Opinion ID: 1133174
Heading Depth: 2
Heading Rank: 1

Heading: Is the assignment entitled to article nine treatment?

Text: We answer in the affirmative. Under section 679.102(1)(a), article 9 is said to apply: To any transaction (regardless of its form) which is intended to create a security interest in personal property or fixtures including goods, documents, instruments, general intangibles, chattel paper, accounts or contract rights; ... [Emphasis added.] Both parties recognize that the assignment by Milford of the certificate of deposit was intended as security for the purchase of a bond from National Indemnity, the assignee. National Indemnity, then, was the clear beneficiary of a security interest in the certificate for its sale of the bond to Milford. Therefore, provided the certificate of deposit properly falls within one of the personal property classifications named in section 679.102(1)(a), the assignment is a transfer entitled to secured transaction treatment under article 9. The parties agree that the certificate falls under the personal property designation of section 679.102(1)(a), but disagree as to its precise classification  the appellant calling it either a general intangible or contract right as defined in section 679.106, the appellee insisting that it is best described as an instrument under section 679.105(1)(g). In either event, the transaction would fall under article 9's coverage. We agree with the appellee that the certificate of deposit here is best characterized as an instrument under section 679.105(1)(g). As defined in that section, an instrument is: a negotiable instrument (defined in s. 673.104), or a security (defined in s. 678.102) or any other writing which evidences a right to the payment of money and is not itself a security agreement or lease and is of a type which is in ordinary course of business transferred by delivery with any necessary endorsement or assignment. [Emphasis added.] We believe the emphasized portion of the above definition to be an accurate description of the certificate of deposit here. Although it was later assigned by Milford as security for a bond, the certificate as purchased from the Bank simply evidenced the right to payment and was clearly not an agreement creating or providing for a security interest as that term is defined in section 671.201(37). While admitting that most authorities define certificates of deposit as instruments, the Bank argues that the restrictions on transfer here remove the certificate from coverage under section 679.105(1)(g). (The Bank cites cases dealing with the negotiability of instruments under section 673.104(1) in support of its position.) We disagree. If the code drafters had intended to exclude non-negotiable instruments from coverage under section 679.105(1)(g), they would not have added the underlined language in the definition, but would have limited it to include only negotiable instruments as was done in article 3. We find persuasive the reasoning of the Texas Civil Appellate Court in First National Bank in Grand Prairie v. Lone Star Life Insurance Co., 524 S.W.2d 525 (Tex. Civ.App. 1975). There, the court held a certificate of deposit payable to the depositor only, with the restrictive legend, Non-Negotiable, to be an instrument under the article 9 definition. The court stated: Simplicity and clarity in such transactions is better achieved by holding as a matter of law that a non-negotiable certificate of deposit is an instrument as defined by § 9.105(a)(9). [§ 679.105(1)(g), Fla. Stat. (1973).] Unquestionably, it satisfies the requirement in this definition of a writing which evidences the right to the payment of money. We conclude that it also is of a type which is in ordinary course of business transferred by delivery with any necessary indorsement or assignment. The word type may be interpreted either narrowly or broadly. In the light of the general purpose of the Code, we do not construe it narrowly to refer only to writings of exactly the same character, such as, in this case, other non-negotiable certificates of deposit. Instead, we construe it broadly to include any writing which, like a stock certificate or negotiable instrument, is treated as a token of the rights it represents and, therefore, is normally delivered to any person to whom the rights are transferred. The certificate in question resembles such instruments more than it resembles ordinary deposit accounts... . It is a writing which the holder must keep and present as evidence of its right, as its language expressly provides. It may easily be delivered by one party to another in the course of a commercial transaction. First National Bank in Grand Prairie v. Lone Star Life Insurance Co., 524 S.W.2d 525, 533-4. We agree that the emphasized language in section 679.105(1)(g) should be interpreted broadly to encompass non-negotiable certificates of deposit. We do not consider the restrictions on assignability requiring consent of and recorded transfer by the Bank to exempt this certificate from the broad coverage of section 679.105(1)(g). We conclude that the certificate of deposit here is an instrument as described in the emphasized portion of section 679.105(1)(g) and that the assignment is therefore entitled to secured transaction treatment under article 9.