Opinion ID: 2614207
Heading Depth: 1
Heading Rank: 2

Heading: The Commercial Code

Text: Although the parties in this litigation joined issue on the validity of the assignment claimed by The Jackson State Bank, it appears they concerned themselves primarily with the question of whether the bank's assignment was subordinate to rights of the trustee in bankruptcy because the bank did not take steps to perfect its security interest by filing a financing statement as required by § 34-9-302, W.S. 1957, 1971 Cum.Supp. The bank admits it did not file a financing statement or take steps to perfect its security interest. It contends it did not have to do so because of exceptions in the commercial code. Disregarding then for the moment the question of whether the assignment to The Jackson State Bank is void for uncertainty, we look to the exceptions claimed by the bank to see whether a valid assignment should have been perfected as a security interest in order to preserve the assignee's priority over other creditors of the assignor. Section 34-9-104, W.S. 1957, 1971 Cum. Supp., provides the commercial code article shall not apply in certain instances. The only subsections of possible concern would be (i) and (k). The former pertains to any right of set-off. It cannot benefit the bank because the deposit involved was made by Gudims and Farmers Home Administration. The bank has no set-off against either of these parties, and it agreed in its deposit agreement to assert no right of offset except service charges. The deposit was not owned or controlled by Garrison and therefore no right of set-off is involved. Subsection (k) pertains to a transfer of any deposit maintained with a bank. Since the deposit we are concerned with was not maintained, owned or controlled in any manner by Garrison, it cannot be said the assignment from him transferred the deposit. Therefore (k) gives the bank no exception. We look next at § 34-9-305, W.S. 1957, 1971 Cum.Supp. It provides that a security interest is perfected by possession under certain circumstances. The section is not very clear as to what security interests are intended to be affected. However, it is clear the bank did not have possession of the Gudim-Farmers Home Administration deposit within the meaning of this section. It is said of possession in 72 C.J.S. Possession p. 233, that it denotes custody coupled with a right or interest of proprietorship; and possession is inclusive of custody, although custody is not tantamount to possession. With respect to deposits in a bank, it is said in 9 C.J.S. Banks and Banking § 267, p. 544, the term deposit has a well accepted meaning in the banking business and has been defined as the act of placing money in the custody of a bank, to be withdrawn at the will of the depositor. The Jackson State Bank had nothing more than a custody with respect to the deposit made by the Gudims and their lender. The bank's assignment authorized and directed the Department of Agriculture, Farmers Home Administration, to pay by check drawn to the order of the bank money due to Garrison. Even if we construed the instrument to mean Gudims should make such payments, with the approval of Farmers Home Administration, it still would take a check from the Gudims, with a counter-signature of the mortgagee, to transfer possession of any part of the deposit to the bank. The only other exception relied on by the bank as an excuse for not perfecting the security interest claimed by it is that contained in § 34-9-302(1) (e). Insofar as pertinent here, this section provides a financing statement must be filed to perfect all security interests, except an assignment of contract rights which does not transfer a significant part of the outstanding contract rights of the assignor. The only evidence having to do with other outstanding contract rights of Garrison indicated he at one time had a contract to purchase a vacant and unimproved lot in North Ogden, Utah. Installment payments were made for a time. The testimony, however, discloses that payments were discontinued, taxes were not paid, and apparently all rights were abandoned. Counsel for the bank states no evidence was introduced to show that the bank's assignment transferred a significant part of the outstanding contract rights of Garrison. Counsel for the trustee counters by saying, if the bank wishes to rely on the exception in (e) of § 34-9-302(1), the burden is on it to show that the assignment did not transfer a significant part of the outstanding contract rights of Garrison. Of course the negative of a proposition, such as the non-existence of other contract rights, would be difficult to prove. On the other hand, if other contract rights did exist, proof of that fact would be available. There would be good reason then for saying the bank should come forward with proof, if Garrison actually had substantial contract rights besides the rights supposedly assigned to the bank. Suffice it to say for purposes of our decision, however, a party relying upon an exception has the burden of proof in connection therewith. Takahashi v. Pepper Tank & Contracting Co., 58 Wyo. 330, 131 P.2d 339, 351. In the absence of proof to the contrary, we will assume the contract rights assigned by Garrison to the bank, if any were in fact assigned, transferred all or at least a significant part of the outstanding contract rights of the assignor. In the light of what has been said up to this point, we must conclude The Jackson State Bank had no priority of lien against the deposit of $5,559.89 and that judgment should have been in favor of the trustee in bankruptcy insofar as The Jackson State Bank is concerned.