We have recently seen some potentially significant Uniform Commercial Code (UCC) decisions in Texas in the last few months which may be of interest to our financial institution clients. We have given a brief synopsis of these cases below, along with our analysis of the impact that such cases may have on our clients.

Statute of Repose in UCC Section 4.406 Runs from Date of Administrator’s Appointment

Jefferson State Bank v. Lenk, 323 S.W.3d 146 (Tex. 2010)

In Jefferson State Bank v. Lenk, the Texas Supreme Court decided a case that is important to financial institutions (and estate administrators) with respect to when the statute of repose under Section 4.406 of the UCC begins to run in the case of an estate administrator’s appointment after the death of an accountholder....

Common Law and Equitable Claims May Co-Exist with UCC Claims

Ross v. Bank of America, N.A., 693 F.Supp.2d 692 (S.D. Tex.2010)

In Ross v. Bank of America, N.A., United States District Judge Lee Rosenthal, a well-respected federal jurist in Houston, issued a memorandum opinion denying a motion to dismiss filed by the defendant bank which requested dismissal of a “money had and received” claim as displaced by the UCC, and held that the revised Section 3.420 of the UCC does not preclude the claim. This is the first Texas case (albeit in federal court) to decide the precise question of whether a “money had and received” claim is displaced by the UCC....

Refining the Definition of “Commercial Reasonableness” Under UCC Article 9

Regal Finance Co., Ltd. v. Tex Star Motors, Inc., ____ S.W.3d____, 2010 WL 3277132, 53 Tex. Sup. Ct. J. 1034 (Tex.2010)

In Regal Finance Co., Ltd. v. Tex Star Motors, Inc., the Texas Supreme Court issued an opinion concerning the appropriate standard for “commercial reasonableness” under Article 9 of the UCC when secured creditors dispose of collateral (repossessed vehicles in this case) and seek to recover a deficiency judgment after foreclosure and sale. Rejecting a court of appeals’ decision which essentially transformed the standard to a “reasonable dealer” standard, at least insofar as the jury charge in that case was concerned, the Supreme Court held that a “reasonable dealer” standard was only one, non-exclusive method of proving commercial reasonableness....