Wightman v. American Nat. Bank of Riverton

• Decision Date: 13 March 1979
• Docket Number: No. 4949,4949
• Citation: 591 P.2d 903
• Parties: Michael Ross WIGHTMAN and Erin Jennell Wightman By and Through their next friends Howard Wightman and Evelyn Wightman, Appellants (Plaintiffs below), v. AMERICAN NATIONAL BANK OF RIVERTON, Appellee (Defendant and Third Party Plaintiff below), v. William MALODY, Jr., a/k/a William M. Malody and John R. Benesch, as Administrator of the Estate of Page Malody, deceased, Third Party Defendants. *
• Court: Wyoming Supreme Court

Page 903

591 P.2d 903

Michael Ross WIGHTMAN and Erin Jennell Wightman By and Through their next friends Howard Wightman and Evelyn Wightman, Appellants (Plaintiffs below), v. AMERICAN NATIONAL BANK OF RIVERTON, Appellee (Defendant and Third Party Plaintiff below), v. William MALODY, Jr., a/k/a William M. Malody and John R. Benesch, as Administrator of the Estate of Page Malody, deceased, Third Party Defendants. ^*

No. 4949.

Supreme Court of Wyoming.

March 13, 1979.

Rehearing Granted June 12, 1979.

Tom C. Toner, Rodle, Yonkee & Arney, Sheridan, for appellants.

Donald P. White, White, Avery & Howard, Riverton, for appellee.

Before RAPER, C. J., McCLINTOCK, THOMAS and ROSE, JJ., and GUTHRIE, J., Retired. ^**

RAPER, Chief Justice.

This case involves rights to a pledged certificate of deposit (C.D.). A motion for summary judgment was granted in favor of defendant-appellee, American National Bank of Riverton (ANB). Plaintiffs-appellants appeal. The district court found that the C.D., in the names of "Page Malody or Michael Ross Malody or Erin Jennell Malody" ¹ as depositors, pledged by Page Malody to secure a joint indebtedness of William and Page Malody, husband and wife, was upon default properly applied by ANB to that debt. The district court also found that while the C.D. stood in the three names shown, ANB's rights upon default were not affected even though Page Malody died before the debt matured. The issues, as stated by the appellants, assert that:

"1. The purchase of the certificate of deposit vested in the children a joint interest in the certificate of deposit with a right of survivorship.

"2. There is evidence from which the jury could find that Page Malody intended to vest a present interest in the certificate of deposit in her children and grant them rights of survivorship in the certificate of deposit.

"3. Page Malody's interest in the certificate of deposit terminated on her death. The note which the collateral agreement was to secure was not due until after her death. The Bank's lien or set-off necessarily terminated on Page Malody's death. The execution of the collateral agreement is not inconsistent with an intent to vest the children with a present beneficial interest in the certificate of deposit."

We will reverse the summary judgment for ANB and remand with directions to enter summary judgment for appellants.

Although we decide the case on relatively simple legal principles and on a narrow issue, the factual background is somewhat involved. Page and William Malody were married January 1, 1971, a second marriage for each. In 1970, Page's grandfather had died and left her a one-half interest in a Nebraska ranch, in trust until she reached age 30.

In October, 1973, the Malodys met with the Executive Vice-President of ANB and discussed with him their intent to purchase a ranch in the Lander area. At that time Page deposited $75,000 from her inheritance to be used as a down payment on the ranch. The Malodys also wished to obtain a line of credit from ANB to purchase livestock and farm machinery. A financing statement, given to the bank at that time, noted Page's expectancy in the Nebraska ranch upon which ANB relied as a consideration in granting loans to the Malodys. In January, 1974, ANB began advancing money to the Malodys. In this same month, Page had a malignant cyst removed from her leg.

In the early spring of 1974, Page received treatment for cancer in Salt Lake City, Utah. At about that same time, arrangements were being made to sell the Nebraska ranch. While in Nebraska and after learning she had cancer, Page consulted with an attorney about establishing a trust for the children with the proceeds of the inheritance. Page had an agreement with William Malody that her children would inherit her property and William's children by a former marriage would inherit only his property. Page continued to receive radium treatments for cancer until, in August, 1974, she was told her cancer had been cured.

In October, 1974, the Nebraska ranch was sold and Page received $182,300 which she deposited in a savings account at ANB. A few days later she withdrew $150,000 and purchased a C.D. in her name alone. On November 29, 1974, the Malodys reduced their loans, apparently at least in part with funds also withdrawn from the $182,300 savings deposit, and consolidated several loans as well. They executed a promissory note to ANB dated November 29, 1974, in the amount of $154,775, payable December 15, 1975. At this same time they executed a security agreement covering the cattle and machinery purchased with the loans from ANB. ² At ANB's request, Page Malody pledged the C.D. in her name alone as depositor as additional security for the loan.

In 1975, Page Malody's cancer symptoms recurred. ANB officials were aware of her illness in 1974 and that it was cancerous in January, 1975. The C.D. which had been purchased in October, 1974, matured on March 1, 1975. Upon reissuance, and at Page's request, a new C.D. in the sum of $154,875 named "Page Malody, or Michael Ross Malody or Erin Jennell Malody," as depositors. ANB did not question the use of alternative payees either upon reissuance of the C.D. or when a new pledge agreement was signed by Page. The pledge agreement contains no provisions regarding the alternative payees but appears to be a form agreement prepared by ANB with a blank space for description of the pledged property. The reissued C.D. had a maturity date of September 1, 1975, but by its printed terms was "automatically renewable." Page Malody died in October, 1975. When the promissory note came due on December 15, 1975, William Malody defaulted and ANB applied the C.D. to the indebtedness. This application of the pledged property to the indebtedness was termed by ANB as a "set-off".

When Page died, Howard and Evelyn Wightman, grandparents of Page's children, asked the President of ANB to serve as administrator of Page's estate. He assured them he would attend to the children's interests but did not advise them that the children's names were on the C.D. It became apparent that without the C.D. there was only $7,000 $9,000 in Page's estate. The ranch, all cattle and machinery had passed to William Malody because it was held jointly as husband and wife with the right of survivorship. Eventually all the cattle and machinery were sold and used to apply to a deficiency in the original indebtedness as well as to the indebtedness incurred by William Malody after Page's death. Since the indebtedness was still not extinguished, ANB received a second mortgage on the ranch itself in September, 1976. When Howard and Evelyn Wightman learned that the names of Page's children were on the C.D., the present action was brought to recover its face amount with interest at its stated rate for the children.

The simple question we have to answer is what interest in the C.D. did Page Malody pledge to the bank on March 1, 1975. Generally speaking, a bank deposit is in the nature of a contract and is owned by the depositor or depositors, or is payable to the person to whose order the deposit is subject, whose rights thereto the bank may not dispute. 10 Am.Jur.2d Banks § 345, pp. 308-309. The bank holds the deposit in a debtor-creditor relationship with the depositor, and is subject to be paid out upon the direction of the creditor according to the terms and conditions imposed by him. 10 Am.Jur.2d Banks § 339, pp. 301-304. As between the depositor and the bank, the deposit agreement is conclusive. O'Hair v. O'Hair, 1973, 109 Ariz. 236, 508 P.2d 66, 68.

In the case at bar, Page purchased the certificate of deposit in her own name and in the names of her two children, in the alternative. It is established by statute in this state that, as between a depositor and a bank, a deposit standing in the names of two or more persons in the alternative belongs wholly to the survivor or survivors upon the death of one depositor. § 13-29.1, W.S.1957 ³ (as amended in 1977, after the events of this case took place, this statute is now § 13-3-601(b), W.S.1977); § 34-1-140, W.S.1977; §§ 34-21-310 and 34-21-316, W.S.1977 (see official comments in Uniform Laws Annotated, Uniform Commercial Code, Vol. 2, §§ 3-110 and 3-116). We hold that the C.D. purchased by Page Malody on March 1, 1975, was held in joint tenancy and upon the death of any of the persons named therein the survivors would thereupon own the entire value of the C.D. ⁴

On March 1, 1975, Page Malody also pledged the C.D. as additional security for loans made by ANB to her and her husband. The document which Page signed was a pledge agreement:

" * * * the undersigned has Pledged, transferred and delivered to said Bank the following property, viz.: Security Agreement and Certificate of Deposit # A-1053 in the amount of $154,875.00." (Emphasis added.)

In addition to the use of the word "pledge", the transaction bears all the characteristics of a pledge: property held by the creditor, as security for payment of a debt, the property being redeemable on specified terms and subject to sale in the event of default. 68 Am.Jur.2d Secured Transactions § 50, pp. 876-878; 72 C.J.S. Pledges §§ 1, 5, and 11; and see, Walton v. Piqua State Bank, 1970, 204 Kan. 741, 466 P.2d 316, 326-329. A pledge is recognized by the Uniform Commercial Code (U.C.C.). ⁵ However, the U.C.C. does not deal with the rights and obligations arising out of pledges. Common law principles are used to fill this gap. ⁶ 68 Am.Jur.2d Secured Transactions § 49, pp. 875-876. While the U.C.C. recognizes pledges, it does not specifically deal with the rights and obligations arising out of them. Moreover, § 34-21-904(a) (xi) specifically excludes the pledge of a savings deposit. Thus we are obliged to peruse the law of pledges in determining the matter before us. We hold that the agreement between ANB and Page Malody was a pledge and the law governing pledges is the proper frame of reference in this case.

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