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Legal Memorandum: Bank's Renewal of Deposit Certificates

Issue: Under Minnesota law, must a bank honor a 32-year-old certificate of deposit that provides for automatic renewal and does not have a stated expiration date?

Area of Law: Banking & Finance Law, UCC & Secured Transactions
Keywords: Certificate of deposit; Automatic renewal; Absence of an expiration date
Jurisdiction: Minnesota
Cited Cases: 238 N.W. 161; 652 A.2d 930; 18 N.W.2d 569; 693 S.W.2d 38; 111 F. Supp. 2d 799; 423 S.E.2d 752; 71 N.W. 621; 184 Minn. 188; 780 So. 2d 639
Cited Statutes: Minn. Stat. § 336.3-104(1), § 336.3-104(2), § 336.3-104(3), § 336.3-202(1), § 336.3-104(b), (j)
Date: 11/01/2005

  Article 3 of the Uniform Commercial Code, which applies to negotiable instruments, contains provisions relating to certificates of deposit.  These provisions probably do not apply to this certificate of deposit, however, because the certificate states on its face that it is not transferable.  Generally, when a certificate of deposit states that it is nonnegotiable, Article 3 does not apply.  See 2 Frederick M. Hart & William F. Willier, Negotiable Instruments Under the Uniform Commercial Code, in Bender’s Uniform Commercial Code Service, § 1A.03[2] (citing, inter alia, Baker v. First Am. Nat’l Bank, 111 F. Supp. 2d 799 (W.D. La. 2000) (certificate stated on its face it was “NONTRANFERABLE”); Addington v. Estate of Milton Temple, 41 U.C.C. Rep. Serv. 2d 865 (Miss. Ct. App. 2000) (certificate stated it was “non-negotiable”), rev’d on other grounds, 780 So. 2d 639 (2001); Amarillo Nat’l Bank v. Dilday, 693 S.W.2d 38 (Tex. Civ. App.–Amarillo 1985) (same)). 

In 1973, Minnesota’s version of the UCC defined a “negotiable instrument” as a writing that (1) is signed by the maker or drawer, (2) “contains an unconditional promise or order to pay a sum certain in money . . . “, (3) is payable on demand or at a definite time, and (4) is payable to order or to bearer.  Minn. Stat. § 336.3-104(1) (1971).  The former section 336.3-104 defined a certificate of deposit more specifically.

A writing which complies with the requirement of this section is . . . […]

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