South v. Smith

• Decision Date: 09 December 1996
• Docket Number: No. 96-504,96-504
• Parties: , 327 Ark. 203 Ray SOUTH and Wilma South, Appellants/Cross-Appellees, v. Berl A. SMITH, Special Administrator of the Estate of Nancy Walton, Appellee/Cross-Appellant.
• Court: Arkansas Supreme Court

Page 503

934 S.W.2d 503

326 Ark. 774, 327 Ark. 203

Ray SOUTH and Wilma South, Appellants/Cross-Appellees, v. Berl A. SMITH, Special Administrator of the Estate of Nancy Walton, Appellee/Cross-Appellant.

No. 96-504.

Supreme Court of Arkansas.

Dec. 9, 1996.

Order Denying Rehearing Feb. 3, 1997.

Arlon L. Woodruff, Lake City, for appellants/cross-appellees.

Mike Cone, Joesboro, for appellee/cross-appellant.

DUDLEY, Justice.

This is another in a long series of cases involving joint accounts in financial institutions. Nancy E. Walton had three children, Buel Walton, Lloyd Walton, and defendant-appellant Wilma South. Buel Walton died in 1982, leaving his daughters, plaintiffs Rita Venable and Monda Hutchison, as his heirs. After Buel Walton's death, Nancy E. Walton opened joint bank accounts and purchased joint certificates of deposit as a joint tenant with her two remaining children, Lloyd A. Walton and Wilma South, in banks and savings and loan associations in Arkansas and Texas, as follows:

1. One certificate of deposit in the Southwest Savings, now known as Guaranty Federal Bank, FSB, a savings association located in Texas in the names of Nancy E. Walton, Lloyd A. Walton, and Wilma South as joint tenants with right of survivorship.

2. Six certificates of deposit in the MCNB Texas, now known as NationsBank, located in Texas, in the names of Nancy E. Walton or Lloyd A. Walton or Wilma D. South.

3. One certificate of deposit in Citizens Bank of Jonesboro in the names of Nancy E. Walton or Lloyd Walton or Wilma South as joint tenants with right of survivorship.

4. One certificate of deposit, one savings account, and one checking account in Home Federal Savings and Loan Association, now known as Capital Bank, in the names of Nancy E. Walton or Lloyd A. Walton or Wilma D. South as joint tenants with right of survivorship.

5. Two certificates of deposit in Pocahontas Federal Savings and Loan Association in the name of Nancy E. Walton or Lloyd A. Walton or Wilma D. South as joint tenants with right of survivorship.

6. Two certificates of deposit in the First State Bank of Arkansas in the names of Nancy E. Walton or Lloyd A. Walton or Wilma D. South as joint tenants with right of survivorship.

All of the accounts were opened with funds that belonged solely to Nancy E. Walton.

Lloyd Walton died on October 24, 1992, leaving a daughter, plaintiff Nancy Norwood as his heir. After Lloyd Walton's death, only Nancy E. Walton and defendant-appellant Wilma South remained as the survivors on the various joint accounts. Meanwhile, in July 1992, Nancy E. Walton had suffered a stroke and was moved to a nursing home. Appellant Wilma South cared for her mother and wrote checks to pay her living expenses. Between November 5, 1992, and November 17, 1992, appellant Wilma South withdrew in excess of $315,000 from the accounts and deposited the funds in new accounts in her and her husband's names. Her husband is defendant-appellant, Ray South. Their daughter's name was also placed on at least one of the accounts. Appellant Wilma South did not tell her mother that she had removed the money from some of the joint accounts or that she had deposited it in joint accounts with her husband and daughter. The only account from which no money was withdrawn was a Home Federal account, but it was changed to reflect Nancy E. Walton, Ray or Wilma South, and Karen Moustafa as joint tenants with right of survivorship. Nancy E. Walton died just days after the money was withdrawn, on November 25, 1992. In December 1992, after her mother's death, appellant Wilma South cashed a $10,000 CD from NationsBank in Texas.

Monda Hutchison, Nancy Norwood, and Rita Venable, as the heirs of Buel and Lloyd Walton, filed this suit and alleged that a fiduciary relationship existed between Nancy E. Walton and defendant-appellant Wilma South and that South breached that relationship by withdrawing in excess of $300,000 from the accounts to which Nancy E. Walton was the sole contributor. They alleged that appellants' actions constituted conversion and that a constructive trust should be imposed declaring the money to belong to the estate of Nancy E. Walton. Appellants answered, denying that they breached a fiduciary duty and asserting that the parties had agreed that any one of them could withdraw the funds, and, if one of them died, the funds would become the property of the survivors. The trial court appointed Berl Smith as special administrator of the estate of Nancy E. Walton and substituted him as the plaintiff in the action.

At trial, there was testimony by various employees of the financial institutions that Nancy E. Walton understood the types of accounts, knew how she wanted the accounts styled, and chose the joint accounts with the right of survivorship. The trial court found that a fiduciary relationship existed between Nancy E. Walton and Wilma South and that, while appellant Wilma South was authorized to withdraw the funds from the accounts, she wrongfully converted the funds by placing them in an account to the exclusion of Nancy E. Walton. The trial court determined that the death of Nancy E. Walton did not terminate her cause of action. The trial court ruled that a constructive trust was created and that Wilma South and Ray South held the proceeds for the benefit of Nancy E. Walton's estate. The trial court ordered Wilma South to pay to Nancy E. Walton's estate all of the proceeds withdrawn before Nancy Walton's death and permitted Wilma South to retain the funds not withdrawn until after her death. The trial court also ordered that "[p]laintiff's claim of $10,000.00 plus interest for the sum withdrawn from Nationsbank in Texas on December 24, 1992 is denied as Arkansas law applies to all accounts."

Wilma South and Ray South, on direct appeal, contend that the trial court erred in that part of the order requiring them to repay all of the funds withdrawn before the death of Nancy E. Walton, and the special administrator appeals from that part of the order providing that Arkansas law applies to the accounts opened in the Texas financial institutions. We reverse on both direct and cross-appeal.

We first address the direct appeal. The applicable statute, Ark.Code Ann. § 23-32-1005 (1987), in material part, provides:

Checking accounts and savings accounts may be opened and certificates of deposit may be issued by any banking institution, or federally or state-chartered savings and loan association, in the names of two (2) or more persons, either minor or adult, or a combination of minor and adult. Checking accounts, savings accounts, and certificates of deposit shall be held and payable as follows:

(1)(A) Unless a written designation to the contrary is made to the banking institution or federally or state-chartered savings and loan association, when a deposit has been made or a certificate of deposit purchased in the names of two (2) or more persons and in form to be paid to any of the persons so named, or the survivors of them, the deposit or certificate of deposit and any additions thereto made by any of the persons named in the account shall become the property of those persons as joint tenants with right of survivorship;

(B) The deposit or certificate of deposit, together with all interest thereon, shall be held for the exclusive use of the persons so named and may be paid to any of those persons or to the survivors after the death of any of those persons. The payment shall be a valid and sufficient release and discharge of the bank or federally or state-chartered savings and loan association for all payments made on account of the deposit or certificate of deposit;

(2)(A) If the person opening the account or purchasing the certificate of deposit designates in writing to the banking institution or federally or state-chartered savings and loan association that the account or the certificate of deposit is to be held in joint tenancy or in joint tenancy with the right of survivorship, or that the account or certificate of deposit shall be payable to the survivor or survivors of the persons named in the account or certificate of deposit, then the account or certificate of deposit and all additions thereto shall be the property of those persons as joint tenants with right of survivorship.

(B) The account or certificate of deposit may be paid to or on the order of any one (1) of those persons during their lifetime unless a contrary written designation is given to the banking institution or federally or state-chartered savings and loan association, or to or on the order of any one (1) of the survivors of them after the death of any one (1) or more of them.

(C) The opening of the account or the purchase of the certificate of deposit in this form shall be conclusive evidence in any action or proceeding to which either the banking institution or federally or state-chartered savings and loan association or the surviving party is a party of the intention of all of the parties to the account or certificate of deposit to vest title to the account or certificate of deposit, and the additions thereto, in such survivor.

....

(5) If an account is opened or a certificate of deposit is purchased in the name of two (2) or more persons, whether as joint tenants, tenants by the entirety, tenants in common, or otherwise, a banking institution or federally or state-chartered savings and loan association shall pay withdrawal requests, accept pledges of the account or certificate of deposit, and otherwise deal in any manner with the account or certificate of deposit. This may be done upon the direction of any one (1) of the persons named therein, whether the other persons named in the account or certificate of deposit are living or not, unless one (1) of the persons named therein shall, by written instructions delivered to the banking institution or federally or state-chartered savings and loan association, designate that the signature of more than one (1...