Okla. Stat. tit. 12A § 1-9-327
The following rules govern priority among conflicting security interests in the same deposit account:
Okla. Stat. tit. 12A, § 1-9-327
Oklahoma Code Comment
These priority rules change the law in Oklahoma and most states by allowing the depository institution where the deposit account is maintained a means to achieve priority over competing secured parties tracing the proceeds of their security interests into the deposit account. See revised section 9-327(1), (3), (4) . Under prior law, the depository bank was largely limited to set-off rights which would normally be subordinate to a known proceeds claim. See generally Alvin C. Harrell, Security Interests in Deposit Accounts: A Unique Relationship Between the UCC and Other Law, 23 U.C.C. L.J. 153 (1990).
A deposit account is a "demand, time, savings, passbook or like account maintained in a bank." A "bank" is defined to include a "bank, savings bank, savings and loan association, credit union, and trust company." Section 9- 102(a)(8) . The definition of deposit account does not include investment property or an account evidenced by an instrument. Section 9-102(a)(29) . This excludes securities, securities entitlements, securities accounts, commodity contracts and commodity accounts It also excludes accounts at depository institutions covered by a negotiable certificate of deposit or by a non-negotiable certificate of deposit which is in the ordinary course of business transferred by delivery with any necessary indorsement or assignment. Section 9-102(a)(47) . Thus the definition of "deposit account" maintains the former distinction between certificated and uncertificated certificates of deposit. An uncertificated certificate of deposit or a certificated certificate of deposit that does not qualify as an instrument will be a deposit account. Certificates of deposit that are covered by a negotiable certificate of deposit or by a non-negotiable certificate of deposit which is in the ordinary course of business transferred by delivery with any necessary indorsement or assignment are instruments. Section 9-102(a)(47) . This treatment of certificates of deposit in Oklahoma does not follow the approach of the prior non-uniform amendment to old Article 9 in Oklahoma. See Alvin C. Harrell, Security Interests in CDs: Some Recent Developments and Proposals, 48 Consumer Fin. L.Q. Rep. 338 (1994). Therefore, Oklahoma law is changed in this respect.
The inclusion of deposit accounts in revised Article 9 does not impact all transactions, however. The transfer of an interest in a deposit account in a consumer secured transaction is left to the common law. Section 9-109(d)(13) . These are transactions in which the obligation is incurred primarily for a personal, family or household purpose and the collateral is held by the debtor for personal, family or household purposes. Section 9-102(a)(26) .
The common law method of perfection may be difficult to determine. The rule appears to be that an assignment is effective between the parties upon the execution of the assignment. See generally Alvin C. Harrell, Security Interests in Deposit Accounts: A Unique Relationship Between the UCC and Other Law, 23 U.C.C. L.J. 153 (1990). At this point, the assignment is effective also against the assignor's creditors and those who merely stand in the shoes of the assignor. Equilease Corp. v. State Federal Savings and Loan, 647 F.2d 1069 (10th Cir. 1981). However, in order to "perfect" a common law pledge, it may be necessary to take control of the documentation (e.g., the savings passbook) evidencing the account, or otherwise restrict the debtor's right to withdraw funds. See Harrell, supra, at 173-176. The assignment is not enforceable against the bank until the bank has been notified. Globe Indemnity Co. v. West Texas Lumber Co., 34 SW.2d 896 (Tx. Civ. App. 1930). Even under prior law such notice alone might not be sufficient, and this is confirmed by revised sections 9-104 and 9-327 . The bank does not have to agree to the assignment. Lipe v. Guilford Nat. Bank, 72 SE 2d 328 (N.C. 1952). The consent of the bank may be necessary. Id., Finance Corp. v. Modern Materials Co., 312 P.2d 455 (Okl. 1957). For purposes of the Bankruptcy Code the assignment is effective when applicable state law says it is effective whether that be on the execution of the assignment or actual payment under the assignment. Goldstein v. Madison National Bank, 807 F.2d 1070 (D.C. Cir 1986). See also Barnhill v. Johnson, 503 U.S. 393(1992) .
A non-negotiable certificate of deposit may be a general intangible rather than an instrument. See revised sections 9-102(a)(47), (42), 9-310 .
Excluded also from Article 9 is the right of recoupment or set-off. Section 9- 109(d)(10) . However, the right of a depository institution to set-off a deposit account maintained with it is specifically recognized. A set-off is effective against another secured party holding a security interest in the account unless the secured party has perfected its interest by becoming the depository institution's customer. Section 9-340 .
Control is the only method by which a security interest in a deposit account can be perfected. Section 9-312(b)(1) . There is no perfection by filing and no temporary perfection. Section 9-310(b)(8) . Perfection commences when the secured party obtains control and continues only so long as control is maintained. Section 9-314(b) .
The method of obtaining control of a deposit account depends on whether the secured party is the institution where the deposit account is maintained. If so, nothing further need be done in order for the bank to have control. If the secured party is not the bank where the account is maintained, the secured party has two alternatives. It must either obtain the agreement of the depository institution maintaining the deposit account that it will comply with instructions of the secured party directing disposition of the funds, or place the deposit account into its name. Even if the secured party is not the depository institution, it can maintain "control" (and thus perfection) by these means under Article 9 even if the debtor retains the right to direct the disposition of funds from the account. As noted supra, this is a change as compared to the common law pledge. If the secured party is the depository institution, the debtor likewise can retain discretion over the disposition of the funds. Even if the secured party becomes the customer of the depositary bank. it could permit the debtor to distribute funds by giving the debtor that authority as a part of its depositary agreement. Section 9-104 . A depository institution is not required to enter into a control agreement even if the customer requests. Once a depository institution has entered into a control agreement, it is under no obligation to confirm the existence of the agreement unless the customer requests. Section 9-342 .
A secured party has a duty to release its control over a deposit account within ten days after receipt of a written demand by the debtor if it has no outstanding secured obligation and no commitment to make advances, incur obligations, or otherwise give value. If the secured party has control by virtue of an agreement with the depository institution under section 9- 104(a)(2) , the secured party must send the depository institution a written statement that releases the depository institution from any obligation to comply with instructions from the secured party. If the secured party has become the customer of the depository institution under section 9-104(a)(3) , the secured party must pay the debtor all funds in the deposit account. Section 9-208(b) .
The choice of law provision for perfection and priority of security interests in deposit accounts is the law of the jurisdiction where the debtor's chief executive office is located. Section 9-304(b)(4) . If the account statement sent to the customer identifies an office, it is the law of the jurisdiction where that office is located. Section 9-304(b)(3) . If an agreement between the depository institution and the customer specifies that the deposit account is maintained at a particular office, the governing law is the law of the jurisdiction where that office is located. Section 9-304(b)(2) . Lastly, if an agreement between the depository institution and the customer specifies that the law of a particular jurisdiction controls for the purposes of Article 9, the law of that jurisdiction is the governing law. Section 9-304(b)(1) .
As before, a security interest in any Article 9 collateral continues in deposit accounts as long as the deposit account is "identifiable" as proceeds. This is now true no matter how the security interest in the original collateral was perfected or who received the proceeds. Section 9-315(a), (b) and (c) ; section 9-322 . Proceeds that are commingled in a deposit account are still identifiable. Id. See also Anderson, Clayton & Co. v. First American Bank of Erick, 614 P.2d 1091 (Okla. S. Ct. 1980). The tracing rules provided under other law will be appropriate. Section 9-315(b)(2) . The goal of "tracing" is to establish what portion of a commingled account constitutes proceeds of the collateral. In factually traceable situations, where proceeds can actually be traced into and out of an account, no resort to artificial tracing methods is needed. But artificial tracing is permitted as need to identify proceeds. Examples of artificial tracing methods include the "lowest intermediate balance" (LIB), "last in first out" (LIFO) and "first in first out" (FIFO) methods of tracing commingled proceeds. Such methods are needed when deposited proceeds have become commingled. Farmers and Merchants National Bank v. Sooner Co-op, Inc., 1988 OK 135, 766 P.2d 325, 7 UCC Rep. Serv. 321 (Okla. S. Ct. 1988). Oklahoma has not required any particular method. Section 4-210(b) adopts the FIFO rule in certain instances. Trust rules generally are not helpful because of the special requirements imposed on the trustee. Boroughs v. Whitley, 1961 OK 161, 363 P.2d 150 (Okla. S. Ct. 1961); Ayers v. Fey, 1940 OK 144, 187 Okla. 230, 102 P.2d 156 (Okla. S. Ct. 1940). The Restatement 3rd, Trusts section 202 and the Restatement, Restitution speak of tracing, but do not set forth a rule. It appears that the appropriate rule will be dictated by the facts of the particular case.
A security interest in a deposit account which arises as proceeds continues until the funds can no longer be traced or otherwise identified. The proceeds security interest will be subject to a prior perfected security interest in the deposit account. Section 9-327(1) . But see section 9-322 . The proceeds security interest will also be subject to any right of recoupment or set-off by the depository institution until the proceeds secured party becomes the customer of the depository institution. Section 9-340 . A depositary bank has no obligation to enter into such a control agreement. Section 9-342 . Further, except as provided in Article 9 or by agreement, a depositary bank is not affected by the creation, attachment of perfection of a security interest in the deposit account nor by knowledge of the security interest, nor by instructions from the secured party. Section 9-341 .
A transferee of funds from a deposit account takes free of a security interest in the deposit account unless the transferee acts in collusion with the debtor to defeat the rights of the secured party. Section 9-332(b) .