’s General

Store’s central argument—that a single section of the financing agreements, Section 14,

should control this case. Finally, we conclude that even focusing on this (arguably

inapposite) section of the financing agreements, Kathy’s General Store is still liable to

Summit on the accounts—even though they were pre-payment accounts—that Kathy’s

General Store had with Walthers.

A

The district court concluded, as a matter of law, that after Kathy’s General Store

received the NOA on July 30, 2007, it was “obligated to pay Summit the amounts due and

owing on the accounts [that Kathy’s General Store] had with Walthers.” Aplt. App.

at 112. However, the district court reasoned, “Kathy’s [General Store] did not incur a

monetary obligation to Walthers . . . for fuel that had been or was to be delivered because

Kathy’s [General Store] prepaid Walthers . . . for the fuel.” Id. And, because Walthers

could not assign an interest it did not have, the Kathy’s General Store’s accounts that

Walthers submitted to Summit were not actually accounts receivable, and Kathy’s

General Store therefore was not liable to Summit on those accounts. In so finding, the

7
district court relied on Cissell v. First National Bank (Cissell II), 476 F. Supp. 474 (S.D.

Ohio 1979), and its interpretation of the pre-1972 Uniform Commercial Code (“UCC”).3

Summit argues that the district court’s determination was based on an incorrect

reading of Article 9 of the UCC, as adopted by Kansas and codified at Kan. Stat. Ann.

§§ 84-9-101 to -801 (“Kansas UCC”). Specifically, Summit points out that Kansas has

adopted the 1972 version of the UCC and thus the pre-1972 version, as well as case law

interpreting it (such as Cissell II), is not applicable. 

Notably, at oral argument, Kathy’s General Store acknowledged that Summit was

correct that the pre-1972 version was inapplicable.4

 Specifically, it agreed with the

3 Prior to 1972, the UCC distinguished between “accounts” and “contract

rights” based upon the time the right to payment accrued in relation to the time the

services were rendered. As relevant for our purposes, “account” was defined to mean

“any right to payment for goods sold or leased or for services rendered” and “contract

rights” was defined as “any right to payment under a contract not yet earned by

performance.” Cissell v. First Nat’l Bank (Cissell I), 471 F. Supp. 480, 485 (S.D. Ohio

1976) (quoting Ohio Revised Code § 1309.01(A)(10)–(11)) (internal quotation marks

omitted); see id. (noting that the “Ohio Revised Code . . . retains the distinction between

accounts and contract rights that was present in the pre-1972 version of [Article 9 of the]

UCC”). The 1972 version, however, broadened the definition of “accounts” to include “a

right to payment for goods sold or leased or for services rendered whether or not earned.” 

Id. Indeed, “[o]ne of the reasons for the [italicized] language, which was an addition not

found in prior versions, was to avoid litigation over insufficient descriptions of

collateral.” Id.; see also E. Turgeon Constr. Co. v. Elhatton Plumbing & Heating Co.,

292 A.2d 230, 233 n.3 (R.I. 1972) (“The final report of the permanent editorial board for

the Uniform Commercial Code filed on April 25, 1971, recommends that the term

‘contract right’ be eliminated as being unnecessary. One of the reasons for the

recommended change has been the litigation that has been engendered because of

inadequate descriptions contained in financing statements.”).

4 We take this acknowledgment to be an implicit recognition that the district

court’s analysis was in error because it should not have relied on case law interpreting an

(continued...)

8
interpretation of the Kansas UCC that Summit has urged with respect to “how

assignments and pre-payments can qualify” “generally” as accounts under the Kansas

UCC, but argued that the Kansas UCC’s definitions “d[id] [not] apply in this case by

definition [and] by the terms of the financing agreement[s].” Oral Arg. at 16:39–17:08. 

At bottom, Kathy’s General Store has accepted the premise that payment obligations

arising from pre-payment arrangements are not categorically excluded from “accounts”

under the Kansas UCC. However, it reasons that it should still be successful by relying

on the terms of the financing agreements, especially Section 14. 

B

Even were we to accept Kathy’s General Store’s premise that we should look to

the financing agreements—and, more specifically, Section 14—to determine whether it

had any obligations to Summit, Kathy’s General Store’s arguments would be

unsuccessful. Read as a whole, the financing agreements show that—even considering

Section 14—Kathy’s General Store was obligated to pay Summit the pre-payment

accounts that Kathy’s General Store had with Walthers. 

As noted, Section 14 of the financing agreements sets out several requirements that

must be satisfied in order for an account to be considered a so-called “Acceptable

Accounts”—in other words, accounts that qualified for purchase by Summit under the

financing agreements. In pertinent part, subsection (b) provides that, in order to be such a

4

(...continued)

outdated version of the UCC.

9
qualifying account, it must be “a bona fide obligation of the Account Debtor” for the

amount specified on Walthers’s records and there must “have been no payments,

deductions, credits, payment terms, or other modifications or reductions in the amount

owing” on the account. Aplt. App. at 150 (emphasis added). 

Kathy’s General Store relies on the “no payments” aspect of this language in

framing its argument that it had no obligation to pay Summit.5

 Specifically, it reasons

that because Kathy’s General Store made pre-payments to Walthers, its accounts cannot

be deemed bona fide obligations within the meaning of Section 14(b) because payments

continued to be applied to those accounts. 

We disagree. Lest our discussion here of the merits of Kathy’s General Store’s

position be interpreted to the contrary, we note at the outset that we seriously question

whether Kathy’s General Store can predicate any claim to relief on Section 14. This

provision defines in part the relationship between Walthers and Summit and specifically

clarifies which of Walthers’s accounts may form the basis for advances by Summit. In

other words, it clarifies which accounts qualify as Acceptable Accounts under the

financing agreements and, therefore, are subject to purchase by Summit at its discretion. 

See Aplt. App. at 147 (“The obligation of Summit to purchase accounts from [Walthers]

is discretionary and Summit shall have no obligation to purchase any account from

5 At oral argument, Kathy’s General Store made brief remarks that might be

interpreted as folding within its argument the other language of this clause relating to

debits, credits, etc. Even if that were true, it would not alter the outcome that we reach

here. 

10
[Walthers], notwithstanding anything to the contrary in this agreement.” (all-capitals

format omitted)). Section 14, however, does not purport to define the obligations of

Kathy’s General Store to Summit. Such obligations primarily were driven, at the

threshold, by the financing agreements’ definition of “account.” See id. at 144

(“‘Account Debtor’ means any person or entity obligated for payment of an Account.”).

Accordingly, the question of whether Walthers’s accounts stemming from its

business dealings with Kathy’s General Store were of sufficiently high quality that

Summit elected to purchase them and advance money to Walthers against them (i.e., the

subject matter of Section 14), would seemingly have no connection to, or bearing upon,

whether Kathy’s General Store owed Summit money based upon those accounts (i.e., the

subject matter of this lawsuit). In other words, whether Walthers’s accounts were deemed

Acceptable Accounts would seemingly be a matter of concern only to Summit and

Walthers, not Kathy’s General Store, even if the accounts stemmed from Walthers’s

relationship with Kathy’s General Store. 

Summit underscored a similar point during oral argument. Specifically, Summit

contended that Kathy’s General Store’s reliance on Section 14(b) and, more specifically,

its focus on whether its accounts held by Walthers qualified as bona fide obligations and

thus Acceptable Accounts that were eligible for purchase by Summit, is misguided. 

Summit noted that two of the district court’s findings are undisputed: first, the security

interest that it obtained from Walthers related to “all of Walthers . . . collateral, that is, its

accounts receivables”; and second, the NOA instructed Kathy’s General Store to “‘make

11
payment of all accounts receivable and all other amounts owing to Walthers . . . directly

to [Summit].’” Id. at 120–21 (emphases added) (quoting id. at 163). In light of those

findings, Summit reasoned as follows: it is irrelevant whether Kathy’s General Store’s

pre-payment plan produced bona fide obligations that were Acceptable Accounts eligible

for purchase by Summit under Section 14(b) because Kathy’s General Store had a clear

obligation to pay all accounts to Summit—whether eligible for purchase or not (i.e.,

whether Acceptable Accounts or not)—as well as all other amounts owing to Walthers. 

Summit’s reasoning is not without persuasive force. 

All that said, we nonetheless elect to address Kathy’s General Store’s argument on

its own terms because, even assuming that Kathy’s General Store could appropriately

base an argument for relief on Section 14, its position that the language of the financing

agreements relieved it from the obligation to pay Summit is untenable.

To begin, we note that the language of the financing agreements itself—through a

cross-reference to the 1972 version of the UCC—generally covers accounts based upon a

pre-payment plan such as that present here. Specifically, while the financing agreements

do not define “accounts,” they state that terms not defined therein, but that are defined in

the UCC, “shall have the meanings set forth in the UCC.” Id. at 144.6

 The Kansas UCC

defines an “Account” as, inter alia, “a right to payment of a monetary obligation, whether

6 We note that the financing agreements purport to define “Accounts” as

“hav[ing] the meaning set forth in the definition of Collateral”; however, there is no

definition of “Accounts” within the definition of “Collateral.” Aplt. App. at 144–45. 

12
or not earned by performance . . . for property that has been or is to be sold.” Kan. Stat.

Ann. § 84-9-102(a)(2) (emphasis added); see Decision Point, Inc. v. Reece & Nichols

Realtors, Inc., 144 P.3d 706, 709 (Kan. 2006) (noting that the UCC defines “account”

“broadly” and setting forth the definition); cf. Cissell I, 471 F. Supp. at 485 (discussing

the difference between the definition of “account” in the pre- and post-1972 versions of

Article 9 of the UCC).7

 And the pre-payment plan here created just such a right to

payment (through the PCS system) in Walthers for fuel that Walthers delivered to

Kathy’s General Store, whether or not that fuel was delivered prior to the payment from

Kathy’s General Store to Walthers. Cf. In re Delta-T Corp., 475 B.R. 495, 519 (Bankr.

E.D. Va. 2012) (“[A]n agreement to sell goods to another creates a right to payment for

the seller. . . . [T]he prior distinction between ‘contract rights’ and an ‘account’ has been

discarded from the Uniform Commercial Code, and ‘contract rights’ are now included

within the definition of an ‘account.’” (citation omitted)); In re Barkley, 31 B.R. 924,

926–27 (Bankr. Mich. 1983) (“The UCC makes no distinction between payments

received at the time goods are sold or payments not received until . . . after the

transaction. For courts to rule otherwise and create such a distinction would lead to

wholly arbitrary and inconsistent results.”). In other words, as Kathy’s General Store

acknowledged at oral argument, “there was an agreement between Walthers and Kathy’s

7 “Because the UCC is intended to be applied uniformly across the various

states, courts routinely turn to decisions from other states when there is no case law on

point within the relevant jurisdiction.” Nat’l Envtl. Serv. Co. v. Ronan Eng’g Co., 256

F.3d 995, 1004 (10th Cir. 2001).

13
[General Store] that Walthers would receive the payments,” Oral Arg. at 25:43–48, and

these payments were made from the proceeds of the PCS transactions that Kathy’s

General Store had assigned to Walthers. 

Accordingly, the language of the financing agreements did not preclude, as a

categorical matter, the accounts generated by the pre-payment plan between Kathy’s

General Store and Walthers from being bona fide obligations within the meaning of

Section 14. And they in fact constituted such obligations. Specifically, by virtue of the

ongoing fuel-supplier relationship that Walthers had with Kathy’s General Store, the

“bona fide obligation” here was the obligation to pay for the fuel. 

Kathy’s General Store was obligated to pay Walthers the reconciliation amount for

the fuel that Walthers delivered to it. See generally Black’s Law Dictionary 1386–87 (9th

ed. 2009) (defining “reconciliation” in accounting as “[a]n adjustment of accounts so that

they agree, esp. by allowing for outstanding items”). As the district court found, Kathy’s

General Store and Walthers would compare spreadsheets once a month “to determine the

balance of the account.” Aplt. App. at 106. Thus, the amount that Kathy’s General Store

owed Walthers for the fuel it had delivered that month was reconciled with the credit card

balance processed through PCS. The key product of this reconciliation process was a

definite, concrete number that was attached to an obligation by Kathy’s General Store to

pay Walthers for each month’s fuel deliveries. This was a bona fide obligation that

Kathy’s General Store owed to Walthers. 

As such, accounts generated by this fuel supply pre-payment plan would have

14
satisfied at least part of the criteria to be eligible for purchase by Summit (i.e., Section 14

criteria)—viz., they would have constituted bona fide obligations. According to Kathy’s

General Store, however, the “no payments” language of subsection (b) would have

prevented these accounts from fully satisfying the criteria. However, in light of Kathy’s

General Store’s acknowledgment that the 1972 UCC includes accounts generated by prepayment plans within its definition of accounts, and the incorporation of this UCC

definition by the financing agreements, Kathy’s General Store’s “no payment” objection

clearly must fail if it is construed as a categorical objection to pre-payment accounts. 

Arguably, Kathy’s General Store makes a different (or additional) point: that the

“no payment” language is designed to exclude from the universe of accounts eligible for

purchase (i.e., the zone of Acceptable Accounts) accounts that are in some sense not

crystallized and definite, in that they contemplate the application of further payments, and

that supposedly the accounts here are of this type. Assuming Kathy’s General Store does

advance this contention, it would fail as a factual matter. At the end of each month,

Kathy’s General Store and Walthers determined the reconciliation amount that Kathy’s

General Store owed to Walthers. This amount was a concrete, fixed figure that

constituted a bona fide obligation of Kathy’s General Store to Walthers; it was not a fluid

figure subject to the application of further payments. Accordingly, the “no payments”

language would not come into play. 

Thus, even addressing Kathy’s General Store’s argument on its own terms—i.e.,

looking to the language of the financing agreements, especially Section 14—it cannot

15
prevail. The accounts of Kathy’s General Store held by Walthers were bona fide

obligations that were eligible for purchase (and actually purchased) by Summit; thus, it

was liable to Summit for the amounts that it originally owed Walthers on those accounts. 

IV

For the aforementioned reasons, we REVERSE the decision of the district court

and REMAND with directions to vacate its judgment in favor of Kathy’s General Store

and enter judgment in favor of Summit.

Entered for the Court

JEROME A. HOLMES

Circuit Judge

16