Court Opinion

ID: 9767942
Source: CourtListenerOpinion
Date Created: 2023-08-29 05:36:05.20809+00
Date Added: 2024-06-11T07:30:34.431521
License: Public Domain

ON MOTION FOR REHEARING
GUITTARD, Justice.
The bank argues in its motion for rehearing that we should remand the case for a new trial because there is no evidence that the certificate of deposit in question “is of a type which is in ordinary course of business transferred by delivery with any necessary indorsement or assignment,” within § 9.105(a)(9) of the Code.1 The bank insists that the “ordinary course of business” of banks regarding non-negotiable certificates of deposit has not been proved.
We do not agree that the status of the certificate as an “instrument” within the Code is a matter of fact to be left to the uncertainties of oral testimony,. Such a holding would be contrary to the underlying purpose of the Code to “simplify, clarify and modernize the law governing commercial transactions.” Section 1.102(b)(1). It would result, instead, in uncertainty and confusion because a person lending money to the holder of such a certificate would have difficulty in determining whether he should perfect his security interest by taking possession of the collateral under § 9.304(a) or by filing a financing statement with the Secretary of State under §§ 9.302(a) and 9.401.
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). 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 trans*534ferred. The certificate in question resembles such instruments more than it resembles ordinary deposit accounts, which are expressly distinguished from certificates of deposit in § 9.105(a)(5), and are governed by different rules set out in chapter 4 of the Code. It is a writing which the holder must keep and present as evidence of his right, as its language expressly provides. It may easily be delivered by one party to another in the course of a commercial transaction. Possession of such a certificate can normally be expected to give the issuer and others notice that the possessor claims some interest in the rights which it represents. Such notice is more effective and more commercially reasonable than filing a financing statement with the Secretary of State. If the certificate is accompanied by an assignment from the original depositor, the issuer would have no reason to refuse payment to the assignee. Accordingly, we hold that the certificate in question, as a matter of law, is “of a type which is in ordinary course of business transferred by delivery with any necessary indorsement or assignment.”
The bank insists that if some third party, such as Lone Star in this case, should present the certificate, the bank would not be required to pay because the third party would not bevihe“depositor” to whom the bank had agreed to pay the money. This argument erroneously assumes that the certificate is nonassignable as well as non-negotiable. Although the certificate is non-negotiable because it is not “payable to order or to bearer” within § 3.104(a)(4), and, therefore, a transferee could not be a holder in due course, it is nevertheless assignable, like any other contract right not involving personal trust or confidence. Ray v. Spencer, 208 S.W.2d 103, 104 (Tex.Civ.App.—Texarkana 1947, writ ref’d). Nothing in the certificate or in the Code limits its assignability. If the third party should present the certificate to the bank, together with an assignment signed by the depositor, the bank, on paying the amount of the certificate, would be protected against liability to the depositor by possession of the certificate as well as by the assignment.
Indeed, the bank does not deny all liability to Lone Star as assignee of the certificate, but only denies liability to the extent of the offset which the bank claims. But, since we hold that the certificate is “of a type which is in ordinary course of business transferred by delivery of possession with any necessary indorsement or assignment,” and, therefore, is an “instrument” within § 9.105(a)(9), Lone Star perfected its security interest by taking possession under § 9.304(a), and the security interest so perfected prevails over the claimed offset.
Motion overruled.
AKIN, J., concurs in this opinion.

. All references in this opinion are to Tex.Bus. & Comm.Code Ann. (Tex. UCC 1968), as amended.