I was reading some old blogs and decided to answer them even though they are OOOOOld.
The first one is about the definition of an "instrument." Most states have two definitions for the term instrument:
1. an instrument defined by 9-304 (checks, drafts, promissory notes, and CDs, but they must be in negotiable form (except checks) to be an instrument and few CDs are in negotiable form; and
2. an instrument formed by its use, i.e. any other writing that:
[*]a. evidences a right to the payment of a monetary obligation,
[*]b. is not itself a security agreement or lease, and
[*]c. is of a type that, in ordinary course of business, is transferred by delivery with any necessary endorsement or assignment.
In other words, if you treat something as an instrument, it becomes and instrument.
A few states included, in its definition of an instrument, a written CD that would be considered an instrument except for the fact that the writing is not negotiable.
In my opinion these few states made a big mistake. You see, if a CD is not an instrument it becomes a deposit account. The method of perfecting a security on a deposit account is by the secured party obtaining and maintaining control. This is easy if you are the depository institution.
But if the CD is an instrument, it cannot be perfected by control. The only method of perfection is by the filing of a financing statement or by the secured party taking possession. This would be OK if possession trumped a filing. But it doesn't unless you're a buyer of the instrument. Banks don't purchase the collateral, they take security interests and therefore could lose to someone who files a financing statement and the security party in possession did not perform a UCC search.
The illusion of knowledge is more dangerous than known ignorance. -- Tom Bridge