Opinion ID: 2612489
Heading Depth: 1
Heading Rank: 2

Heading: the result in this case would be the same, whether the ucc or the ufl is controlling.

Text: CDA asserts that the UCC and not the UFL should be controlling in this case. We disagree. Furthermore, we conclude that the result would be the same, whether the UCC or the UFL is controlling. In its decision denying FNB's motion for summary judgment, the trial court indicated that if the UCC rather than the UFL applied, FNB would not be a holder in due course and would be liable to CDA. The trial court then reasoned that I.C. § 68-309 is a specific statute dealing only with the actions of fiduciaries and banks in which they make deposits, while the provisions of the UCC that would apply to these circumstances are general in nature. In support of its decision to apply I.C. § 68-309, the trial court invoked Hook v. Horner, 95 Idaho 657, 661, 517 P.2d 554, 558 (1973), for the proposition that to the extent that there is a conflict, a specific statute prevails over a general statute. The major premise of the trial court's analysis was that under the UCC, FNB would not be a holder in due course. Our review of the record indicates that the trial court probably established this premise in reliance on Von Gohren v. Pacific National Bank of Washington, 505 P.2d 467 (Wash. App. 1973). CDA cited Von Gohren to the trial court during the hearing on FNB's motion for summary judgment. In Von Gohren, the Washington Court of Appeals considered facts somewhat similar to those in this case. A bookkeeper received authority to endorse in blank checks payable to her employer and to deposit them in her employer's account. The bookkeeper endorsed and deposited some of these checks in her own account. The Washington Court of Appeals affirmed a decision of the trial court holding the bookkeeper's bank liable to the employer. In construing the effect of the portion of the Washington version of the UCC that is identical to I.C. § 28-3-304(2), the court said: RCW 62A.3-304(2) establishes notice where the fiduciary deals with the instrument for his (her) own benefit. The act of depositing the third party checks payable to her employer in her personal account is, we think, such a transaction. We can hardly conceive of a clearer case of personal benefit unless [the agent] actually used the checks to pay personal debts, which of course she is free to do when her account has been credited by the amounts represented by the third party checks. Id. at 473. In its supplemental memorandum in support of its motion for summary judgment filed after the hearing on its motion for summary judgment, FNB argued that Von Gohren was distinguishable from this case because Washington did not have a statute like the UFL. FNB referred to portions of the opinion in Von Gohren indicating that if Washington had enacted a statute like the UFL, the result in Von Gohren would have been different. FNB then argued that the UFL should control in this case, because it is more specific than the UCC. Within a week after FNB submitted its supplemental memorandum, the trial court issued its memorandum opinion and order denying the motion for summary judgment, declaring facts deemed to be established, and stating the issues that remained to be resolved at trial. The trial court said in its opinion: Idaho Code § 28-3-304(2) upon which CDA relies provides a general rule that: The purchaser has notice of a claim against the instrument when he has knowledge that a fiduciary has negotiated the instrument ... in any transaction for his own benefit... . I.C. 28-3-304(2) in conjunction with I.C. 28-3-302 and I.C. 28-3-306 would make FNB's UCC status that of one not a holder in due course and under those circumstances FNB would be liable to CDA absent the application of the [UFL]. Idaho Code § 68-309 upon which FNB relies is a specific statute dealing only with the actions of fiduciaries and their depositing banks. To the extent that the UCC and [the UFL] conflict the specific provisions of the [UFL] prevail over the general provisions of the UCC. See Hook v. Horner, 95 Idaho 657[, 517 P.2d 554] (1973). The first concern we have about the trial court's analysis is that it does not take into account the provisions of the UCC specifically dealing with the question of the repeal of other acts. I.C. § 28-10-102(1) lists the acts and parts of acts that were specifically repealed by the UCC. The UFL is not listed among them. I.C. § 28-10-102(1) also states that all other acts and parts of acts inconsistent with the UCC are repealed. As we read I.C. § 28-10-102(1), any statute or part of a statute that is inconsistent with the UCC is repealed, even if it is more specific than the UCC. I.C. § 28-10-103, the general repealer section of the UCC, states that all acts and parts of acts inconsistent with the UCC are repealed, excepting only those statutes listed in I.C. § 28-10-104. Among those listed in I.C. § 28-10-104 is chapter 9 of title 68, Idaho Code, cited as the Uniform Act for the Simplification of Fiduciary Security Transfers. The list in I.C. § 28-10-104 does not mention the UFL, which is chapter 3 of title 68. From this we could conclude (1) that there was no reason to mention the UFL because it was not considered to be inconsistent with the UCC or (2) that the drafters of the UCC did not intend to except any inconsistent portions of the UFL from the effect of the repealer provisions of I.C. § 28-10-103. There is evidence in the comments to the official text of the UCC that the drafters found at least some portions of the UFL to be consistent with the UCC. The comment to I.C. § 28-3-304(2) states that this subsection follows the policy of Section 6 of the Uniform Fiduciaries Act, and specifies the same elements as notice of improper conduct of a fiduciary. Section 6 of the Uniform Fiduciaries Act, with only slight variation, was enacted in Idaho as part of the UFL and codified as I.C. § 68-306. This statute states: 68-306. Check drawn by and payable to fiduciary.  If a check or other bill of exchange is drawn by a fiduciary as such or in the name of his principal by a fiduciary empowered to draw such instrument in the name of his principal, payable to the fiduciary personally, or payable to a third person and by him transferred to the fiduciary, and is thereafter transferred by the fiduciary, whether in payment of a personal debt of the fiduciary or otherwise, the transferee is not bound to inquire whether the fiduciary is committing a breach of his obligation as fiduciary in transferring the instrument, and is not chargeable with notice that the fiduciary is committing a breach of his obligation as fiduciary unless he takes the instrument with actual knowledge of such facts that his action in taking the instrument amounts to bad faith. This Court has frequently considered the comments to the official text of the UCC in determining the meaning of the text. E.g., Hallowell v. Turner, 94 Idaho 718, 496 P.2d 955 (1972); Southern Idaho Pipe & Steel v. Cal-Cut Pipe, 98 Idaho 495, 567 P.2d 1246 (1977); Western Idaho Production Credit v. Simplot Feed, 106 Idaho 260, 678 P.2d 52 (1984). In Cal-Cut, this Court accepted as a solution to a problem posed under the UCC the one suggested in the comment to the official text. 98 Idaho at 503, 567 P.2d at 1254. Therefore, we give substantial weight to the comment to I.C. § 28-3-304(2). This comment indicates that the drafters of the UCC did not consider at least some parts of the UFL to be inconsistent with the UCC. From this we conclude that the UCC did not repeal the UFL as a whole. This leaves us with the question whether I.C. § 68-309, as applied to the facts of this case, is inconsistent with provisions of the UCC. The trial court found I.C. §§ 28-3-302, 28-3-304(2), and 28-3-306 to be the portions of the UCC that are applicable in considering whether FNB would be liable to CDA, if the UCC were controlling. The pertinent portion of I.C. § 28-3-302 states that a holder in due course is a holder who takes an instrument for value, in good faith, and without notice of any defense or claim to it on the part of any person. I.C. § 28-3-302(1).