North Carolina § 25-9-104 - Control of deposit account.

§ 25-9-104. Control of deposit account.

Requirements for control. - A secured party has control of a deposit account if: The secured party is the bank with which the deposit account is maintained; The debtor, secured party, and bank have agreed in an authenticated record that the bank will comply with instructions originated by the secured party directing disposition of the funds in the deposit account without further consent by the debtor; or The secured party becomes the bank's customer with respect to the deposit account. Debtor's right to direct disposition. - A secured party that has satisfied subsection (a) of this section has control, even if the debtor retains the right to direct the disposition of funds from the deposit account. History (1965, c. 700, s. 1; 1975, c. 862, s. 7; 1999-73, s. 5(a), (b); 2000-169, s. 1.) AMENDED OFFICIAL COMMENT (2010 EDITION) 1. Source. New; derived from section 8-106. 2. Why "Control" Matters. This section explains the concept of "control" of a deposit account. "Control" under this section may serve two functions. First, "control . . . pursuant to the debtor's agreement" may substitute for an authenticated security agreement as an element of attachment. See section 9-203(b)(3)(D). Second, when a deposit account is taken as original collateral, the only method of perfection is obtaining control under this section. See section 9-312(b)(1). 3. Requirements for "Control." This section derives from section 8-106 of revised article 8, which defines "control" of securities and certain other investment property. Under subsection (a)(1), the bank with which the deposit account is maintained has control. The effect of this provision is to afford the bank automatic perfection. No other form of public notice is necessary; all actual and potential creditors of the debtor are always on notice that the bank with which the debtor's deposit account is maintained may assert a claim against the deposit account. Example: D maintains a deposit account with Bank A. To secure a loan from Banks X, Y, and Z, D creates a security interest in the deposit account in favor of Bank A, as agent for Banks X, Y, and Z. Because Bank A is a "secured party" as defined in Section 9-102, the security interest is perfected by control under subsection (a)(1). Under subsection (a)(2), a secured party may obtain control by obtaining the bank's authenticated agreement that it will comply with the secured party's instructions without further consent by the debtor. The analogous provision in section 8-106 does not require that the agreement be authenticated. An agreement to comply with the secured party's instructions suffices for "control" of a deposit account under this section even if the bank's agreement is subject to specified conditions, e.g., that the secured party's instructions are accompanied by a certification that the debtor is in default. (Of course, if the condition is the debtor's further consent, the statute explicitly provides that the agreement would not confer control.) See revised section 8-106, comment 7. Under subsection (a)(3), a secured party may obtain control by becoming the bank's "customer," as defined in section 4-104. As the customer, the secured party would enjoy the right (but not necessarily the exclusive right) to withdraw funds from, or close, the deposit account. See sections 4-401(a) and 4-403(a). Although the arrangements giving rise to control may themselves prevent, or may enable the secured party at its discretion to prevent, the debtor from reaching the funds on deposit, subsection (b) makes clear that the debtor's ability to reach the funds is not inconsistent with "control." Perfection by control is not available for bank accounts evidenced by an instrument (e.g., certain certificates of deposit), which by definition are "instruments" and not "deposit accounts." See section 9-102 (defining "deposit account" and "instrument"). As is the case with possession under Section 9-313, in determining whether a particular person has control under subsection (a), the principles of agency apply. See Section 1-103 and Restatement (3d), Agency § 8.12, comment b . Editor's Note. - Session Laws 2012-70, s. 27, provides: "The Revisor of Statutes shall cause to be printed, as annotations to the published General Statutes, all relevant portions of the Official Comments to the 2010 Amendments to Article 9 of the Uniform Commercial Code and all explanatory comments of the drafters of this act as the Revisor may deem appropriate." The Revision of Uniform Commercial Code Article 9 - Secured Transactions was drafted by the National Conference of Commissioners on Uniform State Laws and The American Law Institute on April 27, 2011. The Official Commentary for the 2010 revision are copyrighted 2010 by The American Law Institute and National Conference of Commissioners on Uniform State Laws. The affected portions of the Official Comment to this section have been set out at this section with the appropriate amendments.