### 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: Inyour recent letter you request an opinion ofthis office whether time certificates of deposit are “lawful money ,ofthe United States I’ within the contemplation ofthose provisions ofthe Texas ,Insurance Code which require that various funds ofinsurance companies be maintained in certain kinds ofinvestments, which include “lawful money ofthe United States. I’ The Insurance Department has considered inthe 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 abank for afixed period oftime, such as that evidenced by a Certificate of Deposit, to be aloan 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 ofthe United States” if there is inforce awritten contract between the depositor and the bank that neither the whole nor any part of such funds may~be withdrawn, by check or otherwise, prior to the date ofmaturity, or prior to the expiration of a specified period of notice which must be given by the depositor to the bank in advance ofwithdrawal of such funds? 

### 2. Ifyour answer to question No. 1is to the effect that such funds cannot be considered “lawful money ofthe 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 anHon. 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 ofthe United States” where the depositor receives a “certificate of deposit” which certifies that such funds have been deposited b&twhich certificate also provides that such funds shall be payable to the order ofthe depositor or to the bearer upon return ofthe 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 ofthe 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 ifnecessary to prevent hardship to the depositor. See Federal Reserve Regulation l’A’l, Sec. 4(d), 2CCH 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 ofthe Federal Deposit Insurance Corporation Act. See 1CCH Fed. Banking L. Rep., par,a. 13,517,; 12 USC 1813 (1). A high degree ofliquidity and safety is the ultimate purpose ofthe insurance law concerning investments by insurance companies. From the standpoint ofliquidity 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 ofthe Walthall opinion, it is necessary to re-examine whether or not a certificate of deposit is aloan or is a deposit. The Walthall opinion cites no Texas case to support its conclusion. Subsequent to the Walthall opinion, itwas held in Shaw, Banking Commissioner, v. McBride, 9S.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 aloan 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). Inview ofthe 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 ofthis office that the Certificates of Deposit are “lawful money ofthe United States” within the contemplation ofthose provisions ofthe Texas Insurance Code which require that various funds ofinsurance companies be invested in certain investments which include “lawful money ofthe 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