JAMES RAICHEL V. EUNICE RAICHEL, ADMINISTRATRIX OF THE ESTATE OF EDDIE RAICHEL
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RENDERED: NOVEMBER 21,200l
TO BE PUBLISHED
2000-SC-0138-DG
JAMES RAICHEL
APPEAL FROM COURT OF APPEALS
1998-CA-2118-MR
LETCHER CIRCUIT COURT NO. 1998-Cl-0014
V.
EUNICE RAICHEL, ADMINISTRATRIX
OF THE ESTATE OF EDDIE RAICHEL
APPELLEE
OPINION OF THE COURT BY JUSTICE STUMBO
REVERSING
We granted discretionary review in this action to determine the ownership of a
cashier’s check found among the personal effects of the decedent. He had obtained
the cashier’s check and was one of the named payees on the check, along with his son.
The issue is whether the check belongs to the surviving named payee or to the estate
of the decedent.
Eddie Raichel, the decedent, obtained a cashier’s check for $42,000.00 with his
own funds, in August 1997 from the Bank of Whitesburg. The language on the check
states, “Pay to the order of Eddie Raichel or James Raichel.” James Raichel is the
decedent’s son and Appellant in this action. At the time the decedent obtained this
check, he was married to Eunice Raichel, Appellee. She was his second wife. They
were married in 1993, and she was not the biological mother of his children. In
November 1997, the decedent and Appellee were vacationing in Florida when Eddie
Raichel died. The cashier’s check was with the decedent’s personal effects, and the
Appellee found and took possession of it. Neither side presented evidence showing
that Appellant or Appellee knew of the $42,000.00 check previous to decedent’s death.
Appellee was appointed administratrix of Eddie Raichel’s estate in December
1997. Appellant filed a motion in late December in the probate proceeding in Letcher
District Court seeking a release of the cashier’s check. The matter was submitted to
the district court for a ruling after a hearing. Then, in January 1998, Appellee filed a
declaratory judgment action in Letcher Circuit Court in order to determine the ownership
of the cashier’s check. On June 25, 1998, the Letcher Circuit Court entered judgment
in favor of Appellant determining that KRS 391.315(l) controlled and that ownership
passed automatically to the son upon the death of the decedent. The Appellee
appealed to the Court of Appeals which reversed and remanded, holding that the check
belongs to the estate, and instructing the court to look to Article III of the Uniform
Commercial Code. This Court granted discretionary review.
The issue before us is whether Appellant, as a named joint payee on the
cashier’s check, has ownership rights in the instrument or whether Appellee, as the
estate of the decedent, has said rights. For the reasons set forth below, we hold the
circuit court appropriately found that the Appellant has superior rights to the check.
Appellant claims that ownership of the check passed to him upon his father’s
death and not to the estate of the decedent because the legal presumption is that
“[slums remaining on deposit at the death of a party to a joint account belong to the
surviving party and parties as against the Estate of the decedent.” KRS 391.315(l),
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For this to be true, the cashier’s check must be a joint account. An account is “a
contract of deposit of funds between a depositor and a financial institution, and includes
a checking account, savings account, certificate of deposit, share account and other
like arrangement.” KRS 391.300. Further, a joint account is “an account payable on
request to one or more of two or more parties whether or not mention is made of any
right of survivorship.” KRS 391.300. Appellant argues that this was a joint account
because the depositor, decedent, deposited the $42,000.00 with the bank, a financial
institution, thereby creating a contract of deposit between them. That is, when the
payee presents the cashier’s check to the bank, the bank must pay the $42,000.00 that
was deposited by the decedent. As a result, a cashier’s check is an “other like
arrangement,” such as a certificate of deposit or checking account, that is contemplated
in the statutory language of KRS 391.300, which defines a joint account.
Conversely, the Appellee argues that this is not a joint account because it is not
listed in the definition of an account in KRS 391.300, rather this is actual cash.
Therefore, the legal presumption of a right of survivorship does not apply to this matter
and the check therefore belongs to the estate of Eddie Raichel. However, the Appellee
argues that if this Court decides KRS 391.315 does apply, then it must be applied in
conjunction with KRS 355.3-l 10. This UCC section dictates that “if an instrument is
payable to two (2) or more persons alternatively, it is payable to any of them and may
be negotiated, discharged, or enforced by any or all of them in possession of the
instrument.” KRS 355.3-l lO(4). Accordingly, since the decedent was in possession of
the cashier’s check at the time of his death, his rights to the check are superior to the
Appellant’s even though the Appellant was an alternative joint payee. Furthermore, the
decedent’s personal representative, Appellee, then succeeded to the rights in the
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cashier’s check at the decedent’s death. In addition, Appellee argued that since she
knew nothing of the cashier’s check until after decedent died, it appears as though
Eddie was trying to conceal funds from his wife and in effect deprive her of her dower
rights.
We believe that this was a joint account and therefore the cashier’s check
belongs to the surviving party as against the estate of the decedent. First, this is an
account because the decedent had to present and deposit $42,000.00 with the bank in
order to obtain the cashier’s check. This created “a contract of deposit of funds
between a depositor [Decedent] and a financial institution [Bank of Whitesburg].”
KRS 391.300(l). Second, this is a joint account because it is “payable on request to
one (1) or more of two (2) or more parties.” KRS 391.300(4). As the language on the
check indicates, the $42,000.00 is to be paid, “to the order of Eddie Raichel [Decedent]
or James Raichel [Appellant].” Therefore, the balance is “payable on request to one (1)
or more of two (2) . . . parties.” KRS 391.300(4). As a result, this cashier’s check is a
joint account according to the definitions set forth in KRS 391.300.
A layperson probably would not deem a cashier’s check an “account.” One
normally thinks of an account as a deposit of funds upon which the depositor can draw,
not as the purchase of a negotiable instrument. However, KRS 391.300(l) provides:
“Account” means a contract of deposit of funds between a depositor and a
financial institution, and includes a checking account, savings account,
certificate of deposit, share account and other like arrangement.
Clearly, a cashier’s check is not an “other like arrangement” in comparison to a
checking account, savings account, or share account. However, KRS 355.3-104(10)
identifies a “certificate of deposit” as a negotiable instrument and defines it as, inter
&, “a note of the bank.” Further, KRS 355.3-412 provides that issuers of notes and
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cashier’s checks have identical obligations with respect to payment. Professors
Leibson and Nowka interpret KRS 355.3-412 as removing any “doubt, if ever there was,
that a cashier’s check shall not be treated as an ordinary check, but rather as a primary
obligation of the issuer, just as a note.” David J. Leibson and Richard H. Nowka1The
Uniform Commercial Code of Kentucky, §4.3(D)(l) (2d ed. Matthew Bender 2000 cum.
supp.). Since a cashier’s check and a certificate of deposit are both notes, the former is
an “other like arrangement” as to the latter, and falls within the scope of KRS
391.315(l)(a),
which provides: “Sums remaining on deposit at the death of a party to a
joint account belong to the surviving party or parties to the account as against the
estate of the decedent unless there is clear and convincing written evidence of a
different intention at the time the account is created.” Therefore, the $42,000.00
belongs to the Appellant, the surviving party to the account, as against the Appellee, the
estate, unless there is clear and convincing evidence otherwise. Here, there is no such
evidence. In fact, the only clear and convincing written evidence indicates the
decedent’s desire for his son, Appellant, to have this cashier’s check, as he is the only
other named payee on the check. There is also case law supporting this position.
In Henslev v. Ball, Ky., 380 S.W.2d 279 (1964), the decedent died intestate and
was survived by his wife and children from a previous marriage. Among his property
were two cashier’s checks made out to Smith Ball, the decedent, and Charlie Ball, his
son. The Kentucky Court of Appeals held that the two cashier’s checks belonged
equally to the estate and the son due to the “and” language. The court found that
Stock certificates, notes, bonds, and cashier’s checks are
basically alike in that each is evidence of contract rights held by the owner
or payee against the signatory institution or party. When one person
causes such a document to be issued by a second person in favor of
another, individually or jointly, the latter becomes a third party beneficiary
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of the transaction, and is vested with the rights evidenced by the
instrument, which is no less a contract simply because it may generally
and more familiarly be regarded as a title document.
Id. at 283. There, the right of survivorship language, “and,” indicated an intent for both
the decedent and the son to share the cashier’s check; unlike in the case at bar where
the intent is for either the decedent orthe son to have the money, alternatively. In a
similar case, Farmer’s Bank & Trust Co. v. Brazell, Ky., 902 S.W.2d 830 (1995), a
mother and daughter were alternative payees to a certificate of deposit. Before the
mother died, she pledged the joint certificates of deposit as collateral on a loan with a
bank. After her death, her daughter, as joint payee, sued the bank in order to have
herself declared as owner of the certificates of deposit as against the bank. The
Kentucky Court of Appeals ultimately determined that the certificates of deposit
belonged to the bank and not to the payee because the certificates of deposit were
negotiable instruments and, therefore, “the party who possessed them could negotiate
them.” Id. at 832. Since the decedent had negotiated them before her death, they
belonged to the bank and not the alternative payee. The Court also noted, however,
that “had the certificates of deposit not been pledged to [the bank], they would have
automatically belonged to [the surviving payee].” Id. That is, like the case at bar, these
instruments “were payable in the alternative because of the inclusion of ‘or’ on their
faces.” Id. Therefore they were payable to either the mother or daughter. However,
while the mother was in possession of these certificates of deposit, she was able to
negotiate them, which she did when she pledged them as collateral for a bank loan.
This is unlike the present matter because here, the decedent never negotiated the
cashier’s check. As a result, the cashier’s check now belongs to the alternative joint
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payee, Appellant James Raichel.
KRS 355.3-l 1 O(4) provides:
If an instrument is payable to two (2) or more persons alternatively, it is
payable to any of them and may be negotiated, discharged, or enforced
by any or all of them in possession of the instrument. If an instrument is
payable to two (2) or more persons not alternatively, it is payable to all of
them and may be negotiated, discharged, or enforced only by all of them.
If an instrument payable to two (2) or more persons is ambiguous as to
whether it is payable to the persons alternatively, the instrument is
payable to the persons alternatively.
The Court of Appeals reasoned that, since Appellant’s father was in possession
of the instrument at the time of his death, it was his property and passed to his estate
which then could negotiate it on his behalf. There is support for this proposition in
Thomas v. Estate of Eubanks, 358 So.2d 709 (Miss. 1978), interpreting a Mississippi
statute virtually identical to KRS 355.3-l lO(4). The instrument in Thomas was a
certificate of deposit, not a cashier’s check, but, as noted above, both are negotiable
instruments. Nevertheless, we believe that the purpose of KRS 355.3-l 10(4) was not
to designate who owned an instrument, but to designate who, as between co-payees,
has the right to negotiate that instrument. This interpretation is reinforced by the fact
that KRS 355.3-101, et seq., is primarily concerned with identifying negotiable
instruments and establishing rules pertaining to the rights and obligations of parties with
respect to the negotiation thereof, while KRS Chapter 391 is specifically concerned with
the descent and distribution of property interests of decedents after their deaths.
Appellee also expresses a concern about her dower rights to the $42,000.00
cashiers check. KRS 392.020 defines the surviving spouse’s interest in the property of
their deceased spouse. It states, “that when a spouse dies intestate”, “the survivor
shall
. have an absolute estate in one-half (I/2) of the surplus personalty left by the
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decedent.” KRS 392.020. However, the $42,000.00 cashier’s check is not surplus
personalty, as contemplated in the statute, because the decedent deposited it, before
his death, in the name of himself or Appellant, and therefore it was not part of his
estate. The $42,000.00 belonged to the alternative payee, Appellant, upon the
decedent’s death, and as a result, it was not part of the surplus personalty to be given
to his spouse, Appellee. We do not address the issue of dower rights as discussed in
Harris v. Rock, Ky., 799 S.W.2d 10 (1990), because Appellee did not claim at trial that
the check was purchased to defraud her dower rights.
For the reasons stated above, we reverse the Court of Appeals and reinstate the
judgment of the Letcher Circuit Court.
Graves and Wintersheimer, JJ., concur. Cooper and Keller, JJ., concur in result
only, as they do not believe this is a “joint account.” Lambert, C.J., dissents by
separate opinion, with Johnstone, J., joining that dissent.
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ATTORNEY FOR APPELLANT:
Harold D. Boiling
135 West Main Street
Whitesburg, KY. 41858
ATTORNEY FOR APPELLEE:
Darrell Hall
P.O. Box 765
Whitesburg, KY. 41858
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RENDERED: NOVEMBER 21,200l
TO BE PUBLISHED
2000-SC-0138-DG
APPELLANT
JAMES RAICHEL
V.
APPEAL FROM COURT OF APPEALS
1998-CA-2 118-MR
LETCHER CIRCUIT COURT NO. 1998-Cl-0014
EUNICE RAICHEL, ADMINISTRATRIX
OF THE ESTATE OF EDDIE RAICHEL
APPELLEE
DISSENTING OPINION BY CHIEF JUSTICE LAMBERT
I would affirm the Court of Appeals. The majority holds that cashier’s
checks are accounts; therefore, the survivor takes the check if the check is made
payable to alternative payees. Here Appellant, decedent’s son, takes under the majority
reasoning, to the exclusion of all other beneficiaries, because the check was made
payable to “order of Eddie Raichel [decedent] or James Raichel [decedent’s son]“.
The majority rests its decision on KRS 55 391.315(l), 391.300(l) and (4).
None of these are controlling in this case. KRS § 391.300(l) defines an account as “a
contract of deposit of funds between a depositor and a financial institution, and includes
a checking account, savings account, certificate of deposit, share account and other
like arrangement.” The majority incorrectly categorizes cashier’s checks as ‘accounts.’
Cashier’s checks do not fall within the phrase “other like arrangements” as the majority
holds because these checks are unlike the other accounts listed in the statute. They
are not accounts at all. The decedent was not a depositor because there was no
deposit.’
KRS § 355.3-l IO’ states that one in possession of a negotiable
instrument, such as a cashier’s check, may negotiate it.3 One who obtains a cashier’s
check procures prior acceptance.4 The drawee has no right thereafter to refuse
payment except for fraud. Thus a cashier’s check takes on the characteristics of
currency which may be kept or exchanged as the possessor chooses. Here the
possessor chose to keep his cashier’s check and it remained his property until the
moment of his death, when it, like other personalty, passed to the control of his
personal representative. Therefore, his estate succeeds to his interest and it may
negotiate the check.
The majority cites Farmer’s Bank & Trust Co. v. Brazel15 comparing it to
the case at bar. That case dealt with certificates of deposit with joint alternative payees.
Certificates of deposit are accounts as defined in the statute. Because cashier’s checks
’ Deposit is defined in 9 C.J.S. Banks and Banking § 269 (1996) as “a sum of
money left with a bank and the depositor as the person who leaves it there.”
2 (4) If an instrument is payable to two (2) or more persons alternatively, it is
payable to any of them and may be negotiated, discharged, or enforced by any or all of
them in possession of the instrument.
3 KRS § 355.3-201. Negotiation. (1) “Negotiation” means a transfer of
possession, whether voluntary or involuntary, of an instrument by a person other than
the issuer to a person who thereby becomes its holder.
4 KRS § 355.3-409.
5 Ky., 902 S.W.2d 830 (1995).
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I
.
are not accounts, this case is inapplicable. However, the case states that because
certificates of deposit are negotiable instruments they can be negotiated by either
payee who has them in their possession.’ This statement supports the argument put
forth in this dissent that the possessor of a cashier’s check can negotiate the check.
Since cashier’s checks are not accounts, then survivorship rights
associated with joint accounts do not exist if the check is payable to alternative payees.
Because the check was in decedent’s possession at the time of his death, it is part of
his estate. Appellee as administratrix of his estate may negotiate the check and add it
to the personalty of the estate.
Appellee also claims that the way in which decedent proceeded with this
transaction was deceitful and “it is apparent that decedent was attempting to conceal
funds from his wife and in effect deprived her of her dower rights.“7
The holding by the majority could effectively eliminate dower rights. KRS §
392.020 states that a surviving spouse has a right to one-half surplus personalty of a
spouse who died intestate. Under the majority holding, a spouse can now place most or
all of his or her personal property (converted into cash) into a “joint account” in the form
of a cashier’s check payable to the deceitful spouse or someone other than the
surviving spouse.
Appellee cites Harris v. Rock’ to support her dower rights argument. In
Harris, the Supreme Court reversed the Court of Appeals, because the wife should
have received dower interest in joint accounts in the name of decedent and decedent’s
6 U. at 832.
’ Appellee’s Brief at page 6.
’ Ky., 799 S.W.2d 10 (1990).
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children because such accounts were personalty of her husband. “Widow’s right to
dower cannot be defeated by a gift by her spouse of all, or more than one-half, of his
property to another with the intent to defeat the claims to dower.“’ The majority in Harris
read an implied limitation into KRS § 391.315 so that a widow can recover dower
interests in joint accounts if the money was deposited into the account when the
depositor did not have a right to deposit the money in the first place. A depositor would
not have the right to deposit funds if the depositor is trying to defeat dower rights. If this
is the case, the survivor of the joint account is not an unrestricted owner of the funds,
instead the surviving spouse takes dower interest in the remaining funds.”
Harris is inapplicable to the present case because it dealt with the implied
limitation on an account per KRS § 391.315(l). Since there is no account or joint
account by virtue of the cashier’s check, this case and statute do not apply.
For the above mentioned reasons, Appellee, as administratrix of the
decedent’s estate, should take the cashier’s check as a part of the decedent’s estate.
As the majority has held otherwise, I respectfully dissent.
Johnstone, J., joins this dissenting opinion.
’ M. at 11.
loId. at 12.
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ZOOO-SC-0138-DG
JAMES RAICHEL
APPELLANT
APPEAL FROM COURT OF APPEALS
1998-CA-2 118-MR
LETCHER CIRCUIT COURT NO. 1998-Cl-0014
V.
EUNICE RAICHEL, ADMINISTRATRIX
OF THE ESTATE OF EDDIE RAICHEL
APPELLEE
ORDER DENYING PETITION FOR REHEARING
The petition for rehearing filed by the appellee, Eunice Raichel, is hereby denied.
All concur.
Entered: February 21, 2002.
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