Walton v. Piqua State Bank

• Decision Date: 07 March 1970
• Docket Number: No. 45575,45575
• Citation: 466 P.2d 316,204 Kan. 741,7 U.C.C. Rep. 1067
• Parties: , 7 UCC Rep.Serv. 1067 Marjorie WALTON, Appellant, v. The PIQUA STATE BANK, Appellee.
• Court: Kansas Supreme Court

Page 316

466 P.2d 316

204 Kan. 741, 7 UCC Rep.Serv. 1067

Marjorie WALTON, Appellant, v. The PIQUA STATE BANK, Appellee.

No. 45575.

Supreme Court of Kansas.

March 7, 1970.

Syllabus by the Court

1. To be sufficient as a note or a memorandum under the statute of frauds (K.S.A. 33-106), a writing must be complete in itself, leaving nothing to rest in parol. The general rule that a contract which is not entirely in writing is to be treated as a parol or verbal contract, is applicable in determining whether the contract is within the inhibitions of the statute of frauds.

2. Where the words of an oral agreement can have only one meaning and there exists no grounds upon which reasonable minds might differ, the construction of the agreement becomes one of law for the court's determination.

3. A guaranty is a collateral undertaking by one person to answer for the payment of a debt or the performance of some contract or duty in case of default of another person who is liable for such payment or performance in the first instance.

4. The fact that one who has made a loan of funds does not assert a claim against a third person until he has failed to receive payment from the person who was principally obligated, indicates that the third person was not looked to primarily for payment and that whatever promise he made for payment is within the statute of frauds as a collateral obligation.

5. The fact that the guarantor-promisor derives some personal benefit from a transaction is insufficient to remove his promise from the statute of frauds.

6. If the statute of frauds is held to apply only where a promisor guarantees the debt of another in a transaction in which the promisor is completely uninterested, the statute is effectively destroyed. Completely uninterested persons do not guarantee the debts of others.

7. It is the duty of one who contends an oral promise is outside the statute of frauds to show or establish facts taking the promise out of the statute.

8. The common-law pledge is given recognition by K.S.A. 84-9-104 with respect to any deposit, savings, passbook or like account maintained with a bank, savings and loan association, credit union or like organization, and the lien of the pledgee is perfected by the delivery of such intangibles by the pledgor to the pledgee.

9. A pledge is a security interest in a chattel or in an intangible represented by an indispensable instrument, the interest being created by a bailment for the purpose of securing the payment of a debt or the performance of some other duty.

10. To constitute a valid pledge of personal property as security for a debt, it is essential that there be an actual delivery of the property by the pledgor to the pledgee and that the pledgee must thereafter hold possession of the pledge openly and adversely to the pledgor.

11. A savings account, being a chose in action, is a proper subject of a pledge, and may be placed in possession of the pledgee by delivery of the savings account passbook, or by a written assignment of the account to the extent of the debt, and such delivery is best evidenced by the delivery of the passbook together with a formal written assignment of the account to the pledgee. If there is no transfer or delivery of the account by such methods, it is imperfect as a pledge of personal property.

12. The record in an action by the depositor against the bank to recover a deposit of $15,000 in a savings account, and a cross petition by the bank against the depositor to recover the sum of $25,000 which was evidenced by a Loan Guaranty Agreement, is examined, and, as more fully set forth in the opinion, it is held: (1) The purported Loan Guaranty Agreement was incomplete on its face and void and unenforceable under the statute of frauds; (2) there was no substantial evidence to establish as direct primary contractual agreement between the depositor and the bank for payment of the debt of another; (3) the oral agreement of the depositor to guarantee the debt of another was collateral and within the statute of frauds, and unenforceable; (4) there was no delivery of possession of the savings account to the bank as pledgee, either by delivery of the passbook or by written assignment of the account to the extent of the debt, and no lien was created in favor of the bank as pledgee, and (5) the plaintiff is entitled to recover with interest the amount deposited in the savings account.

Elwaine F. Pomeroy, Topeka, argued the cause, and Emerson M. Pomeroy and Allan A. Hazlett, Topeka, were with him on the brief for appellant.

J. D. Conderman, Iola, argued the cause, and Robert V. Talkington, Iola, was with him on the brief for appellee.

FATZER, Justice.

The principal questions presented are whether the promise of Marjorie E. Walton comes within our statute of frauds (K.S.A. 33-106), as a 'special promise to answer for the debt, default or miscarriage' of her brother, Robert E. Kendall, and whether her deposit of $15,000 in a savings account in The Piqua State Bank constituted a valid pledge to secure an indebtedness to the bank.

The facts are not greatly in dispute. The plaintiff, Marjorie E. Walton, is a young farm widow, and started helping her brother, Robert E. Kendall, financially About the time Kendall started his TV and Appliance business in Yates Center, Mrs. Walton signed a guaranty agreement with General Electric Credit Corporation (GECC) to enable him to finance his inventory. In September, 1965, Kendall was substantially in debt to GECC and it was pressing him for payment. It had a security agreement on his inventory and was going to pick it up. As he had done in the past, Kendall sought his sister's assistance. She loaned him $4,000 which he sent to GECC for the amount due. Between September, 1965, and October 14, 1966, Mrs. Walton advanced Kendall more than $22,000 on twelve different occasions to pay his creditors. Between the latter date and December 27, 1966, she advanced Kendall money for the same purpose on three other occasions, totaling at least $6,000. It was conceded her intention in making the loans was to enable Kendall to continue his financing arrangements, and to keep his inventory from being repossessed. The fact she guaranteed his indebtedness with GECC in no way influenced her decision.

shortly after her husband's death in 1964. She had advanced him approximately $69,000 prior to the transaction in controversy. Some of the money was used to enable Kendall to move his family to Yates Center, but, by far, the majority of the money was used to enable him to set up his TV and Appliance business in Yates Center and to meet his business expenditures, such as obtaining inventory, meeting his payroll, making good insufficient checks written by him, and his business obligations in general. All of those transactions were entered into by Mrs. Walton to help her brother establish his business. She had no primary motivation to benefit herself.

The present controversy arises out of loans The Piqua State Bank made to Kendall on and subsequent to October 14, 1966.

Mrs. Walton's petition alleged she deposited $15,000 in a savings account in the bank; that she demanded a return of the deposit but the bank refused her demand; that it claimed she was guarantor of certain sums it advanced to Kendall, doing business as Kendall's TV and Appliance; that a copy of the purported guaranty agreement the bank was relying on was attached to her petition as Exhibit A; that the same was null and void having no legal effect whatsoever, and was in violation of K.S.A. 33-106; that said purported guaranty agreement failed to comply with the statute of frauds in that it was not completely in writing; that the same failed to state with reasonable certainty each party to the contract, either by his own name or by such a description as would serve to identify him, or the name or description of his agent; that it failed to state with reasonable certainty the terms and conditions of all the promises constituting the contract, or to whom the promises were made; that neither the amount guaranteed, nor whose debt was guaranteed, was stated in said purported agreement; that no reference was made by said writing to the principal obligation, nor did the writing describe in any way the principal obligation, and that the purported guaranty was invalid since it was not supported by any valid consideration, and was not capable of being performed within one year. The petition further alleged misrepresentation and fraud on the part of the defendant, but no evidence was offered on this point. The prayer was that the purported guaranty agreement be declared null and void as being in violation of K.S.A. 33-106, and that plaintiff be permitted to withdraw the $15,000 deposited in the savings account.

The bank answered, and filed a cross petition. It admitted Mrs. Walton deposited $15,000 in a savings account in the bank, and, except as otherwise admitted or explained, it denied generally and specifically the petition.

The bank alleged Kendall sought a loan totaling $25,000, which it was unable to make since he did not have sufficient security; that Kendall was told by Dreiling, as president of the bank, the loan could be made if the plaintiff would guarantee it and deposit $15,000 in a savings account to be held as a guarantee. It further alleged The bank further alleged that on September 14, 1967, Dreiling wrote Mrs. Walton, advising he was concerned about Kendall's loans and thought she should know about the matter as she was guaranteeing them. It further alleged the plaintiff replied to Dreiling's letter, and on October 31, 1967, Dreiling, as president of the bank, made written demand upon Kendall for payment of his entire indebtedness to the bank within ten days, such indebtedness being in the sum of $25,390, plus interest, and evidenced by two promissory notes; that payment was not made by Kendall as demanded, and Dreiling, as president of the...