UND SCHOOL OF LAW - HOMECOMING CLE 2015

DEBTOR CREDITOR, BANKRUPTCY

AND
COMMERCIAL LAW

ILLUSTRATED
THE LAW IN CARTOONS . . . SERIOUSLY, FOLKS

Presented by John S. Foster, Tracy A. Kennedy & John D. Schroeder

Zimney Foster P.C.

3100 South Columbia Road
Ste. 200
Grand Forks, ND 58201
(701) 772-8111
Website: www.northdakotalaw.net
tracykennedy@northdakotalaw.net
johnfoster@northdakotalaw.net
jschroeder@northdakotalaw.net
 DISCLAIMER
These materials are intended for educational purposes only. Nothing in this program, the program
materials, or communications stemming from the program (including questions and answers)
should be considered as the rendering of legal advice or as creating an attorney-client relationship
between any program attendees/readers and the presenters/authors. Persons having a need for legal
advice should engage the services of a licensed attorney in all legal matters. Seminar
attendees/readers should assure themselves that these presentations/materials/communications are
current and applicable at the time they are reviewed or considered. The presenters/authors do not
warrant that these presentations/materials/communications will continue to be accurate, because
laws and interpretation of laws evolve and change over time, nor do they warrant them to be
completely free of errors when delivered/published. Seminar participants/readers should verify
statements before relying on them.
 HOMECOMING SEMINAR FACULTY BIOS

JOHN S. FOSTER is retiring at year end 2015 from nearly 40 years in the practice of law
and from almost 35 years teaching at UND Law School. He is a Shareholder, Director and
President Emeritus of the Law Firm of Zimney Foster P.C. in Grand Forks, where his practice
over his career has been devoted to banking law, commercial transactions and creditors rights in
bankruptcy. He earned his BA degree cum laude, from the University of Wisconsin and his Juris
Doctor degree, with distinction, from the University of North Dakota School of Law. Foster
serves as Special Assistant Attorney General for North Dakota Mill & Elevator Association and
the Bank of North Dakota, and a former Assistant States Attorney for Grand Forks County. For
over three decades Foster has been adjunct faculty at the University of North Dakota School of
Law where he taught Debtor/Creditor Law, Bankruptcy Law, Commercial Paper and Advanced
Commercial Transactions, and he has lectured on Uniform Commercial Code, bankruptcy and
creditors’ rights issues for lawyers’ and bankers’ associations. He also is faculty on the Dakota
School of Banking sponsored by North Dakota Bankers Association. Foster is listed in The Best
Lawyers In America and Chambers USA: America’s Leading Business Lawyers. Foster has also
served as a Director of a National Bank. He is the author of four law school textbooks for the
UND Law courses he taught, and has published in the North Dakota Law Review. Foster has
also authored numerous seminar texts on topics such as UCC Revised Article 9, workout
agreements, check fraud, bankruptcy, agricultural liens, personal guaranty law, judgment
collection, foreclosure issues, prejudgment remedies, and commercial loan documentation.
Foster proudly turns the practice and teaching reins over to his extremely talented, able and
comedically gifted Law Partner Tracy……….

TRACY A. KENNEDY is a Shareholder, Director and Treasurer of the Law Firm of

Zimney Foster P.C. in Grand Forks, where her practice is devoted to banking law, commercial
and business law, creditor’s rights and agricultural lending and credit transactions. She is
adjunct faculty at the University of North Dakota School of Law, where she is teaching UCC
Article 9 Secured Transactions. She has co-authored with her Law Partner John Foster a UCC
Article 9 textbook. She also serves as faculty on the Dakota School of Banking sponsored by
North Dakota Bankers Association. She is listed in The Best Lawyers In America and Chambers
USA: America’s Leading Business Lawyers. US News & World Report named her “Lawyer of
the Year 2015” in her areas of expertise and in her geographic practice area. Ms. Kennedy served
as President of the Grand Forks County Bar Association in 2004-05. She was appointed by the
Bankruptcy Judge for the District of North Dakota where she serves on the Bankruptcy Rules
Committee. She earned her BA Degree from Minot State University in 1994, and obtained her
J.D. Degree from the University of North Dakota School of Law in 1999. Ms. Kennedy served
as an associate editor of the North Dakota Law Review. She practices in North Dakota and
Minnesota State Courts, and in the US District Court for the State of North Dakota and the US
Court of Appeals for the Eighth Circuit. She has presented seminars to various legal and lending
organizations in commercial topics such as loan documentation, UCC, loan workouts,
agricultural liens, collection law, foreclosures and bankruptcy.

JOHN D. SCHROEDER grew up in East Grand Forks, Minnesota. Mr. Schroeder

graduated summa cum laude from Concordia College in Moorhead, Minnesota with a Bachelor’s
Degree in Political Science and a minor in Religion in 2007. He graduated summa cum laude
from the University of North Dakota School of Law in 2013 earning his Juris Doctor. He is
licensed to practice law in North Dakota and Minnesota.
While in law school, Mr. Schroeder was a member of the North Dakota Law Review and was the
Student Articles Editor for the 2012 and 2013 school year. He is the author of the Outstanding
Note, chosen by the North Dakota Bar Foundation, for 2012, titled “Who are My Real Mommy
and Daddy? Third Party Child Custody Determinations and the Need for Legislative Guidance in
North Dakota with this Policy-Laden Area of Law” published at 88 N.D. L. Rev. 235 (2012).

Prior to attending law school Mr. Schroeder worked in consumer and small business banking in
East Grand Forks. Mr. Schroeder’s practice is dedicated primarily to representing financial
institutions in loan documentation and collections, business and estate planning, probate, and
commercial litigation. He, his wife and two young children live in Grand Forks.
 UND SCHOOL OF LAW - HOMECOMING CLE 2015

DEBTOR CREDITOR, BANKRUPTCY & COMMERCIAL LAW

ILLUSTRATED
THE LAW IN CARTOONS . . . SERIOUSLY, FOLKS

Presented by John S. Foster, Tracy A. Kennedy and John D. Schroeder

CONTENTS

UCC Art. 9 SECURED TRANSACTIONS

Security Agreement vs. UCC-1 Financing Statement ....................................................5
Proper Debtor Name on UCC-1 Financing Statement ...................................................7
UCC-1 Financing Statement Filed in Debtor’s “Location” ...........................................9
Filing in the Right Place vs. the Wrong Place ...............................................................12
Exceptions to Debtor Location Filing ............................................................................13
UCC Perfection vs. Central Notice System vs. Government Assignments .................15
Signatures? When Are They Needed For UCC Transactions? ...................................17
Purchase Money Security Interest (“PMSI”) Super Priority ......................................19
How to do a PMSI Properly ............................................................................................21
Special Rules for PMSI on Livestock & Inventory .......................................................23
Motor Vehicle Perfection – Consumer/Farmer/Businessman vs. Dealership ............25
Perfection by Control ......................................................................................................27
Perfection in Sales & Leases Chattel Paper ..................................................................31
Who Has to be Notified of a of Repossession Sale?.......................................................33
Setoff vs. UCC 9 Security Interest in Deposit Accounts ...............................................35

AG INPUT LIENS
Agricultural Lien Priorities ............................................................................................39
Good Ag Liens vs. Bad Ag Liens ....................................................................................41
Essentials Ag Invoice Requirements ..............................................................................44

BANKRUPTCY
Types of Bankruptcy........................................................................................................47
Automatic Stay .................................................................................................................49
Proof of Claim ..................................................................................................................51
Debts Die, Liens Live .......................................................................................................53
Avoidable Preferences .....................................................................................................55
Avoidable Setoffs..............................................................................................................57
Strong Arm Power ...........................................................................................................59
Tardy Perfection ..............................................................................................................61
Loaning Money to a Bankrupt Debtor...........................................................................63
Use of Collateral & Cash by Debtor in Chapter 11 ......................................................65

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MORTGAGE & GUARANTY LAW
How Long Do Mortgage Liens Last? .............................................................................69
Critical Timing of Guaranties.........................................................................................71
Future Advance Clauses ..................................................................................................73
Prepayment Penalties ......................................................................................................75

COMMERCIAL PAPER - UCC Art. 3, 4, 4A & 5

Checks & Notes – Negotiation Process...........................................................................79
How a Collection Agent on a Bad Check or Defaulted Note Can Claim
“Holder-In-Due-Course” Status – the Shelter Rule ..................................81
Forged Maker Won’t Kill Holder-In-Due-Course Status ............................................83
Forged Payee or Indorser Will Kill Holder-In-Due-Course Status ............................85
Underlying Transaction Liability vs. Negotiable Instrument Liability ......................87
Negligence Precluding Assertion of Forgery or Alteration ..........................................89
Final Payment of a Check and the “Four Legals” ........................................................91
Check Forgery & Alteration – Reporting Deadlines To Get
Account Recredited .................................................................................................93
Wire Transfers – UCC & Feds Work Together ............................................................95
Consumer Electronic Money Transactions – Rights and Remedies ...........................97
How Letters of Credit Work ...........................................................................................99
Credit Card Analogy for a Letter of Credit Transaction ..........................................101
International Letters of Credit .....................................................................................103

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 NO SIGNATURE UCC-1

STILL
NEED
DEBTOR'S
SIGANTURE

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DEPOSIT ACCOUNTS

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Grand Forks, ND 58201

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