MILLER, JUSTICE:

The question presented by this appeal is whether, under our Uniform Commercial Code [UCC], a bank can obtain a security interest in a depositor's reserve bank account which would prevail over a suggestee execution issued by a judgment creditor of the depositor.

The First Huntington National Bank [hereinafter Bank] agreed to finance, through a deed of trust, the purchase by Applied Energies, Inc. [hereinafter Debtor] of a tract of land known as Meadow Links Estates. With the purpose of subdividing the tract into lots for mobile home dwellers, Debtor sought further financing from the Bank for resale of the lots to individual purchasers. The proposal was that Debtor would assign the purchasers' promissory notes, secured by deeds of trust, to the Bank.

The Bank agreed to this arrangement, but insisted on security in the form of a "reserve account" to be controlled by the Bank which would, in effect, guarantee the Bank the right to a reserve of 25% of the unpaid balance of the outstanding notes. Payments into the reserve account would be accomplished by the Bank retaining 25% of the amount due Debtor on notes assigned by Debtor to the Bank from the sale of individual lots. The rules governing the reserve account were established by written agreement between the Bank and Debtor.

Sometime after this arrangement between Bank and Debtor became effective, Debtor terminated its business. Subsequently, two creditors of Debtor, Ronald L. Eastham Associates, Inc., and Duncan Box Lumber Company [hereinafter Duncan], instituted separate proceedings against Debtor, obtaining judgments and proceeding by suggestee execution to attach the reserve account of Debtor in the Bank. The Bank contended the sum in the reserve account, approximately $41,000, did not exceed 25% of the unpaid balance owed by Debtor to Bank, which was roughly $400,000. The Bank thus asserted that Debtor had no "interest or property in the reserve account," and that the Bank was not "in possession of any property belonging to [Debtor]." The Circuit Court of Cabell County upheld the Bank's contentions and dismissed the proceedings. This appeal followed.

Duncan argues that the Bank has no lien because it failed to file a financing statement under the general requirement of our Uniform Commercial Code, W. Va. Code, 46-9-302(1), which states, with enumerated exceptions: "A financing statement must be filed to perfect all security interests. . . ." The Bank asserts that a financing statement was not required because the reserve account falls within exception (a) of that Code section, which states "a security interest in collateral in possession of the secured party under section 9-305 [§ 46-9-305]."

At the time the reserve account was created in 1973, W. Va. Code, 46-9-305, provided generally that if a creditor took "[a] security interest in letters of credit and advices of credit . . ., goods, instruments, negotiable documents or chattel paper" and retained possession of the collateral, then he had perfected his security interest without the necessity of filing a financing statement.

Duncan asserts the reserve account does not fall within this Code section because the account constitutes money, and that money was not within the statutorily enumerated items as this statute existed in 1973 when the agreement was executed. To buttress this point, Duncan calls our attention to the 1974 amendment to W. Va. Code, 46-9-305, which added the term "money" to the list of interests perfectible by possession.

These arguments, however, miss the critical point of the case. The agreement creating the reserve account was essentially a common law pledge. It is true that W. Va. Code, 46-9-102 (2), provides generally that Article 9, governing secured transactions, applies "to security interests created by contract including pledge . . . ." But it is equally clear under W. Va. Code, 46-9-104(k) [1963], that certain transactions which may constitute a pledge are excluded from Article 9:

"[Article 9 does not apply] to a transfer in whole or in part of any of the following: Any claim arising out of tort; any deposit, savings, passbook or like account maintained with a bank, savings and loan association, credit union or like organization."

The official comment to this section states in paragraph 7:

"Rights under life insurance and other policies, and deposit accounts, are often put up as collateral. Such transactions are often quite special, do not fit easily under a general commercial statute and are adequately covered by existing law. Paragraphs (g) and (k) make appropriate exclusions."

The upshot is that the UCC does not apply to a pledge or transfer of a bank account, and thus the validity of such an arrangement is tested not by the UCC, but under the common law. This is the conclusion reached by courts which have passed on the question.

Walton v. Piqua State Bank, 204 Kan. 741, 754, 466 P.2d 316, 327 (1970), involved a purported pledge of funds in a passbook savings account. The court, after stating the statutory exceptions, acknowledged the inapplicability of the UCC:

"Hence, no provisions of the Uniform Commercial Code are applicable to the question presented, and we refer to our decisions and to the Restatement of the Law, Security, as they apply the common law."

The court in Wightman v. American National Bank of Riverton, 591 P.2d 903, 906 (Wyo. 1979), discussed this question in more detail:

"A pledge is recognized by the Uniform Commercial Code (U.C.C.). However, the U.C.C. does not deal with the rights and obligations arising out of pledges. Common law principles are used to fill this gap. 68 Am.Jur.2d Secured Transactions § 49, pp. 875-876. While the U.C.C. recognizes pledges, it does not specifically deal with the rights and obligations arising out of them. Moreover, § 34-21-904(a) (xi) [the Wyoming version of UCC 9-104(k)] specifically excludes the pledge of a savings deposit. Thus we are obliged to peruse the law of pledges in determining the matter before us . . . ."

See Miller v. Wells Fargo Bank International Corp., 540 F.2d 548, 557 n. 2, 561-63 (2d Cir. 1976); United States v. Sterling National Bank Trust Co. of New York, 360 F. Supp. 917, 924 (S.D. N.Y. 1973), modified on other grounds, 494 F.2d 919 (2d Cir. 1974); 1 P. Coogan, W. Hogan D. Vagts, Secured Transactions under the Uniform Commercial Code § 5A.14 (Bender 1980).

In light of the foregoing authority, we exclude a consideration of the UCC from our inquiry and proceed to consider the common law of pledges.

In First National Bank of Parkersburg v. Harkness, 42 W. Va. 156, 24 S.E. 548 (1896), we defined a pledge in Syllabus Point 1:

"A pledge is a bailment of goods by a debtor to his creditor, to be kept by him until his debt is discharged."

We also discussed the distinction between a pledge and a mortgage:

"Jones, Pledges, § 1, says: `Every contract by which the possession of personal property is transferred as security only is to be deemed a pledge. . . .' * * * The distinction between a pledge and a mortgage is stated in Jones, Chat. Mort. § 4, as follows: `The chief distinction between a mortgage and a pledge is that by a mortgage the general title is transferred to the mortgagee, subject to be revested by the performance of the condition; while by a pledge the pledgor retains the general title himself, and parts with the possession for a special purpose.' And the same author in his work on Pledges (section 7) says: `A pledge differs from a mortgage of personal property in being a lien upon property, and not a legal title to it. The legal title to the property pledged remains in the pledgor, while a mortgage passes the legal title of the property itself to the mortgagee, subject to be revested in the mortgagor upon the performance by him of an express condition subsequent.' . . ." [ 42 W. Va. at 165-66, 24 S.E. at 552].

In Bank of Mill Creek v. Elk Horn Coal Corp., 136 W. Va. 36, 40-41, 65 S.E.2d 892, 895 (1951), we reaffirmed the foregoing statements from Harkness in the context of a pledge of corporate stock, an intangible at common law.

Courts initially were troubled with the concept that a pledge of intangible property interests or choses in action could be obtained. The underlying concept of a pledge required physical possession by the creditor of the object pledged, and hence the early reluctance by some courts to find physical possession of something "intangible." As recognized in Annot., 53 A.L.R.2d 1396 (1957), the problem has been resolved through the concept of the "indispensable instrument":

"Problems involved in the free transfer of intangible property interests have been substantially solved, as to a large class of such rights, by the introduction of the concept of negotiability, by virtue of which a document representing the right is vested with many of the characteristics of an actual chattel, and it seems to be settled that such a right may be pledged by delivery of the negotiable instrument which represents it. However, there remains a large class of intangibles which may in some sense be said to be represented by a commercial document which is not, however, negotiable, and the question is frequently presented whether such a right may be pledged by delivery of the document in question. This question may be answered simply, although not too helpfully, by saying that the courts generally recognize that if the document delivered does represent the right to the extent that it stands in the place of, or embodies, or reifies, the intangible, a pledge of the document amounts to a pledge of the right." [53 A.L.R.2d at 1398].

Both Wightman v. American National Bank of Riverton, supra, and Walton v. Piqua State Bank, supra, involved a type of bank deposit that was peculiarly susceptible to a pledge. Wightman dealt with a certificate of deposit, while Walton concerned a passbook savings account. In each case, the common law pledge requirements were found not to have been met because the pledgor had not made a sufficient transfer of the account.

A case even more analogous to the present one is Miller v. Wells Fargo Bank International Corp., supra, where a claim was made that a time deposit in a bank could be pledged because the pledgee was the only party having a Telex key and key code which purportedly gave it sole physical control over the account. However, the court found there was not sufficient evidence "to establish that the Telex test key code gave [the purported pledgee] irrevocable authority over [the purported pledgor's] account in Luxembourg." [ 540 F.2d at 563].

We have not had occasion to discuss the principles surrounding the pledge of intangible property. We do not doubt that in the ordinary case, where the intangible is represented by an indispensable instrument, the possession of such instrument must be transferred to the creditor-pledgee. This comports with the general definition of a pledge contained in Section 1 of the Restatement of Security (1941):

"A pledge is a security interest in a chattel or in an intangible represented by an indispensable instrument, the interest being created by a bailment for the purpose of securing the payment of a debt or the performance of some other duty."

However, in the case of a bank, which can create a deposit account, an intangible, and by specific agreement with the depositor, as in the case here, can obtain exclusive control over such account so as to employ it as a security device for the bank's loans to the debtor, the entire arrangement is functionally equivalent to a common law pledge. We do not doubt that a different result would have been reached in Miller v. Wells Fargo Bank International Corp., supra, had the bank contending for the pledge established its exclusive control of the pledgor's bank account, notwithstanding the absence of a traditional indispensable instrument that represented the funds in the account.

In the commercial realities of the present case, the funds in the reserve account representing the pledged assets constituted security for the Bank's loans on the notes. The written agreement between the Bank and the Debtor manifests an unequivocal intention to permit the Bank to control the reserve account so that it might retain, without further consent or action on the part of Debtor, 25% of the amount due Debtor on the notes assigned by it to the Bank. The agreement creating the pledge is unmistakably intended to give the Bank collateral security.

Unlike a passbook or a nonnegotiable certificate of deposit, the written agreement here did not represent or embody the funds in the reserve account. However, it is not disputed that access to the reserve account was available only to the Bank. Under the terms of the written agreement, the Bank was required to pay on an annual basis to the Debtor any amount in the account which exceeded 25% of Debtor's total outstanding indebtedness to the Bank. This was not an account to which the pledgor had access, since it possessed no document which represented the account and which would enable it to transfer all or any part of the account. See Miller v. Wells Fargo Bank International Corp., supra.

We conclude that where, as here, a bank, by agreement with its depositor, creates a reserve account with the depositor's funds as security for loans made by the bank to the depositor, and retains the exclusive possession and control over the account, such account meets the requirements of a common law pledge.

Given our conclusion that the reserve account constitutes a valid common law pledge independent of the UCC, the claim of Duncan that the Bank did not file a financing statement as required by W. Va. Code, 46-9-302(1), must fail. There is no common law or statutory requirement in this jurisdiction which requires recordation of a non-UCC pledge. An essential purpose of recordation of a security interest is to put third parties on notice that the debtor's property is subject to a creditor's security interest. This reason for recordation, as we have previously noted, is not applicable where the physical possession of the property is not with the debtor, but with the creditor.

We have recognized in First National Bank of Parkers-burg v. Harkness, 42 W. Va. 156, 24 S.E. 548 (1896), that a pledge will prevail over a subsequent attachment on the pledged property, stating in Syllabus Point 3:

"An attachment subsequently levied upon [pledged property] would be subject to the lien created by [the] pledge."

It is the generally accepted rule, unless modified by statute, that the pledgee's right is superior to that of all subsequent lien holders or judgment creditors. Stevan v. Union Trust Co., 316 F.2d 687, 690-92 (D.C. Cir. 1963); Restatement of Security § 28 (1941); 72 C.J.S. Pledges § 25; cf. Reconstruction Finance Corp. v. Sun Lumber Co., 126 F.2d 731, 738-39 (4th Cir. 1942).

For the foregoing reasons, the judgment of the Circuit Court of Cabell County is affirmed.

Affirmed.