Court Opinion

ID: 9767941
Source: CourtListenerOpinion
Date Created: 2023-08-29 05:36:05.204139+00
Date Added: 2024-06-11T07:30:34.430452
License: Public Domain

CLAUDE WILLIAMS, Chief Justice
(concurring).
While I am in agreement with, and concur in, the result reached by the majority that the judgment of the trial court should be affirmed, I express my disagreement with the theory that the resolution of the questions presented by this appeal is controlled by the Tex.Bus. & Comm.Code Ann. (Tex. UCC 1968).1 I would simply base the affirmance of the trial court’s judgment upon the established law of this state as announced by the Supreme Court in National Indemnity Co. v. Spring Branch State Bank, 162 Tex. 521, 348 S.W.2d 528 (1961).
The facts of this case are relatively simple. Upon being sued by Lone Star to recover upon the certificate of deposit, the bank denied any liability because such certificate of deposit was non-negotiable and also that the bank was entitled to setoff against the certificate of deposit for obligations of Hamilton to the bank, which were in default. Therefore, the primary question presented by this case is whether or not the bank was entitled to a setoff against a certificate of deposit. I consider Tex.Bus. & Comm.Code Ann. § 9.104(9) (Tex. UCC Supp.1974), as demonstrating that no provision of the Uniform Commercial Code is applicable to the resolution of this question.
The majority opinion urges that article 9 of the Texas Business and Commerce Code Annotated (Tex. UCC 1968) is applicable and therefore states:
The bank’s conclusion is that since the certificate of deposit is not excluded under § 9.104, which enumerates transactions excluded from article 9, and since a certificate of deposit is not a deposit account under § 9.105(a)(5), then this entire transaction is governed solely by the Code. We agree with this contention.
I cannot agree with this statement since I do not think that it is supported in law.
First, the fact that a certificate of deposit does not fall within the Uniform Commercial Code definition of “deposit account” in Tex.Bus. & Comm.Code Ann. § 9.105(a)(5) (Tex. UCC Supp.1974) is no reason to hold *532that the Uniform Commercial Code is completely controlling in this case.2
Second, the fact that a certificate of deposit is not enumerated in Tex.Bus. & Comm.Code Ann. § 9.104 (Tex. UCC Supp. 1974), as being excluded from the coverage of article 9 is no justification to hold that the Uniform Commercial Code is controlling. The idea that something not excluded from coverage of the Uniform Commercial Code is included in it, is expressly rejected by Tex.Bus. & Comm.Code Ann. § 1.103 (Tex. UCC 1968), which provides that: “Unless displaced by the particular provisions of this title,” the principles of Texas law supplement the Code’s provisions. [Emphasis added.]
Third, the statement “this entire transaction is governed solely by the Code,” is refuted by Tex.Bus. & Comm.Code Ann. § 9.104 (Tex. UCC Supp.1974), which is entitled: “Transactions Excluded from Chapter” and says in part: “This chapter does not apply ... (9) to any right of set-off.” This statement clearly excludes the idea that the Code is the controlling law concerning the right of the bank in this case to assert a setoff against the certificate of deposit.
By way of analogy, Tex.Bus. & Comm. Code Ann. § 9.104(7) (Tex. UCC Supp.1974) provides that a transfer of an interest or claim in or under any policy of insurance is excluded from coverage of article 9. The comment to subsection (7) states:
7. Rights under life insurance in other policies, and deposit accounts, are often put up as collateral. Such transactions are often quite special, do not fit easily under a general commercial statute and are adequately covered by existing law.
Such policy is clearly applicable in this situation. We do not have two parties, each with some variety of a security interest in the certificate of deposit, involved in this case. Lone Star has a security interest, but the bank’s sole right to the certificate of deposit arises from its setoff against the certificate of deposit. Since the question presented is solely that of setoff, Tex.Bus. & Comm.Code Ann. § 9.104(9) (Tex. UCC Supp.1974) indicates no provision of the Uniform Commercial Code is applicable to the resolution of the question.
As demonstrated by the Supreme Court’s post-UCC opinions in Hudnall v. Tyler Bank and Trust Co., 458 S.W.2d 183 (Tex.1970) and Citizens National Bank v. Hill, 505 S.W.2d 246 (Tex.1974), it is clear that the rule of National Indemnity is still the law in Texas. The majority opinion seeks to distinguish these cases by the fact that they did not involve a certificate of deposit. However, a certificate of deposit may evidence a general or special deposit depending upon the particular facts involved. Martin v. First State Bank, 490 S.W.2d 208, 211 (Tex.Civ.App. — Amarillo 1973, no writ); 9 C.J.S. Banks and Banking § 315, at 641 (1938). Additionally, it should be noted that the Martin court applied the National Indemnity rule to a certificate of deposit case finding:
On the other hand a deposit made for some special application or disposition is a special deposit and when a bank knowingly accepts a deposit for a specific purpose, it cannot thereafter divert it for its own benefit or otherwise act to defeat the purpose for which the deposit was made. ... A special deposit, or one made for a specific purpose, differs from a general deposit in that title to the special deposit does not pass to the bank. . [A]nd the relationship created by the deposit is that of bailor and bailee, rather than that of creditor and debtor. (With authorities cited therein)
The Martin case also points out that the determination of whether a deposit is a general or a special deposit turns on the *533mutual intentions and understandings of the parties, “as revealed by their agreements and all of the circumstances of the case involved.”
The trial court, in its findings of facts and conclusions of law, found that the bank had actual notice and knowledge that the certificate of deposit was pledged to Lone Star'as security for the loan of Lone Star to Hamilton in the amount of $30,000. The uncontradicted evidence in this case shows that Murdock, an officer of the bank, attended the closing between Lone Star and Hamilton. This officer observed Hamilton sign a security agreement and turn the agreement and the certificate of deposit over to Lone Star. This bank officer then accepted $30,000 in funds supplied by Lone Star in payment of the certificate of deposit. The court found that the bank had actual knowledge that the certificate had been pledged to Lone Star; that the $30,000 which funded the purchase of that certificate of deposit belonged to Lone Star; and that Lone Star had an interest in such certificate. Under these findings the question of setoff is definitely one of banking law which has long since been established by the Supreme Court in National Indemnity. I would construe these findings and conclusions of the trial court as being final with regard to the question of whether or not the bank agreed to the quasi-trust agreement in this case. Therefore, I would deny the offset and affirm the judgment of the trial court, but not based on any strained construction of the Uniform Commercial Code.

. Any Annotated (Tex. UCC 1968). reference herein to the Code refers to the Texas Business and Commerce Code

. No one has urged that any section of article 4 of Tex.Bus. & Comm.Code Ann. (Tex. UCC 1968), which deals with banking deposits and collections, is applicable in this case.