Court Opinion

ID: 9550975
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:45:57.985849+00
Date Added: 2024-06-11T15:22:50.579099
License: Public Domain

THOMAS, Justice,
dissenting, with whom McCLINTOCK, Justice, joins.
I am persuaded that the judgment of the district court in this instance should be affirmed. Í therefore dissent from the majority opinion in this case.
The disposition made in the majority opinion assumes that the American National Bank must found any rights it has upon the pledge of the new certificate of deposit issued in the names of Page Malody and her children on March 1,1975. This assumption in turn rests upon an assumption that the security interest of the bank in the first certificate of deposit was terminated when that instrument was made available to Page Malody to be exchanged for the March 1, 1975, certificate of deposit. The result reached in the majority opinion appears to attach significance to the fact that the pledgee and the depository bank were the same entity. I submit that in order to correctly analyze and apply the law the American National Bank in its role as pledgee should be treated as a stranger to the contract of deposit. A pledgee of a certificate of deposit will not always be able to control the circumstance surrounding its collection and the substitution of a new certificate as.the majority opinion suggests.
I do not find the disposition made in the majority opinion to be in accordance with settled rules of law. The correct rule applicable to this situation is succinctly stated in the Restatement of the Law of Security, § 11, p. 38 (A.L.I. 1941) as follows:
“ * * * A pledge is not terminated by delivery of the chattel to the pledgor for a temporary and limited purpose relating to the maintenance of the value of the pledgee’s interest and having to do with the protection, improvement or sale of the chattel, or where the chattel is an instrument or document, its handling or collection.”
Clark v. Iselin, 21 Wall. (88 U.S.) 360, 22 L.Ed. 568 (1874); Merchants Collection Agency, Ltd., v. Mitchell, 32 Haw. 343 (1932); Hoerner v. First National Bank of Jackson, Miss., 254 So.2d 754 (1971); White v. Platt, 5 Denio 269 (N.Y. 1848); Hickok v. Cowperthwait, 210 N.Y. 137, 103 N.E. 1111 (1913); and Bundy v. Commercial Credit Co., 202 N.C. 604, 163 S.E. 676 (1932). See Manufacturers Acceptance Corporation v. Hale, 65 F.2d 76 (6th Cir. 1933); Foote v. Sun Life Assur. Co. of Canada, 173 So. 477 (La.App.1937); and Howick v. Bank of Salt Lake, 28 Utah 2d 64, 498 P.2d 352 (1972). A similar statement of the rule is found in 72 C.J.S. Pledges § 27f, p. 40 (1951), where the following language appears at p. 41:
“ * * * A redelivery by the pledgee of collateral security to the pledgor for collection only ordinarily does not divest the pledgee’s lien as against the pledgor. * *
The same rule is found in 68 Am.Jur.2d, Secured Transactions, § 79, p. 908 (1973).
The application of this concept in situations involving third parties is explained in Restatement of the Law of Security, § 16, p. 62 (A.L.I. 1941) where the following rule appears:
“Where the pledgor transfers a pledged chattel to a third person, the transferee acquires the pledgor’s interest in the chattel but the transferee’s interest is subject to the interest of the pledgee unless the transferee is a
“(a) bona fide purchaser from a pledgor who is in possession with the consent of the pledgee and the purchaser has relied upon the pledgor’s possession, or
“(b) holder in due course of a negotiable instrument.”
The comments in the Restatement of the Law of Security in connection with the above-quoted rules demonstrate that they govern the facts in this case. One must start with the valid security interest of the bank in the first certificate of deposit which was pledged. The adoption of a rule which requires the bank under these circumstances to refuse to permit the pledgor to present the certificate of deposit for collection once it had matured and no longer was drawing interest creates an unnecessary burden upon the rights and relationship of these parties. Quite likely such refusal would constitute a violation of a duty owed by the bank to its pledgor. See Restate*910ment of the Law of Security, § 18, p. 66 (A.L.I. 1941). What really occurred in this instance, however, is that the American National Bank delivered the first certificate of deposit to Page Malody upon its maturity for the temporary and limited purpose of exchanging it for another certificate of deposit to be substituted as collateral under the pledge. The law of pledges contemplates such a substitution. Restatement of the Law of Security, § 40, p. 122 (A.L.I. 1941).
It follows that the transfer of an interest to Page Malody⅛ children, however it may be described, was subject to the pledge to the American National Bank. These children, whom I would identify as third-party beneficiaries of a contract of deposit between Page Malody and the American National Bank, hardly could qualify as bona fide purchasers in the context of this rule.
Only two possible grounds to reverse the trial court appear in this instance. The first would be that there exists an issue of material fact relative to the intention of the parties. If the parties could be found to have intended some different result from that dictated by the foregoing authorities then effect should be given to their intention. My examination of the record persuades me that reasonable men could not differ as to the intention of the parties that the first certificate of deposit was to be made available to Page Malody only for the special and limited purpose of converting it into the second certificate of deposit to be substituted as security with the American National Bank. Consequently I would not remand for trial for that reason.
A suggestion is found in the argument of the appellant that the American National Bank chose to set off the funds represented by the certificate of deposit against its debt rather than to foreclose its security interest in the pledged collateral. There does appear in the record a letter from the bank to Page Malody’s husband so stating. However, there also appears testimony of bank officers by deposition which for me sufficiently clarifies that factual situation as to make it unreasonable to conclude that there would be a genuine issue of fact as to whether the American National Bank exercised its remedy of setoff or its remedy of foreclosing its pledge. It exercised the remedy of foreclosure.
Lastly, I must dispose of one incidental matter. I agree that the Uniform Commercial Code as adopted in Wyoming does not pertain to the factual situation presented in this case because of the provisions of § 34-21-904(a)(xi), W.S.1977. In my view, however, the following statement appearing in the majority opinion does not accurately state the law:
“However, the U.C.C. does not deal with the rights and obligations arising out of pledges. Common law principles are used to fill this gap. 68 Am.Jur.2d Secured Transactions § 49, pp. 875-876.” (Footnotes omitted.)
Perusal of 68 Am.Jur.2d, Secured Transactions, § 49, p. 875 (1973), discloses the following language at the very beginning of the section:
“Article 9 of the Uniform Commercial Code applies to security interests created by pledge * *
The same conclusion is to be drawn from the portion of our statute, § 34-21-902(b), W.S.1977, quoted at footnote 5 in the majority opinion. Succinctly, it is my view that one can create and perfect a security interest by placing possession of the collateral in the hands of the secured party. This is a pledge, and the rights of the parties then are to be governed by Article 9 of the Uniform Commercial Code as adopted in Wyoming.