Holloway v. Wachovia Bank & Trust Co., N.A.

• Citation: 423 S.E.2d 752,333 N.C. 94
• Decision Date: 18 December 1992
• Docket Number: No. 11PA92,11PA92
• Court: North Carolina Supreme Court
• Parties: , 19 UCC Rep.Serv.2d 1086 Timothy S. HOLLOWAY, Jr. v. WACHOVIA BANK & TRUST COMPANY, N.A. and WACHOVIA BANK & TRUST COMPANY, N.A. v. Marcia Crisp COLEMAN.

Page 752

423 S.E.2d 752

333 N.C. 94, 19 UCC Rep.Serv.2d 1086

Timothy S. HOLLOWAY, Jr. v. WACHOVIA BANK & TRUST COMPANY, N.A. and WACHOVIA BANK & TRUST COMPANY, N.A. v. Marcia Crisp COLEMAN.

No. 11PA92.

Supreme Court of North Carolina.

Dec. 18, 1992.

On discretionary review pursuant to N.C.G.S. § 7A-31 of a decision of the Court of Appeals, 104 N.C.App. 631, 410 S.E.2d 915 (1991), affirming a judgment entered by Fullwood, J., on 14 December 1990 in Superior Court, New Hanover County. Heard in the Supreme Court 10 September 1992.

Maupin Taylor Ellis & Adams, P.A. by Karon B. Thornton and James E. Gates, Raleigh, for plaintiff-appellant.

Stevens, McGhee, Morgan, Lennon & O'Quinn by Richard M. Morgan, Wilmington, for defendant-appellee.

No brief filed by third-party defendant Marcia Crisp Coleman.

WHICHARD, Justice.

On 13 October 1975, Wachovia Bank ( "Wachovia" ) issued a $20,000.00 certificate of deposit to "Timmy S. Holloway, Jr., by Rountree Crisp, Sr., Agent." At the time Timmy ("Timothy") was a six-year-old minor. Crisp died on 5 April 1978. At Crisp's death, the certificate of deposit in Timothy's name with Crisp as agent was found in Crisp's safe deposit box, along with two other certificates of deposit. One was in the name of "Rountree Crisp, agent for Marcia Coleman," and the other was in the name of "Rountree Crisp, Agent for Rountree Crisp, Jr." Wachovia paid the latter two certificates of deposit to Marcia Coleman and Rountree Crisp, Jr., respectively.

Marcia Coleman, Crisp's daughter and Timothy's mother, testified on deposition that her father may have placed certificates of deposit in the names of various people for tax purposes. Coleman also testified that her father was very private about his financial affairs, never told her about the certificate of deposit in Timothy's name, did tell her about the certificate in her name, and paid her the interest on the latter certificate.

As to the certificate of deposit in Timothy's name, on 11 April 1980 Wachovia paid to Marcia Coleman and Louise Crisp, Crisp's widow and Timothy's grandmother, the sum of $26,294.92, purportedly the proceeds then due on the certificate of deposit, upon an endorsement reading "Timothy S. Holloway, Jr., by Estate of George R. Crisp, Sr., Marcia Coleman, Adminx., Louise D. Crisp, Adminx." On the same date and on a second occasion, Coleman rolled over the proceeds of the certificate of deposit into the following certificates of deposit issued by Wachovia: 1) a certificate for $26,294.92 in the name of "Timmy S. Holloway, Jr., by Marcia Coleman," dated 11 April 1980 and 2) a certificate for $26,294.92 in the name of "Timmy S. Holloway, Jr., by Marcia Coleman," dated 17 October 1980.

On 23 October 1981, Coleman presented the 17 October 1980 certificate to Wachovia for payment. Wachovia paid the certificate with a check in the amount of $26,294.92 payable to "Timmy S. Holloway, Jr., by Marcia Coleman." Coleman stated in response to interrogatories that she does not remember what she did with the $26,294.92 proceeds of the 23 October 1981 check. At this time, Timothy was still a minor. No court had appointed Coleman as Timothy's guardian with authority to receive the funds for him. In June 1986, Coleman was appointed Timothy's guardian for purposes of holding real property inherited by Timothy from his grandmother, Louise Crisp.

Timothy attained his majority on 5 September 1987. Shortly before his eighteenth birthday, Timothy's relationship with his mother had deteriorated to the point that he had moved away from her house and to an aunt's house. In the summer of 1988, Timothy was in need of money and his aunt told him about the certificate of deposit left by his grandfather. Timothy then remembered that his grandmother had told him when he was a child that his grandfather had left him money.

On 12 May 1989, Timothy brought this action against Wachovia seeking to recover the original value of the certificate ($20,000.00) plus interest. Both parties moved for summary judgment. The trial court denied Timothy's motion and granted Wachovia's motion. The Court of Appeals affirmed. Holloway v. Wachovia Bank and Trust Co., 104 N.C.App. 631, 410 S.E.2d 915 (1991). On 4 March 1992, we allowed plaintiff's petition for discretionary review. On appeal, the parties agree that no triable issue of fact exists; neither party has disputed that the case is appropriate for summary judgment.

Both lower courts viewed the issue as whether the certificate of deposit which Crisp purchased constituted a completed inter vivos gift to Timothy; both held that it did not. We hold that the certificate of deposit does represent a completed inter vivos gift from Crisp to Timothy. We further hold that the certificate evidences a contract between Wachovia and Crisp, the terms of which Wachovia violated when it paid the proceeds of the certificate to Coleman. The trial court thus erred in denying Timothy's motion for summary judgment and in granting Wachovia's, and the Court of Appeals erred in affirming the trial court.

Before turning to our gift and contract analysis, we first note that the certificate of deposit in question does not qualify as a negotiable instrument under the Uniform Commercial Code ("UCC"). While the UCC explicitly recognizes that certificates of deposit can be negotiable instruments, N.C.G.S. § 25-3-104(2)(c) (1986), the certificate at issue fails to meet two elements of negotiability under the UCC. First, the certificate is not payable to "order" or to "bearer." N.C.G.S. § 25-3-104(1)(d) (1986). Rather, the certificate is "payable to the Registered Holder, or to the duly registered assignee hereof." While the UCC states that "assigns" language may satisfy the requirement of being payable to order, N.C.G.S. § 25-3-110(1) (1986), this Court has held that language similar to that contained in the certificate lacks the essential words of negotiability. Trust Co. v. Creasy, 301 N.C. 44, 51-52, 269 S.E.2d 117, 122 (1980) (a paper which states that "the undersigned hereby absolutely and unconditionally guarantees to you and your successors and assigns the due and punctual payment of any and all notes" is not negotiable under Article Three); see also Savings & Loan Assoc. v. Trust Co., 282 N.C. 44, 54, 191 S.E.2d 683, 690 (1972); Gray v. American Express Co., 34 N.C.App. 714, 716, 239 S.E.2d 621, 623 (1977); but see Security Pacific Nat'l Bank v. Chess, 58 Cal.App.3d 555, 561 and 561 n. 7, 129 Cal.Rptr. 852, 856 and 856 n. 7 (1976) (indorsement to "Equipment Leasing of California, a corporation, its successors or assigns" makes notes "order" paper under 3-110, not "bearer" paper).

If the certificate of deposit merely lacked "order" or "bearer" language and met all the other requirements of negotiability under the UCC, the UCC would still govern, except there could be no holder in due course of the certificate. N.C.G.S. § 25-3-805 (1986); Creasy, 301 N.C. at 52 n. 2, 269 S.E.2d at 122 n. 2. There is a second aspect of the certificate, however, which places it in a class of certificates of deposit which are not negotiable by either means under the UCC because they contain terms precluding transfer. See Estate of Isaacson v. Isaacson, 508 So.2d 1131, 1134 (Miss.1987); Steven L. Harris, Non-Negotiable Certificates of Deposit: An Article 9 Problem, 29 U.C.L.A.L.Rev. 330, 333 (1981). Those terms are that the "Certificate is assignable only by registration on the books of the Bank." Courts that have addressed similar restricting language in certificates of deposit and other instruments have held that these instruments are nonnegotiable because they do not contain the unconditional promise to pay required by section 3-104(1)(b) of the UCC. Isaacson, 508 So.2d at 1132-34 (involves three sets of certificates of deposit containing restrictions on transfer, one of which states that no assignment is binding on bank until written notice of assignment by depositor(s) or last registered assignee has been acknowledged in writing by bank); Citizens Nat. Bank of Orlando v. Bornstein, 374 So.2d 6, 12-13 (Fla.1979) (certificate of deposit does not fall under 3-805 because in the event of assignment, the promise to pay is conditioned upon consent of the bank and reflection of the assignment on the bank's books); First State Bank at Gallup v. Clark, 91 N.M. 117, 119, 570 P.2d 1144, 1146 (1977) (promise to pay was not unconditional and note was expressly drafted to render it nonnegotiable by addition of a restriction on the back of the note stating that the note could not be transferred, assigned, or pledged without consent of the maker).

Because the certificate of deposit at issue does not fall under the UCC, we must turn to the common law. We first turn to gift law, as the lower courts did. The essential elements of a gift inter vivos are 1) donative intent and 2) delivery, actual or constructive. Fesmire v. Bank, 267 N.C. 589, 591-92, 148 S.E.2d 589, 592 (1966). The lower courts agreed with Wachovia that both elements are absent in this case. The Court of Appeals reasoned that donative intent is negated by the presence of the language "Rountree Crisp, Sr., Agent," as that language indicates an intent to retain some control over the certificate of deposit. The Court of Appeals also held that no delivery, actual or constructive, occurred, where neither Timothy nor his mother knew of the existence of the certificate until it was found in Crisp's safe deposit box after his death.

We hold that Crisp clearly expressed his intent to give the underlying funds to Timothy when he transformed the funds into a certificate of deposit in Timothy's name, with himself listed merely as agent for Timothy. See, e.g., Malek v. Patten, 208 Mont. 237, 241-43, 678 P.2d 201, 204 (1984); Kelly v. Huplits, 103 Pa.Super. 430, 432, 157 A. 704 (Super.Pa.1931). There are two key aspects of this transaction that indicate donative intent. First, Crisp did not merely place...