75R8047 CLG-F                           

         By Marchant                                           H.B. No. 1375

         Substitute the following for H.B. No. 1375:

         By Grusendorf                                     C.S.H.B. No. 1375

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to the definition of a certain account and instrument for

 1-3     purposes of a secured transaction and to the perfection of a

 1-4     security interest in an instrument.

 1-5           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-6           SECTION 1.  Section 9.105(a)(5), Business & Commerce Code, is

 1-7     amended to read as follows:

 1-8                 (5)  "Deposit account" means a demand, time, savings,

 1-9     passbook or like account maintained with a bank, savings and loan

1-10     association, credit union or like organization, other than an

1-11     account evidenced by a certificate of deposit or a nonnegotiable

1-12     certificate of deposit.

1-13           SECTION 2.  Section 9.105(a)(9), Business & Commerce Code, is

1-14     amended to read as follows:

1-15                 (9)  "Instrument" means a negotiable instrument

1-16     (defined in Section 3.104), a nonnegotiable certificate of deposit,

1-17     or any other writing which evidences a right to the payment of

1-18     money and is not itself a security agreement or lease and is of a

1-19     type which is in ordinary course of business transferred by

1-20     delivery with any necessary indorsement or assignment, but the term

1-21     does not include investment property.

1-22           SECTION 3.  Section 9.105(a), Business & Commerce Code, is

1-23     amended by adding Subdivision (14) to read as follows:

1-24                 (14)  "Nonnegotiable certificate of deposit" means a

 2-1     written document issued by a bank, savings and loan association,

 2-2     credit union, or similar financial organization that:

 2-3                       (A)  states on its face that it is a certificate

 2-4     of deposit (defined in Section 3.104) or receipt for a book entry;

 2-5                       (B)  contains an acknowledgement that a sum of

 2-6     money has been received by the issuer, with an express or implied

 2-7     agreement that the issuer will repay the sum of money; and

 2-8                       (C)  is not a negotiable instrument.

 2-9           SECTION 4.  Section 9.304(a), Business & Commerce Code, is

2-10     amended to read as follows:

2-11           (a)  A security interest in chattel paper or negotiable

2-12     documents may be perfected by filing.  A security interest in money

2-13     or instruments (other than instruments which constitute part of

2-14     chattel paper) can be perfected only by the secured party's taking

2-15     possession, except as provided in Subsections (d) and (e) of this

2-16     section and Subsections (b) and (c) of Section 9.306 on proceeds.

2-17     Possession of a nonnegotiable certificate of deposit in which the

2-18     secured party is the issuer of the document is established when the

2-19     issuer places a restriction on withdrawals from the account on its

2-20     records that evidences the document.  Possession established by the

2-21     restriction of withdrawals from an account evidenced by a

2-22     nonnegotiable certificate of deposit takes priority over any other

2-23     possession established under this chapter of which the secured

2-24     party does not have prior knowledge.

2-25           SECTION 5.  This Act takes effect September 1, 1997, and

2-26     applies only to a certificate of deposit that is issued or an

2-27     account agreement that was entered into on or after that date.

 3-1           SECTION 6.  The importance of this legislation and the

 3-2     crowded condition of the calendars in both houses create an

 3-3     emergency and an imperative public necessity that the

 3-4     constitutional rule requiring bills to be read on three several

 3-5     days in each house be suspended, and this rule is hereby suspended.