EA ORNEY GENERAL 

OF XAS 

+lSTlN 11. TEXAS 

BVILL WILSON 

*z-rORNEYGENERAr. 

May. 18, 1962 

The Hon. William A. Harrison 

Commissioner of Insurance 

International Life Building 

Austin 14, Texas 

Opinion No. WW-1331 

Re: Whether Certificates of 

Deposit in Banks are “Lawful 

Money of the United States. ” 

Dear Commissioner Harrison: 

In your recent letter you request an opinion of this office whether 

time certificates of deposit are “lawful money ,of the United States I’ 

within the contemplation of those provisions of the Texas ,Insurance Code 

which require that various funds of insurance companies be maintained 

in certain kinds of investments, which include “lawful money of the 

United States. I’ The Insurance Department has considered in the past 

funds deposited in a state or national bank to be “lawful money~of the 

United States” if such funds are subject to immediate withdrawal or 

withdrawal upon demand by the insurance company, but the department 

has regarded money deposited in a bank for a fixed period of time, such 

as that evidenced by a Certificate of Deposit, to be a loan to the bank 

rather than a deposit. This view was adopted because of an Attor~ney 

General’s Opinion written in 1912 by acting Attorney General Walthall. 

The questions that you ask are these: 

1. Are funds on deposit with a state or national bank t’lawful 

money of the United States” if there is in force a written 

contract between the depositor and the bank that neither 

the whole nor any part of such funds may~be withdrawn, 

by check or otherwise, prior to the date of maturity, or 

prior to the expiration of a specified period of notice 

which must be given by the depositor to the bank in advance of withdrawal of such funds? 

2. If your answer to question No. 1 is to the effect that such 

funds cannot be considered “lawful money of the United 

States, 1’ would such funds ,be “lawful money,of the United 

States” if the contract between the depositor and the bank 

provides that the depositor may withdraw all or a portion 

of such funds upon presenting proper proof, in an 
Hon. William A. Harrison, page2(WW-13,31) 

emergency, that it is necessary to withdraw such funds 

to prevent great hardship to the depositor? 

3. Would funds deposited with a state or national bank be 

considered “lawful money of the United States” where 

the depositor receives a “certificate of deposit” which 

certifies that such funds have been deposited b&t which 

certificate also provides that such funds shall be payable to the order of the depositor or to the bearer upon 

return of the certificate on a specified date? 

A time certificate of deposit is a negotiable or non-negotiable instrument received by the depositor, obligating the bank to pay the amount 

of the deposit on a specific date set out in the instrument. See 2 CCH 

Fed. Banking L. Rep., paras. 30,413 and 32,313. The Federal statutes 

and regulations provide that the time certificates may be paid before 

maturity if necessary to prevent hardship to the depositor. See Federal 

Reserve Regulation l’A’l, Sec. 4(d), 2 CCH Fed. Banking L. Rep., para. 

19,~llO. 05. It is also significant to note that certificates of deposit are 

regarded as insurance deposits within the meaning of the Federal Deposit 

Insurance Corporation Act. See 1 CCH Fed. Banking L. Rep., par,a. 

13,517,; 12 USC 1813 (1). 

A high degree of liquidity and safety is the ultimate purpose of the 

insurance law concerning investments by insurance companies. From the 

standpoint of liquidity and safety, then, certificates of deposit are certainly a desirable investment; a certificate of deposit differs only from 

a demand deposit in that it may not be drawn prior to maturity except 

under emergency circumstances. 

Because of the Walthall opinion, it is necessary to re-examine 

whether or not a certificate of deposit is a loan or is a deposit. The 

Walthall opinion cites no Texas case to support its conclusion. Subsequent to the Walthall opinion, it was held in Shaw, Banking Commissioner, 

v. McBride, 9 S. W. 2d 410, 411-412 (Civ. App., 1928, opinion approved 

27 S. W. 2d 121), wherein the controlling question was whether a certificate of deposit was a loan or a deposit, that a time certificate of deposit 

was not a loan, but rather a deposit. The reasoning of Shaw, Banking 

Commissioner v. McBride finds additional support in the decisions of 

other jurisdictions: McCormickv. Hopkins, 122 N.E. 151, 153 (Ill., 

1919); Elliott v. Capital City State, 103 N.‘W. 777, 778 (Iowa, 1905). 

In view of the Shaw, Banking Commissioner v. McBride case, the 

Walthall opinion is not controlling. 
- -- 

Hon. William A. Harrison, page 3 (WW-1331) 

Consequently, it is the opinion of this office that the Certificates of 

Deposit are “lawful money of the United States” within the contemplation 

of those provisions of the Texas Insurance Code which require that 

various funds of insurance companies be invested in certain investments 

which include “lawful money of the United States. ‘1 

SUMMARY 

Certificates of Deposit are “lawful money,of the 

United States” within the contemplation of those 

provisions of the Texas Insurance Code which 

require the various funds of insurance companies 

to be invested in certain investments which 

include “lawful money of the United States. ‘I 

Very ,truly yours, 

WILL WILSON 

Attorney General of Texas 

BY 

Bob E. Shannon 

Assistant 

BESrlmc 

APPROVED: 

OPINION COMMITTEE: 

W. V. Geppert, Chairman 

Marvin Sentelle 

Bob Patterson 

Malcolm Quick 

REVIEWEDFOR THEATTORNEYGENERAL 

BY: Houghton Brownlee