Estate of Isaacson v. Isaacson

Decision Date03 June 1987
Docket NumberNo. 56336,56336
Citation508 So.2d 1131
CourtMississippi Supreme Court
Parties4 UCC Rep.Serv.2d 103 In the Matter of the ESTATE OF Morris ISAACSON, Deceased; Joan Isaacson, Administratrix, v. Philip A. ISAACSON.

Harry J. Rosenthal, Billy Don Hall, Jackson, for appellant.

Rufus Creekmoore, W.E. Gore, Jr., R.G. Nichols, Jr., Jackson, for appellee.

Before HAWKINS, P.J., and DAN M. LEE and GRIFFIN, JJ.

HAWKINS, Presiding Justice, for the Court:

This is an appeal from Hinds County Chancery Court, First Judicial District, wherein the estate of Morris Isaacson contended that certain certificates of deposit formerly owned by the decedent became the property of the estate. The chancellor determined that the certificates passed to a surviving joint owner instead, and the estate has filed this appeal. Finding no error, we affirm.

FACTS

After Morris Isaacson died on February 1, 1984, his estate gathered seven certificates of deposit (CDs) from three different banks. The CDs were:

                    1.  10-12-82  Unifirst       $10,000
                    2.  10-22-82  Unifirst       $10,000
                    3.  10-22-82  Unifirst       $10,000
                    4.   7-26-83  1st MS Nat'l   $19,000
                    5.   8-03-83  Jxn VA FCU*    $10,000
                    6.  11-02-83  Jxn VA FCU     $10,000
                    7.   1-03-84  Jxn VA FCU    $100,000
                

---------------

* Jackson VA Federal Credit Union

Philip, Morris's brother, intervened, asserting an interest in the CDs since he and Morris were joint owners of the CDs with rights of survivorship.

All of the CDs either stated (or were attached to signature cards that stated) that Philip and Morris were joint owners with rights of survivorship. The signature cards were signed by Philip and Morris.

The Unifirst certificates do not contain the words "the order of" or "to bearer". At the bottom of the CDs, in bold type, is the word "NON-TRANSFERABLE".

The 1st Mississippi National Bank CD does not recite that it is payable either "to the order of" or "to bearer". It further recites that:

No assignment of this deposit shall be binding on 1st Mississippi National Bank or its successors or assigns until written notice of such assignment signed by the depositor(s) or the last registered assignee shall have been acknowledged in writing by this bank.

In the left hand corner, in bold type, appear the words "NON-NEGOTIABLE".

The Jackson VA Federal Credit Union CDs do not state that they are payable to "order of" or "to bearer". Each CD states "This certificate may not be pledged, transferred or assigned to any party other than the Credit Union." In large letters at the bottom of each CD appear the words "NOT TRANSFERABLE".

The estate relies primarily on the case of Thomas v. Estate of Eubanks, 358 So.2d 709 (Miss.1978), where a CD that qualified as a negotiable instrument passed to the decedent's estate instead of an alternative payee relying on the presumption of survivorship rights.

Despite the obvious nature of these CDs, Morris's estate contended that the CDs were negotiable instruments, that there was no evidence that Morris ever gave up any rights to the certificates, and he retained possession of all certificates. Therefore, the estate contended Morris was a holder in due course and the CDs should go to his estate.

At trial, Philip put on evidence that Morris clearly intended to create a joint ownership with rights of survivorship regarding the CDs. Bank employees that issued each CD testified that they knew Morris and he understood that when he died, the CDs would go to his brother.

On January 14, 1985, the chancellor found that the CDs were not negotiable, that the deposits created a joint tenancy with rights of survivorship, and that Thomas v. Estate of Eubanks was inapplicable. Therefore, the CDs went to Philip as a surviving joint owner, and Morris's estate has appealed to this Court.

LAW
I. THE LOWER COURT ERRED IN ADJUDICATING THE CERTIFICATES OF DEPOSIT WERE NOT NEGOTIABLE.

In asserting this assignment of error, the estate argues that since the CDs were negotiable, Thomas v. Estate of Eubanks, supra, should be followed. For reasons set forth in Part II of this opinion, we find this case distinguishable from Thomas. For purposes of this section, we address only the negotiability question of the CDs.

The CDs in question were commonly referred to as savings or investment certificates. Certain savings certificates are certificates of deposit as the term is defined in Article 3 of the Uniform Commercial Code. Miss.Code Ann. Sec. 75-3-104 provides:

(1) Any writing to be a negotiable instrument within this chapter must

(a) be signed by the maker or drawer; and

(b) contain an unconditional promise or order to pay a sum certain in money and no other promise, order, obligation or power given by the maker or drawer except as authorized by this chapter; and

(c) be payable on demand or at a definite time; and

(d) be payable to order or bearer.

(2) A writing which complies with the requirements of this section is

* * *

* * *

(c) a "certificate of deposit" if it is an acknowledgment by a bank of receipt of money with an engagement to repay it; ... [Emphasis added]

See, e.g., Thomas v. Estate of Eubanks, supra (example of Article 3 negotiable CD).

Therefore, to be subject to Article 3, a certificate of deposit ordinarily must comply with all the requirements of negotiability. However, Miss.Code Ann. Sec. 75-3-805 provides a statutory exception for a CD that lacks words of negotiability (i.e., is not payable to order or to bearer):

This chapter applies to any instrument whose terms do not preclude transfer and which is otherwise negotiable within this chapter but which is not payable to order or to bearer, except that there can be no holder in due course of such an instrument. [Emphasis added]

See, e.g., Rand v. Moore, 414 So.2d 885, 887 (Miss.1981). Bank of Crystal Springs v. 1st Nat'l Bank, 427 So.2d 968, 969-70 (Miss.1983) (examples of Sec. 75-3-805 "non-negotiable" CDs).

For Miss.Code Ann. Sec. 75-3-805 to apply, the CD must be otherwise negotiable except for the "order or bearer" language. If, however, the CD is otherwise not negotiable, e.g., contains a conditional promise to pay, or whose terms prohibit transfer, that CD is not subject to Article 3. Miss.Code Ann. Sec. 75-3-805; Harris, Non-Negotiable Certificates of Deposit: An Article Therefore, three classes of savings CDs have been identified:

9 Problem, 29 U.C.L.A.L.Rev. 330, 333 (1981).

1. Sec. 75-3-104--Negotiable CD--(all requirements met; Article 3 applies);

2. Sec. 75-3-805--"Non-negotiable" CD--(all requirements met except "order or bearer"; Article 3 applies with limitations); and

3. CDs that are otherwise not negotiable, i.e., by terms which preclude transfer (Article 3 does not apply).

Harris, 29 U.C.L.A.L.Rev. at 333.

Turning now to the CDs in question, it has been stipulated they do not fall in the first category. Morris's estate argues that Miss.Code Ann. Sec. 75-3-805 should apply, but since all the CDs contain terms that preclude transfer ("not transferable", "not negotiable", "non-negotiable"), these CDs fall into the third category and are not subject to Article 3 of the U.C.C.

II. THE LOWER COURT ERRED IN ADJUDICATING THE RULING IN THOMAS V. ESTATE OF EUBANKS IS NOT APPLICABLE TO THIS CASE.

In Thomas, a CD was issued as follows: "Mrs. Ruby Eubanks has deposited in this bank $14,000 payable to the order of herself or Doyle Thomas in current funds twelve months after date on the return of this certificate properly endorsed with interest at 5%." [Emphasis added] 358 So.2d at 710. This CD met all requirements of negotiability and was in Ruby's possession during her lifetime.

When Ruby died, Doyle Thomas claimed ownership as a joint tenant with rights of survivorship. Thomas relied on the presumption of survivorship rights pursuant to Miss.Code Ann. Sec. 81-5-63 (1972). Ruby's estate argued that since the CD was negotiable, Ruby was a holder in due course and since the CD was in Ruby's possession when she died, the proceeds should pass to the estate. This Court, through Justice Sugg, reasoned that to adopt the position of Thomas would render the provisions of the U.C.C. pertaining to CDs meaningless. 358 So.2d at 711.

In the case at bar, Morris's estate relies almost...

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