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.