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pays filing fees And file I must when cause is almost just. 1. INTRODUCTORY TERMS A. Voluntary Credit Transactions 1. Credit Sales – purchase but no payment (pay on time) 2. Loans – borrow money to do something • All definitions are found in either 9-102 or 1-201 and 9-102 trumps in the case that there are any discrepancies between definitions in the two sections. • Start w/ Art. 9. Then go to other UCC provisions. If not in UCC, 1-103 says that common law controls. • Remember that Unsecured Parties can include those obligated through involuntary credit transactions. Such as Tortfeasor (D) and injured party (CR). • A defendant in a patent infringement suit. If someone gets a judgment, they are a creditor, they owe someone. • If person has a positive balance in their bank account, the Bank is the D (b/c they’re borrowing your money) and you are the CR. • 3d parties include: (a) Buyer #2 who buys from Buyer #1 (b) Trustee in bankruptcy (c) Bank #2 who loans you money after Bank #1.
Credit Sale-Bank Borrower-D Bank #2 (can use good as collateral) TIB (trustee in bankruptcy) Buyer #2 (sells good to buyer) Bank #2 TIB Buyer #2
3d parties to a loan – Bank Borrower-D
If there is a D-creditor relationship created, what are the rights of that creditor as against third parties. That is where almost all of the litigation is. The very same issues apply to both above.
Difference B/W Unsecured and Secured CRs
Types of Credit – UNSECURED CREDIT SECURED PERSONAL PROPERTY *****(this course) D has given a specific interest in specific property by K to CR to ensure performance
Kinds of Unsecured Credit – • Seller credit cards are for dealings only w/ that seller that allow D to buy on time • Bank Credit Cards • Employment • Services (medical, legal, dental, plumber, mechanic, etc . . .) • Utilities (phone, electric, gas, water, cable, etc . . .) • Student Loans are Signatory loans where we sign a promissory note promising to pay but no interest in D’s property is established.
Hypo #1: Enforcement of Judicial Lien – Car 1/2/00 – CR D $10K Prom. Note promising to pay in 8 mos.
8/2/00 – D defaults CR is a “unsecured creditor”. Since the PN gave CR no interest in the car, the car is no longer CR’s and CR cannot get it back upon D’s default. CR must sue D for unpaid debt, get a judgment (normally a default judgment), get a writ of execution directing the sheriff to seize the non-exempt property of D, sell the property, and satisfy the amount of debt outstanding. If CR would have had a security agreement, CR would have had the right to repossess the car. •
Without a Security Interest, the CR has no right to get the property back on his own. K.S.A. § 60-2304(c) – Exempt property from seizure and sale. Includes transportation regularly used and costing less than $20K. The car above is exempt from seizure and sale (not all states have exact, but all states have these exempting
statutes). Attachment reference in statute is not to Article 9, but rather a prejudgment creditor’s remedy. Same facts as hypo except for there was a security agreement signed. Does the exemption, like the Kansas one above, apply? NO, the exemption statute does not apply because the security agreement is created by contract. Simply put, a perfected secured creditor is going to win against anyone in a claim in the property. C. Difference B/W Security Interest, Judicial Lien, and Statutory Lien 1. Lien Creditor (Judicial Lien) – 9-102(a)(52)(A) – CR has acquired a lien on property involved by attachment, levy, or the like. • CR in above example was a lien CR when the sheriff took control of the car, but not before control over the property existed. • Non-consensual 2. Trustee in Bankruptcy – 9-102(a)(52)(C) – tib is automatically a lien CR upon the date that the petition for bankr. is filed. Exemptions don’t apply to tib 3. Statutory Lien – Status liens created by operation of law. Example: Mechanics have a labor lien in services provided for your car. The law says you pay for the work done, or the mechanic has the legal right to keep the car until payment is made. Non-consensual. 4. Consensual Lien – Creation of SI by K pursuant to a SA. Secured Creditors 1. 9-201(a) – EFFECTIVENESS – Except as provided for elsewhere in Art. 9, Security Agreement (SA) is good b/w the parties, agst purchasers of the collateral, and agst other CRs. 2. Not subject to exemption rules like Unsec. CRs are 3. Sec. CR are usually protected in Bankruptcy 4. Sec. CR are protected against 3d parties 5. Sec. CR can obtain reimbursement easier and quicker.
Hypo. #2(a) – 1/2/00 – S sells barrels on Unsecured Credit to D 2/1/00 – D borrows $ from Bank → PSI in all D’s assets 6/1/00 – D files Bkcy petition Bk’s PSI → paid off in whole if D’s assets equal or are greater than the unpaid debt. S will receive little or nothing at all (b/c Unsec. CR) The absolute “safest” thing this seller could have done was make the sell a “cash sell” The secured part of SC is the value of the collateral.
D gives SI in all EQ and Inv. Employees would also fall into the realm of unsecured creditors in such a situation. The tort claimants will receive very little. will be paid off first from D’s liquidated assets.Hypo. There is no way to plan around the secured creditors. Consumer D (9-102(a)(22)) vs. There are no “choices” here in terms of credit decisions. How should Article 9 respond this type of situation? E. 1/2/00 – Bank files proper FS in proper place 2/1/00 – S sells to D on unsecured credit 7/1/00 – D files Bkcy petition Bk’s wins to extent the secured collateral covers the unpaid debt. Bk’s filing of the FS put the world on notice of its PSI and S could have found out that the D was being financed Perfection puts the world on “notice”. S could have looked and called Bk to find out about financing and security agreement. they are classified as unsecured creditors. Article 9 does not make any judgments on priority of unsecured creditors. #3 – Bank financing D’s production of implants. Hypo. Bk has PSI D was sued in tort by thousands of woman D files Bkcy petition Bk. Commercial D 4 . #2(b) – 1/2/00 – Bank loans money to D.
and 2. (1-201(3). (2). (c) Collateral is a certificated (8-301) security and has been delivered to CR. ATTACHMENT – § 9-203. D must have rights to collateral or power to transfer rights in collateral. etc . ♦ 2 types of credit transactions – Credit Sales – 9-203(1). ♦ All 3 requirements may not happen at the same time. CR must give value (1-201(44)). A SA must exist. 5 . . (3)(B) occur at time of sale Loan – Bk won’t agree to extend credit until know whether other CR have interest in the collateral. Generally – When does CR get a SI that is enforceable against D’s property? Essential for SI to be enforceable b/w CR and D. Definitions • Debtor– 9-102(a)(28)(A) = Buyer • Secured Party – 9-102(a)(72)(A) = Seller • Security Agreement – 9-102(a)(73) = K creating SI • Security Interest – 1-201(37)(first paragraph) = granting interest to CR in property possessed by D • Collateral – 9-102(a)(12) = D’s property that the interest is created in Three Requirements of Attachment under 9-203(b) 1. 1. 9-102(a)(73)) (WHAT SATISFIES AS WRITING) (a) D must authenticate the SA’s description of the collateral. EXCEPTIONS to non-authenticated security agreement which still fall under the statute in subsections (B)-(D) (b) CR must have possession of collateral (authentication not required). B. . electronic chattel paper. and 3.II. but they must all happen for Attachment to occur. (Authenticate = to “sign” or signature by electronic device/email 9-102(a)(7)) Has to be an appropriate authentication and have a sufficient description of the collateral. or (d) CR has control of the collateral that is a deposit acct. includes giving the D money or allowing D to have access to a line of credit. § 9-204 A.
and A/R into the PSI. #2 – SA covered Mach. and A/R? Composite document theory does not bring Inv. And A/R SA and FS must be considered together Parties intended inv and A/R Can the composite document theory be used to bring in Inv. Unintentionally omitted inventory (Inv.” Singed by D’s manager.) and accounts receivable (A/C). Bk claimed SI in inv. Parties intended all to be covered. and Fixtures. EQ. D has always had possession of widgets. Furn. = “all widgets owned by D” 2/1/00 D’s manager sends letter to CR saying” I. Hypo. If not. #1 – 1/1/00 FS filed – Coll. only authorize the filing) • PN signed referring to SA that never existed. Then look to composite document theory) 6 . PN stated that CR’s interest was secured by coll. Need more than just the FS to bring it in. if both parties admit mutual mistake. Assume 9-203(b)(1) is satisfied and value is given 9-203(b)(2) is satisfied b/c D was always in possession of the widgets 9-203(b)(3) → Composite Document Theory • FS filed (9-502 says that D need not authenticate. PN’s strength is weak. (Look to see if Sec. is unlikely to let other coll. • LETTER is a much stronger argument for intent if the manager had the authority to bind the D.) The Ct. the Ct. FS covered everything D filed bkcy petition. debtor’s manager. (If another CR saw a FS covering everything. may reform the K to what the parties swear is the correct description. described in 3/1/00’s SA which was never filed. in b/c the SA was unambiguous on its face. then is there some record in any medium that the terms of the SA could be found in. But. enclose FS giving you a SI in all widgets owned by D.Hypo. CR has possession. 3/1/00 D signed PN and delivered to CR. they would ask to see the SA and would ultimately rely on what it said was covered.
etc . They also could have said “all equipment. Cars aren’t covered. Chattel Paper.. in and of itself. Security Agreement 1. 7 . ALL equipment. 9-108(e) BUT description is sufficient if it satisfies 9-108(a) and contains descriptive component beyond the “type” alone. . Equipment. Hypo #3 – SA makes specific reference to Internat’l Truck and has an omnibus clause. C. And the SA specifically lists the truck but not specifically the cars. identification. Description (a) Sufficient if it reasonably identifies what is described. compare this Illinois case to Bollinger where there was no security agreement at all and the creditor won. Just because you use the buzz words does not mean you will be covered. General Intangibles. CR would see the SA and assume that the cars aren’t covered. Documents. . but was insufficient in covering two entities. consumer goods. In this case. identify for SA purposes (although it is acceptable for FS purposes (9-504) because a financing statement gives notice and priority. 9-108(b) • Category = all furniture • Types of Collateral = Accounts. or ALL farm products is sufficient. Goods (Consumer Goods.. Strong dissent saying the majority was ludicrous because of the omnibus clause read “all equipment. Farm Products. A way to redraft this correctly is including the wording “all vehicles”.. 471 F. Instruments. by type when it’s a commercial tort claim or consumer transaction. not a contract like the SA) 9-108(c) (d) Can’t describe coll. 1973). even though a security agreement existed. The use of the word “example” in 9-108(b) shows that the test really is: “is it a reasonable identification of the collateral”. ALL crops is NOT specific enough.2d 1124 (2d Cir. A reas. Inc. Inventory) (See Old 9-102 for the list) (c) “All D’s assets/personal property” does NOT reas. a fatal error. wherever located”. The cars are not “here at the plant” (limited to property) or are going to be “brought in or installed” later. (e) 9-108 is not intended to be an exclusive list. Does that clause encompass the 2 Oldsmobile cars? In re Laminated Veneers Co. All equipment is not. 9-108(a) (b) Examples of reas. the creditor lost.Ironically. it is rather a category.
that a SI in inventory and accounts receivable includes AA Inv. (d) There is no need for financing statements to include references to after-acquired property. and A/R. don’t continue to exist. The use of “including” allows reasonable CRs to understand that the coll. They assume that there’s a “floating lien” on the collateral. 7. If you see afteracquired consumer goods. 8 . The sure fire way to not miss anything: “All equipment of every kind including… but not limited to” 2.2d 689 (2d Cir. and (2) identifiable (9-315(a(2)). and A/R” includes present and AA goods. 509 F. 1975). Adequately covers all Mach and EQ even though the word “all” was not used. EQ. 9-504. After-Acquired Property (a) It is a rebuttable presumption.Hypo #4 – SA covers Mach. (Filtercorp and 9204(a)) • CR wouldn’t enter into SA for inv. based on the nature of overturning assets. FS is treated completely different than SA. Same judge that ruled in previous hypo. Proceeds (a) The security agreement does not need to specifically refer to the proceeds of the collateral and is covered as long as it is (1) proceeds (9-203(f)). a red flag goes up. and Fixtures. Includes specified molds. reasonably allowing them to assume that “all Inv. 3. Otherwise. UCCC and federal rules that regulate lending also regulate after-acquired consumer goods. Does this cover only specified molds or also other Mach and EQ? In re Sarex Corp.. (K interpretation matter) (c) The EXCEPTION is 9-204(b) → AA Consumer Goods must be acquired by D w/in 10 days after secured party gives value. Federal law will trump UCC if applicable. SA is unenforceable as to AA consumer goods. (b) 9-108. • The real issue is the construction and the interpretation of the contract. Cmt. Cmt. and A/R when these coll. 9502(a)(3). 9-204. 3 says that SAs failure to explicitly include AA goods is not covered by UCC because it is a matter the Drafters punted and left to the courts. in this SA isn’t limited to only those specified molds.
C. to Chy. a SI in the cars • 9-203(b)(3)(A) – Written SA • 9-203(b)(1) – Value given? “New Value” 9-102(a)(57) isn’t required 9 . Chy. Credit P defaulted on obl. intervened The cars: 9-102(a)(48) – “Inventory” = Any good held by business for sale In order to prevail. S sought cars from P But Chy. • Cash is hard to identify b/c it’s deposited into accts w/ other cash. Chattel Paper and Trade-in are identifiable. The closest definition is that of 9-315(b)’s commingled proceeds identifiable. Chy. must est. 9-315(a)(2) – SI attaches to any identifiable proceeds of collateral Difference b/w Cash Proceeds (9-102(a)(9)) and Non-Cash Proceeds (9-102(a)(58)) • Car dealer example handout: • PN and SA = Non-cash proceeds/chattel paper. • Trade-in & Cash = Non-cash proceeds and Cash proceeds 9-203(f) – Attachment of SI in collateral gives Sec. Very broad and simply put means “anything replaced for collateral”. CR rights to proceeds provided by 9-315(a)(2) (any identifiable proceeds) • “Identifiable” is not defined by the code. Rights in the Collateral THIEF------------------------------------------------OWNER **The questionable rights facts fall within the above extremes Swets Motor Sales Cars & Clear Title S Bad Checks Pruisner PSI in P & AA Inv.(b) (c) (d) (e) (f) 9-102(a)(12)(A) – Collateral includes Proceeds 9-102(a)(64) – “Proceeds” includes anything exchanged for the collateral. • Cash payment = Cash proceeds. Chrysler must establish the three elements under 9-203.
C failed to act in good faith as a reas. has SI under 9-203. The overall reasoning of the harsh result to S is that S runs the risk of commerce as between S and Chrysler. Good Faith def under 9-102(a)(43): “Good faith” means honesty in fact AND the observance of reasonable commercial standards of fair dealing. 2-403(1) protects good faith purchasers. Min-Go Can’t go after Collateral until D defaults!!!!! 9-601(a) and 9-609 10 . P bought the cars and obtained voidable.“Value” 1-201(44)(b) → Value given for pre-existing debt is enough. First Nat’l Bank v. However.48 cb) Production K ‘91 C PH ‘92K Assigned ’91 K $ Bk SI – ’92 Crop The Ct found for the Bank and not for C who was the superior Sec. 2-403(1)– Chy. (the bolded was added in the 1999 revision and probably codified Swets). is good faith purchaser with good title. transferable title. business person. CR. P could create good title to good faith purchaser even though he paid with a bad check (2-403(1)(b)). S is an Unsec. Purchaser includes a “security interest”. voidable title is recoverable by seller. CR. • Where does the power come from? 2-507(2). (This is broader than the good faith standard applied at the time of Swets) 1-201(32) & (33) – Purchaser includes CR → “any other voluntary transaction creating an interest in property. Chy. Pleasant Hollow Farm (p. Moral: S should have required certified funds. when third parties are involved. • 9-203(b)(2) – P has rights in the collateral or the power to transfer rights in the collateral to a secured party. Cmt. 1-103 Common Law provision allowed the court to estop C from defeating Bk’s claim b/c C allowed Min-Go to hold itself out as if it owned the crop. 3: between two parties.
he must get a judgment. Otherwise. B/c it was a check given. S has a right to the specific property of P if either of these two statutes apply. S has right to get goods back so long as there’s no 3d party. time. Owner watch Jeweler 11 .) Can reclaim goods if within 10 days w/o suing Buyer. He doesn’t need a SI b/c he can reclaim the goods within a reas. 2-702(2) – Applies to credit transactions where Buyer says pay in 5 days (for ex. this is a cash transaction and not a credit transaction 3-408 – Bank only has to pay S if the check is a properly payable check 2-507(2) – When ck is dishonored.Hypo #1 – P gives S a check and defaults on the check.
documents. And this is perfectly acceptable. Intangibles • Filing is permissible for goods. Automatic upon attachment (limited) 4. Control B. • Filing is only way to perfect for Accts and Gen. D need only Authorize. Deposit Accts 9-312(b)(1). chattel paper. • A CR can file a FS and a SA may never be reached. 1. securities. Go to 9-501 to determine where to file Go to 9-502 to determine what FS must include C. Filing 1. 9-509(a)(1) requires D Authorization. and instruments • Filing not permissible for money 9-312(b)(3). goods or documents that can be perfected w/o filing or possession (b)(6) → collateral in the possession of the secured party (b)(8) → personal property such as deposit accts. It is usually an alternative way to perfect. Five Ways to Perfect 1.III. 9-308(a) → SI is Perfected if Attached and Steps for Perfection are completed. (9-502 Cmt 2) Essential for CR to be protected agst 3d parties. documents. BASIC PERFECTION RULES Start with 9-310 (a) says that must file unless (b) exceptions apply. (b) exceptions include (b)(2) → perfected upon attachment (includes PMSI in consumer goods) (b)(3) → property subject to other statutes such as cars subject to cert. 12 . of title. goods subject to certificate of title 9-311(a)(1) & (d) 2. and investment property which is perfected by control (b)(10) → proceeds (c) doesn’t require filing when a PSI is assigned to another CR. NOT Sign (requirement Dropped from 9502.) • Now there is no argument about whether a FS can stand alone without a SA since D need not sign FS. Filing – works for almost all goods except those that require cert. PERFECTION – 9-308 A. Possession by the secured party 3. No SA may ever attach. Generally – Puts world on notice that there may be a SI in the particular property. of title (b)(5) → certificated securities (stock certificates). Notation of security interest on certificate of title 5.
reliance upon absence of record from the files. FS is effective except agst purchaser of coll. or org. • (2) Purchaser takes clear of PSI when he gives value in reas. Filing Office’s Rejection of FS (a) 9-520(a) → Shall refuse for reasons set forth in 9-516(b) and only for those reasons. 9-516(c) 13 . takes delivery of the collateral. (b) The filing officer cannot practice discretion if the requirements (see below) are met. reliance upon incorrect information. (b) Proper Refusal Reasons 9-516(b) • Incorrect communication or incorrect medium (b)(1). • Failure to include D’s address. (c) If Improperly Refused. • If Incorrect. • Failure to file a continuation statement w/in the final 6 mos (b)(7). Also see 9-516(b) for additional requirements including the “right to reject” without the mailing address of the secured party (4) or mailing address of the debtor (5)(a). CR (b) (4). (b)(5).2. 9-516(d) provides that the filing is effective as a filed record EXCEPT as against a purchaser (includes a secured party under 1-201(32)-(33) (does not include TIB because lien creditors do not get an interest in property voluntarily) of the collateral which gives value (1201(44)) in reasonable reliance (must show that they reasonably searched) upon the absence of the record from the files. who gives value in reas. and in the case of some types of coll. Go to 9-338 → • (1) Incorrect FS subordinate to conflicting PSI where CR gave value in reas. What to File – 9-310 When filing is required and when it’s not Where to File – 9-501 Where to file financing Statement Contents of Financing Statement (a) Need to look at two places: 9-502(a)(1-3) – Minimum Identification Requirements. or type of org (includes debtors name). reliance upon incorrect information. 9-520(a). 4. • Inability to file the record b/c of improper or missing descriptions (b)(3).. There has been a bill introduced in Congress to change the rule in effect to a trustee in bankruptcy. identity as ind. • Failure to include name assignee if assignment (b)(6). If the filing officer wrongfully rejects. • Failure to include name and address of Sec. 3. • Incorrect filing amount (b)(2).
9-204. Money 9-102 • Whether “consumer goods” are covered under 9504(2)’s blanket provision is unclear. the D must authorize the FS filing. Farm Products). cannot expand the amt designated in the SA. Accts. Indicates collateral included. FS describes Coll. The SA control whether you have attachment and must have attachment to achieve perfection. To be safe. the CR must describe the collateral in the SA. Cmt. SI in 900 cows. as inventory. General Intangibles. Cmt.5. Letters of Credit. Hypo #3(a) – SA gives SI in all new/used Buicks now or hereafter acquired. 9-502. Chattel Paper. if trying to cover consumer goods in FS. “Inventory” satisfies FS description requirement. FS describes coll. Only in SA does a need ever present itself. Hypo #2 – SA “1000 cows” FS “100 cows” CR has PSI in 100 cows. The FS’s language of “1000 cows” is no different than the broad language allowed under 9-504(2). Inv. 2 (c) D has some control over how the collateral is described. 7. as “All Personal Property of D” 14 . Hypo #3(b) – SA gives SI in all new/used Buicks now owned or AA. or to simply state “all assets or personal property of the D” • Personal Property = Goods (Consumer Goods. FS desc. Description of Collateral 9-502(a)(3). Under 9509(b)(1). Documents. EQ. Hypo #1 – SA gives SI in “100 cows w/ @ brand” FS says “1000 cows w/ @ brand” CR has PSI in 100 cows. Unperf. one should follow the specific type provision of 9-108(e). Under 9-509(a)(1). (b) There is no need to refer to AA prop or Future Advances in FS. FS controls the amt of the SA that is perfected. 9-504 (a) 9-504 – Sufficient to describe collateral according to 9-108 rules..
A more specific description is needed. Name of D • FS are filed and indexed by D name 9-519(c) • D’s name may depend on what kind of entity it is (Ask D for name and documents supporting that name. but not in the FS. • 9-503(a)(4) → “Sole Proprietorship” – D is the individual • Ways to find out? Ask. except as provided for in (c) (c) Look at the system used by the filing office to see if seriously misleading. If doesn’t find FS → Seriously misleading. 6. Minor Error Rule 1. 9-102(a) (70) • Ways to find out? Ask. look at incorporation documents. (9-504(2)) 9-108(e)(2) → Specificity. reference to 9-108 is only for possible types of descriptions. tax-returns. (See In Re Bollinger where Z & J pay of ICC’s $65K PSI – No new filing needed to give Z & J a PSI) D. Assignment of PSI – 9-310(c) says that when PSI is assigned. What name do they file 1040 under) • 9-503(a)(1) → “Registered Organization”. etc. “All Personal Property” would fail in the SA. Primary function of FS → To give Notice & To establish Priority 3. covered if it indicates all assets or all pers. Hypo #3(c) – If this were a consumer transaction at issue. of the D. tax-returns. Trade Name is insufficient. 9-108(e)(2) says that consumer transactions cannot describe collateral only by type. 9-504(2) states that the FS may sufficiently indicate the coll. another filing isn’t needed to continue PSI status agst other CRs and 3d parties. If the office searches under the D’s correct name and finds FS → Not seriously misleading. • But you could file a “trade name” FS and a correct one to cover your ass on a Kansas like search logic. It doesn’t matter is it’s a commercial or consumer transaction. 9-503(c). serving notice purpose. • Trade Name NOT Legal Name. prop. Minor Error Rule 9-506 (a) Effective unless seriously misleading (b) Failure to sufficiently provide D’s name is seriously misleading. 2. created mostly for SA 9-504(2) → broad. 9-502(a)(3) requires the FS to indicate the collateral covered. 15 . not for bringing in the (e)(2) restriction. etc.
buys 5 new computers Q → What computers are covered by Old FS? Old FS still covers All Computers. 9-507(b) → Except as otherwise provided for in (c) & 9-508. acquired by D before or w/in 4 mos after the change and (b) FS not effective to perfect a SI in coll. acquired by D more than 4 mos after the change. name would be seriously misleading under 9-506. FS not ineffective if. after the name change. it’s supposed to be a bright line test. the info in FS become seriously misleading under 9-506. CR Proper FS filed in proper place (a) – 1/2/00 A Co. CR’s knowledge or consent to the disposition. A Co. unless CR files an amendment to orig. 9-507(c) B Co. despite Sec. 9-507(c) → Change in D’s Name that becomes seriously misleading under 9-506 (a) FS is effective to perfect a SI in coll. 5. would remain PSI for B Co. 4. If CR files amendment to Old FS by 5/1/00. If this methodology is used. etc. Editors of Rev. D Changes His Name 1. if SI continues. leased. Hypo #4 – “A Co. 9-507(a) → Filed FS effective w/ respect to coll. had 10 computers used in Business 4/1/00 B Co. Assume that most offices have a methodology to find D’s FS. exchanged. after FS is filed. 9-508 – A name change is not considered a “transfer” 2.• “Standard Search Logic” is not defined. the new 5 computers were bought w/in 4 mos after the name change. changes name to B Co. Comment 2. Don’t Find → Seriously Misleading D’s Correct Name Use standard search logic Find → Not Seriously Misleading E. But. 16 . 9 probably “assume” that attachment is present based on the rules of 9-507. 3. FS that renders the name change not seriously misleading w/in the 4 mos.” gives SI in P and AA EQ (Computers) to Sec. that’s sold.
(Typically what happens w/ mergers. 3 for Drafters interpretation as to how to handle these 9-203 provisions. The transfer of property would have to be considered a disposition. Is the financing statement still good? 9-508 leads us to 9-506’s “minor error rule” to determine 17 . Attachment Exists. (g) 9-508(c) says that New D rules don’t apply if 9-507(a) Disposition rules apply. • No other SA is needed to make SI enforceable. by law or K (not under UCC). sells 10 computers to C Co. (h) 9-508(b) → If New D’s name is seriously misleading as to Orig.) (e) 9-302 -. as long as the original debtor had an “after acquired property” provision. FS still covers 10 Computers. that New D now has an interest in to the extent that FS would have been effective agst the Orig. the new debtor is bound pursuant to 9-203(e). and an incorporation.A transfer of collateral can include a sale. D. acquired before and w/in 4 mos. • Summary: Once you have a new debtor. This clearly changes the outcome of In Re Scott . free of PSI. 9-507(a) says that FS remains effective despite sale . is described in SA. so long as SI continues. acquired by New D after 4 mos. etc. (f) 9-203(e) → If New D becomes bound. 9-508 → New D Rules (a) 9-508(a) → New D is bound by FS naming Original D that created a PSI in coll. D’s FS (under 9-506 test): • FS effective as to New D’s coll. the person becomes generally obligated for the obligations of the other person and acquires or succeeds to all or substantially all of the other person’s assets. unless Sec. . 9-315(a)(1) says that PSI follows coll. • See 9-508 Cmt. . a merger. after New D becomes bound under 9-203(d) • FS not effective as to coll. CR authorizes the disposition of the coll. 6.(b) – 1/2/00 A Co. • 9-203(b)(3) is satisfied with respect to P & AA prop. (b) 9-102(a)(56) → “New D” is bound by SA previously entered into by another person (c) 9-102(a)(60) → “Original D” defined (d) 9-203(d)(2) → Person becomes bound by SA entered into by another person if. of New D to the extent the prop. unless an initial FS providing New D’s name is filed w/in those 4 mos.
unless during those 4 mos. If the name is seriously misleading. or this is a disposition of the property and not a new D situation. AND assets acquired 4 months after the change. D Co. 9-508(c). and Proceeds of Inv. 1/2/00 D sold assets (10 apple computers) to Buyer. name of Original D is seriously misleading under 9508(b). A Co. 9-203(e) says that Attachment exists here regarding the New D’s existing and AA property to the extent that the property is covered by the Original SA and that no other agreements need to be made.’s obligations 2/1/00 D Co.’s name. the plus step is filing. Perfection exists? 9-308(a) says that to perfect there must be a SA and the perfection plus steps must occur.. subject to PSI of CR. The only issue is whether incorporation is a transfer (no specific language but comments and courts indicate incorporation is so). 9-102(a)(56) defines New D. 9-508(a) says that FS remains effective unless it is seriously misleading. (Filed FS covering all equipment under D Co. Since this is EQ in the possession of the D. now possessed by Buyer? In coll acquired after the transfer? 18 . FS perfects the SI of CR 1 for 4 mos after New D becomes bound. obligations. Under state law. 2/1/00 Buyer buys 10 IBM computers Q → Does CR have PSI in Inv. 9-203(d)(2) says that a New D. 9-508(b). CR 1 has PSI in Original EQ and EQ #3. Attachment Exists.) 3/5/00 D buys EQ #3 8/4/00 D buys EQ #4 Question → CR 1 and CR 2 have PSI in all of D Co’s EQ? D Co. PSI in P & AA EQ to CR 2. Since the name of the New D vs. CR perfected SI by filing in D’s name and describing Coll in same way. the old finance statement is effective to assets prior to the change of entity. You need to look at “pre-change” assets and “post change” assets. Hypo #6 – D SA to CR in P & AA Inv. Hypo #5 – 1/2/00 A Co. is a New D. 9-310(a). gives PSI in P & AA EQ to CR 1 1/5/00 A Co. CR 2 has PSI in EQ #4. CR 1 were to file a new FS w/ D Co. under 9-315(a)(1). merges w/ D Co. is required to assume A Co. the bank security interest follows the collateral transferred to the new corporation. The Priority Rules in 9-322(a) support this b/c CR 1 was filed first.. Assuming there was no specific authorization. Transfer of assets. security interest follows it.if the name is seriously misleading. Buyer gave SA to CR describing Coll in same way CR did NOT file a new FS with Buyer. D Co. is bound by Original D’s.
perfect by: Question 2 – Sells TV ABC (TV Retailer) SA. Deposit Accounts 9-312(b)(1). and Documents (c) Filing is not permissible for Money 9-312(b)(3). 3.Apples: Attachment → 9-315(a)(1) SI continues after disposition of coll to Buyer. Goods. perfect? Classify TV → Inventory (9-102(a)(48)) How to Perfect → 9-310(a) File unless an exception in (b) applies. fixtures filings for goods that are or are to become fixtures If Inventory. Place of Filing and Mechanics 1. Instruments. PN Q → How does ABC perfect? Doctor’s Office Classify TV → Equipment 9-102(a)(33) 19 . of title statutes 9-311(a)(1) & (d). (even if the public record is not corrected 9-507. No Exceptions Apply. letter of credit rights. Cmt. 3) IBMs: Attachment → Assume 2d SA meets the requirements set forth in 9-203(b) Perfection → No PSI b/c CR didn’t file. then so does FS. 9-501(a)(2) (b) Local filing may be required for certain types of collateral • 9-501(a)(1) → real property such as as-extracted coll. then where to file (a) Central filing is typically required. SI F. Only attachment = Unperf. Intangibles (b) Filing permissible for Chattel Paper. SI in TV ABC (TV Retailer) Q → How does TV Manuf. and goods subject to cert. Perfection → 9-507(a) If SI continues. Type of perfection required or allowed (a) Only file for Accts and Gen. If Filing. Where to File → 9-501(a)(2) Central Filing What to File → 9-502(a)(1-3) FS Required Information If Equipment. or timber to be cut. perfect by: Question 1 – Sells TV TV Manuf. Correct classification of property 2.
you must have a security interest (attachment) for the PMSI to apply. How to Perfect → 9-310(a) File b/c no (b) exceptions apply Where to File → 9-501(a)(2) Centrally What to File → 9-502(a)(1-3) FS Required Information If Consumer Goods.) 20 . etc. perfect by: Question 3 – Sells TV ABC Consumer (for home use) SA. Dentists. Test to see if PMSI applies. PN Q → Perfect? Classify → TV is a Consumer Good 9-102(a)(23). If Accounts Receivable. perfect by Question 4– $ Bank Farmer Coll = crops Q → Perfect? Classify → Crops are Farm Product 9-102(a)(34)(A) & (a)(35). there had to be a real estate description in the SA and FS for growing crops. you would file centrally for the “consumer good”. Lawyers. Does the credit enable the debtor to require the collateral? If Agricultural Crops. Doctors. If you still put one in. perfect by: Question 5 – Bank perfect SI in A/R? Classify → Account 9-102(a)(2) (i. Also do not forget to look at 9102. Referred to as a “secret lien”. This has been deleted from Revised 9. No need for filing. If you wanted to file anyway.e. How to Perfect → 9-310(a) File Where to File → 9-501(a)(2) Central and/or 9-501(a)(1) Local What to File → 9-502 – 9-504 Under the old rule. How to Perfect → 9-310(b)(2) Purchase Money Security Interest (PMSI) [defined in 9-103(b)]. Comment 4(a) to verify. Remember. 9-309(1) says that PMSI’s perfect upon Attachment. Not inventory under 9-102(a)(48) because inventory excludes farm products. don’t screw up.
A. Cmt. You must follow the same rules as above for vehicles. How to Perfect → 9-310(a) Filing (9-313.S. still effective if filed • EXCEPTION: Failure to meet 9-516(b)(5) is governed by 9338 (when incorrect info given at filing) 5. If Automobile. Taking possession is the “safest” avenue. Incorrect refusal by filing office under 9-516(d) → PSI effective agst all but (a) a purchaser of coll. of title (notation on certificate of title is equated with “filing” 9-320. must inform CR why and when 4. Cmt. 8-127. 9-516(a) Filing occurs when (a) The record is communicated to the filing office and (b) Tender of the filing fee is made. just register. 8-135(c). and 8-128. or (c) When the record is accepted by the filing office 2. Note: If a vehicle is being used in a business. treat subject to the certificate of title statutes. Cmt. then file. Exception: 9-311(d) if goods are held by D as inventory. THERE WILL BE A QUESTION ON MIDTERM ABOUT A “VEHICLE” If Mobile Homes 9-102(a)(53)-(54): most states. like Kansas. it is classified as equipment under 9-102(a) (33) but the same rules below apply. 9-520(a) Shall refuse for reasons set forth in 9-516(b) and only for those reasons. which (b) gives value (c) in reas. perfect by: Question 6 – Bank perfect SI in Certificate of Deposit? Classify → Instrument 9-102(a)(47) (A CD is a negotiable instrument. How to Perfect → 9-310(b)(5) & (6) – Can perfect by taking possession under 9313(a) or by filing under 9-312(a). 3. 9-520(c) If FS meets requirements in 9-502(a) & (b) yet could have been rejected for failing to meet a 9-516(b) requirement. perfect by: Question 7 – Bank perfect SI in vehicles? Classify → Consumer Good: Good subject to certificate of title 9-102(a)(10). 21 . 5) No need to file. not a deposit account) See also 9-312. reliance upon absence of record from file. How to Perfect → 9-310(b)(3) send us to 9-311(a)(2) and K. Note: The PMSI statute under 9-309 does not apply. When Filing Occurs 1. 2 – Accts generally require filing) Where to file → What to file → If Certificate of Deposit. 9-520(b) If rejected for any reason. 2. Only way to perfect: Mark the SI on the cert. G.
Even though Correction Statement is filed. 9-518(c) (b) In order to eliminate the effectiveness of the bogus statement. 9-513. CR is a Purchaser b/c it’s a voluntary transaction creating an interest in D’s property • Lien CR and TIB is NOT a purchaser b/c NOT a voluntary creation of an interest in D’s property. If BK is not paid. 7.6. Bank is to send enough surplus to L to pay L off and rest of surplus back to D. Does L have PSI in note Bk possesses? 22 . 9. the effectiveness of the Bogus Filing is unaffected. Perfection by Possession 1. 9-625(e)(4): very specific remedies for not complying with the termination rules. (a) H. Perfection by possession is referred to in the industry as a “pledge”. but may not know if FS improperly filed) Some states shield filing officer immune to liability. Bogus Filing 9-518 → FS filed w/o D’s authorization (a) File Correction Statement 9-518(a) following either Alternative A or B as to what the Correction Statement must say. incorrectly filed. 8. is not perfected if not meeting the requirements of 9-502. (Based on the idea that the CR should know if FS improperly rejected. 9-513(c)(4) requires CR to file a termination statement w/in 20 days from D’s request if D didn’t authorize the filing. 12. Termination of finance statements. 10. before expiration 9-515(c)-(d). It can be amended under 9-512. (c) 9-625 – CR is liable for $500 damages for such bogus filings FS effective for 5 years 9-515(a). 11. 9-625(b). “Purchaser” 1-201(32) → Sec. 9-310(b)(6) allows for perfection by CR’s possession of the collateral under 9-313. 93-94) – 1/1/00 Bank loaned D $10K. Upon default. (a) Bk doesn’t reply to Letter. the note is to be returned to D. Indorsed and delivered to Bank Upon payment. D pledged 100K note. D gives L a SI in the $100K note. A financing statement. the Bank is to sell the note and return the surplus to D 5/1/00 L loans D $15K. Continuation statement can be filed and must be filed w/in the last 6 mos. Problems (pp. Kansas 9523(f). 9-517. Failure to properly index FS does not affect effectiveness of filed record. L and D send letter to Bank requesting Bank to send note to L if Bk is paid.
goods 1/8/00 Consumer buys new TV → Covered 2/1/00 Consumer buys new TV → Not Covered 2. Since the Note is a Negotiable Instrument. 3. SI. What’s L’s interest? PSI while Bk held the note. SI before returned Unperf. The terms of bank’s obligations and duties to L are to be left up to the two parties to K into. Consumer gives Bk a SA in P & AA cons.UCC does not make the Bank L’s agent. 9-313(c) Unperf. Perfection in Consumer Goods 1. 9-204(b) gives the CR rights to only those AA cons. Bk replies that it won’t represent L. 9-313(g)(1) – If Bank does acknowledge possession for L. when Bk paid off. CR gives value. There is nothing to indicate that the Bank is L’s agent. acknowledgment is effective even if it violates the rights of the D. See also Cmt. Should file under 9-312(a). 9312(a). it can be perfected by either filing. For L to have PSI. “Secret liens” → No need to file if PMSI in consumer goods 9309(1). or by possession. Hypo #16 (Holder in Due Course) – TV Dealer Consumer PN 23 . (c) Bk replies and agrees to hold note for L and to comply with the terms set forth in the letter. the note is returned to the D and not to L. L has an unperf. Bank must authenticate a record stating that it holds possession for L. This is not present here so we go to 9-313(c). When does L have a PSI? (b) Unperf. 9-313(c). SI once Bank returns the note to D. 8. 9-313(f) – The bank is not required to acknowledge that it holds possession for L’s benefit. SI after returned b/c neither filed nor possessed. returns note to D. 9-313(a). The SI is perfected upon Attachment. goods acquired w/in the 10 days after the Sec. I. When paid off. 9-313(d) provides that the PSI continues only while Sec. But. AA consumer goods treated differently. 9-313(g)(2)-. This could be established through 9-313 Cmt. CR retains possession either personally or through an authenticated 3d party. Hypo #15 – 1/2/00 Bk gives Consumer a loan.
Bk claims he’s a holder in due course 3-302 → Who is a holder in due course 3-305 → What defenses are not good agst a holder in due course This concept has essentially been destroyed in the context of consumer goods. Filing fees • Remember that Dealer must look to the purpose for which the good was bought when deciding whether the instrument is a consumer good (amateur) or equipment (professional). 24 . Meyer: the dealer is unperfected. Consumer could use instrument as coll. CR has no remedies other than going to court to become a judicial lien CR.PN C $ TV breaks and C stops paying Bk. for another loan Q → What are D’s cost factors if he’s to begin creating PSI in sales? Forms. (9-102(a)(33)) Perfection requires attachment and filing here Hypo #18 – Q → What if Amateur turns Professional and use of the instrument changes from consumer goods to equipment? Rev. Bk says pay and replies that he’s not subject to personal defenses C has agst Bank Dealer. Dealer would therefore lose to a tib. Art. Attachment is enough to perfect if it’s a PMSI (9-103 & 9309) so long as Dealer has a valid SA in record form. Consumer may sell the instrument to another Buyer. 9 not clear on who wins. Hypo #17 – Dealer sells instruments on credit to Amateurs as 75% of his business Dealer sells instruments on credit to Professionals as 25% of his business Q → What kinds of risk does D have? Unsec. 9-317(b) says that Buyer takes free of SI if he gives value and receives delivery of coll w/o knowledge of the SI before the SI is perfected. The court would carry through the old notion that the “secret lien” cannot be extended when the use changes. With Consumer Goods. With Equipment. 9-401(3): the use can change. 9-317(a)(2) places Dealer’s SI as subordinate to PSI and to person who becomes a lien creditor before Dealer’s SI is perfected. Looking at the old code. People to fill out forms and file them properly. Still exists in the commercial context.
5a. Dealer who didn’t file and relied on PMSI automatic perfection will lose to the Buyer. Money.. Manuf.. 9-315(a)(1) says that the SI follows the Coll. (c) primarily for personal. family. 9-301(3)(C) – When Nonpossessory interest is in a Negotiable Doc. no FS SI.) SI (Secured party does not have possession of collateral) 2. 9-301(1) – Location of D controls Perfection and Priority of Nonpossessory (cmt. 9203(f) says that Proceeds are automatically covered as the replacement for the Inventory. or Tangible Chattel Paper. 5a. and (d) before the filing of a FS covering the goods. Good. no FS Furn. Manuf.Hypo #19 – Dealer has PSI in instrument and Amateur sells it. has to file to Perfect. Manuf.) SI (Secured party has possession of collateral) 3. Instrument. Dealer SI. except as provided for in 9-320 9-320 → Buyer of Consumer Goods takes free of PSI if buys (a) w/o knowledge of SI. A/R. chattel paper). Manuf = Unperf SI CR If Dealer sell furn. location of the collateral controls Priority 25 . (A PMSI IS NOT GOOD AGAINST THE WORLD) Hypo #20 – Furn. or household purposes. they get back something (cash. Consumer 9-310 – Furn to Dealer = Inventory. Coll and also Unperf for Proceeds Dealer has PSI → PMSI (9-103) under 9-309. = Unperf for Orig. 9-301(2) – Location of Collateral controls Perfection and Priority of Possessory (cmt. trade-in. (b) for value. Perf. Multi-State Perfection Issues 1. J.
CR 1 has priority – First to file 9-322(a)(1) Hypo #22 – Kansas Corp. Perfected b/c under 9-310(a). This is an exception to 9-301(1)’s “except as otherwise provided” language. State A law applies under 9-301(3)(C) – location of coll. registered Plant Exec. In this case. It makes no difference in equipment or offices move if the organization is registered. 9-316(a) would have become relevant. The key is if the debtor’s location changed. State B D located CR 2 files FS Two prongs of inquiry (1) What state law governs? 9-301(1) or (2). 9-307 → D Location Rules 9-316 → PSI perfected until earliest of (1) when perfection would have expired under state law. of coll. It is the birth state of the organization pursuant to 9307(e). 5. 9-307(e) says registered org are located in the state registered in. SI Inv. Poss. (2) 4 mos. only collateral changed. CR must file and he did so centrally as 9-501(a)(2) states he must. D location = Kansas. 4. after D changes location 26 . controls possessory SI – Perfected under 9-310(b)(6) and 9-313 by controlling the good. Office 1/1 BK PSI in EQ Filed centrally 3/1 4/1 D bkcy petition Iowa Plant w/ EQ EQ moved to Iowa plant Q → Bk perfected as to all EQ? 9-301(1) says perfected because nonpossessory SI perfection is governed by law of state in which D is located. (2) Is the collateral perfected? 9-310 PERFECTION → CR 1 – Look to law of state A b/c loc. CR 2. of D controls nonpossessory SI. SI Inv. Of Inv. 9-307(b)(3) says that D who is an organization w/ more than one place of business is located in the state where it’s chief executive office is located. If the debtor’s location had changed. CR 2 – Look to law of state B b/c loc. 9-301(3)(c) Priority is governed by Iowa law since that’s where coll is located.Hypo #21 – State A CR 1. Both CRs PSI PRIORITY → Since it’s a good.
to another jurisdiction. And SI is subordinate to conflicting SI. 9316(e)(2) Has either 4 mos or until PSI would have been unperf in KS originally to reperf this SI. (b) 9-303(c) → State who issued the cert. 4: The fact that the law of one State ceases to apply under 9-303(b) does not mean that a security interest perfected under that law becomes unperfected automatically. (Even Buyer purchased w/in and violates the 4 mos grace period) 27 . 9-316(e) Iowa Buyer purchases car for value and KS Bk has not had its PSI noted on new C of T or has not taken possession (9-313). (e). Multi-State Perfection regarding Automobiles (a) Applies only to goods covered by a certificate of title and there is no requirement that the debtor or collateral be in the state in which certified. under KS law had the C of T not been reissued in Iowa. then SI is unperfected. after issuance of C of T and w/o conflicting Sec CR’s knowledge of SI. and (3) 1 yr after transfer of collater to another person who becomes a D and is located in another jurisdiction (NEW D) 6. Cmt. And is perfected by 9-311(b). whether w/in 4 mos. grace period or not – Buyer of goods takes free of SI if he gives value and receives delivery of goods after issuance of the C of T and w/o knowledge of the SI. the security interest will remain perfected. The law of the issuing jurisdiction still has to be dealt with. 9-316(d) (c) 9-303. 9-337 If KS fails to have its PSI noted. See 9-316(d). 9-303(a). In most cases. Iowa Car moved to Iowas C of T issued No KS SI noted Hypo #23 – Kansas Bk PSI C of T Car Now Iowa law governs Perfection and Priority 9-316(d) KS PSI remains perfected until SI would have become Unperf. of title governs until 9303(b) another state issues a new title or the title ceases to be effective under the law of the issuing jurisdiction.
And w/o knowledge of SI. RP is an account debtor because he is obligated under an account. 9-337(1) – Buyer of goods here takes free of SI b/c he gave value. PSI in Ill. of purchaser. w/ no mention of CR’s SI 5/2/00 D files bkcy petition (w/in 4 mos grace period of 9-316(e)) tib does not = a purchaser. Ex. RP is an account debtor under 9-102(a)(3). The transfer rule essentially only applies when you have a new debtor. C of T 2/1/00 D moves to Tenn (9-316(e) 4 month time starts to accrue) 4/1/00 Clean title issued by Tenn. Inc. and received delivery after clean title issued by Tenn. 4. = RP’s acct (9-102(a)(2)) that replaced the EQ RP just bought. Office 1/1/00 KS Bk loans to ABC. Tib isn’t holder of voluntarily granted interest. Issued a clean title. 5/2/00 D sells car to Buyer who paid value. 7. Ill. Look at 9-102 def. It would make no difference if the bkcy was filed on 8/1/00. 9-316. The Tib is not a purchaser (9-102) under the language of 9-316(e) and even if the four month period passes.Hypo #24 – 1/2/00 CR loans to D. Multi-State Perfection and Intangibles ABC RP Hypo #26 – Kansas Iowa ABC. Reg. 2. 2/1/00 KS EQ sold to R to pay in 90 days Is this a transfer under 9-316(a)(3)? What is a transfer of collateral? Physically moving equipment is not a transfer. Hypo #25 – 1/2/00 CR loans to D. didn’t know of SI and relied upon the clean title 9-303(b)-(c) – Until Tenn. BK Plant Exec. 4/1/00 Clean title showing no CR lien issued by Tenn. Law applied 9-316(d) – Still perfected until 9-316(e) says it’s not. C of T 2/1/00 D moves car to Tenn. gets SI in all EQ and Files centrally. SI in Ill. Cmt. Account debtor is not included under the 9-316(a)(3) one-year rule. The 9-337 exception does not apply. it cannot get good title. 28 . Now coll. 9-316(e)(2) – Gives CR four months grace period to have SI perfected and renoted on cert.
taste. touch. PRIORITY → An account is an intangible (can’t see. feel. Here we have a nonpossessory security interest in a proceed. Tangibles governed by coll. location in 9-301(3)(C) 29 . hear). General intangibles governed by D location in 9-301(1). What law governs perfection and priority with regard to an account? PERFECTION → 9-301(1) D location for nonpossessory SI. KS law governs for both EQ and Acct.
Lien Creditor ($ judgment from the court) [9-317(a)(1)] 3. Perfected Secured Creditor [9-322 to 9-324] 2. Generally – Determines whose claim is superior and whose is subordinate. 4 to 9-322. SI is perfected OR b. B. 1.S. What if L filed locally? The Bk (9-322(a)(2)) Hypo See Example 4. PRIORITY – 9-317 – 9-339 A. SA (EQ #1) Bk $35k to D.S. 5. buyer of farm products 7 U.IV. Cmt. 3-222. Unsecured Creditor [9-201. SI is almost perfected: one of the conditions in 9-203(b)(3) is met (such as SA exists but there’s no attachment yet) AND FS covering the collateral is filed. Lien Cr (including tib) trumps any conflicting SI so long as become Lien Cr before a. documents and securities under other Articles 9-331] The first issue of any priority conflict is to identify the status of the parties (see handout). Buyers of collateral subject to a SI [9-315(a)(1) buyer of goods 9320. SA all EQ 5/1/00 -. purchaser of instruments. Lien Crs vs any conflicting SI – 9-317(a) 1. Unperfected Secured Creditor [9-317] 5. 1631. § 544-551] 4.Default Who has priority? The Bk (9-322(a)(1)) Would it make any difference if Bk knew about L’s advance when it loaned? No. 10/1 Bk loaned $35k to D SA (EQ #1) (P loan and FA’s) Proper FS filed correctly (no FA clause) L $25k to D.C. Tib [9-317(a)(1) and 11 U. SA all EQ 2/5/00 – L files FS covering all EQ 2/9/00 – Bk $ to D.C. 9-317(a)(1)] 6. New SA (EQ #1) new FS 11/1 12/1 30 . Hypo → 2/1/00 – Bk filed FS covering all EQ 2/2/00 – L loaned $ to D. Cmt. purchaser of chattel paper and instruments 9-330.
What happens when you make a new advance and you make a new SA? Triggers the application of the first-to-file rule. They simply filed a new one. SA in proceeds and equipment No future advances clause. in FS you do not need a future advance clause. and FS are good for 5 years and will cover ANY SA created during that period of time so long as the description in the FS covers the description. FS filed centrally Secured Party B gives 40. 3 “under a proper reading of 9-222(a)(1) it is “abundantly clear” that the time when an advance is made plays no rule except when the financing statement is not filed. 9-323. No doubt whether the first to file rule applies to future advances. p. As long as you have attachment. In summary: if the FS is effective as to EQ #1. it makes no difference when it occurs. The court’s that have looked at this have just ignored the re-filing and do not apply the first-to-file rule again. When L sees that the Bank has a filed FS for the collateral. Remember. Bank’s value (9-203(b)(1)) attached on 12/1 when the future advance was given. Status of the parties at default: Lender is clearly perfected. SA Existing equipment 31 . Therefore. under these facts.141) 2/1 6/15 Secured Party A gives 30. they simply need to deal with the Bk. 9-323 is labeled “future advances” but does not help us at all with this problem (drafters fucked up). you do not need the another filing.000 Loan.000 loan. the general rule is that future advances are not secured. This section applies to limited circumstances. 9-322 has no references to subsequent advances. There was no need for the bank to have filed a new financing statement. Bank did not become perfected until 12/1.12/30 D defaulted on both loans EQ #1 = $60k How should the $60k be divided? Two Issues: (1)When the original SP does not have a security agreement. the bank gets it all. See also All-Chalmers  (2) What impact does the filing of a new financing statement have? Bank does not terminate original financing statement. Hypo (problem 1. cmt.
Hypo → 1/1/00 – Nat’l Bk loans $10K used to buy EQ 1. State Bk possession of EQ – sold for $9K Owed State Bk $11K. 9-210 is informational in nature and has not impact. Co. Co. have priority as to the $6K? 9-322(a)(1) → First-to-file has priority State Bank could have taken an assignment of Nat’l’s interest under 9-310(c) and would not have had to file anything new. Zero doubt: if an assignment would have been executed. P EQ No new FS filed Default Eq= 100.3 ex. 9-322 is a pure race statute. cmt. Proper FS 3/1/00 – D defaults on Nat’l loan 3/2/00 – D goes to State Bk to pay Nat’l $10K ($ directly to Nat’l). SI to Bk.000. State Bk could also have argued subrogation (common law assignment theory under 9103). 9-323. loan.000 SP A has 90. The only way this would have had any impact is if B would have asked an agreement with A not to make any more loans (than you would have had a K issue).000 secured debt SP B has 40. This is a “damn simple” rule.000 Loaned Secured Party B saw SA and No Future Advances clause 7/15 9/1 Secured Party A loaned 60. $6K. Co. [2 competing PSCrs] Does Fin. SA. 1 is exactly applicable. State SI. 32 . Priority would have then dated from Nat’l Bk’s 1/1/00 filing. Does 9-322(a)(1) apply? The loan made on 7/15 is a future advance.Filed FS centrally Debtor files 9-210 statement Secured party A said only 30. Proper FS 5/1/00 – Default. SI in EQ 1. but 9-323 does not apply. Fin.000 secured debt Both parties are perfected. This has NO impact on the priority rules. Secured party B had debtor request 9-210 statement. Pure Race to the Courthouse: unless you are dealing with a PMSI. it is merely informational. State would have won. Proper FS 2/1/00 – Fin. The winner: Secured Party A gets all the money.
If he does 9-324 below. only new SA → L would have searched and found FS for Bk and D. not taking advantage of the situation. Winner= earlier of 1st to file OR 1st to perfect b. e. If he doesn’t.→ Fin. OR (ii) New SA (with FA) with 2d loan → Don’t have to file new FS. UnPSI. (i) 9-210(c) request for accounting → CR 1 must provide a list of coll. don’t have to re-file → 9-513 Make sure that CR 1’s FS is terminated (iii) 9-512(a) CR 2 could get release on part of collateral (iv) 9-339 CR 2 and CR 1 could execute a subordination agreement. allowing them to contract around the priority rules. A PSCr can claim priority as to a FA so long as (i) FA Clause is in 1st SA (see above Hypo). If there are two PSCr. Not likely to happen. → 9-514 Assignment from BK. Different Rules b. First-to-File-or-Perfect-Rule 1. 33 . Should have understood that the FS applied to both P and FA. (a)(1) → 2 PSI. 9-322 a. Future Advances a. knew another CR was out there when it loaned D the $ so it’s not unfair to place them 2d. 2. (a)(2) → 1 PSI vs. go to 9-322. then would have had to describe new collateral in the original SA. The only exception to this is a PMSI d. claimed to the D upon D’s request. Winner = 1st to Attach 3. 9-204(c) → allows FA clauses to be included in SA b. If the collateral changes (1st loan: EQ 1. C. (ii) 9-310(c) CR 2 can arrange for an assignment of the SI and pay CR 1 off. State Bk was merely trying to keep D in business. a. (a)(3) → 2 UnPSI. Co. Priority is determined by first filing (unless one of the limited exceptions apply). time of advance does not determine priority. 2d loan: EQ 2). Winner = PSI c. → 9-602 D cannot waive rules in 9-210 → 9-625(f) imposes a $500 penalty if the SCr fails to comply with 9-210 w/o reasonable cause. A 2nd in time lender can protect itself. BUT. 9-323(a) → Perfection of a FA occurs upon advance. (Cmt 3) c. first ask if the 2d PSCr has a PMSI.
After-Acquired Collateral a. 9-322, Cmt 5 – Follow the first-to-file rule if 2 CRs are perfected at same time as to the AA Coll. and neither has PMSI. b. Follow FA rules → don’t need to mention AA clause so long as new SA when AA coll. exists. FS doesn’t need to refer to AA
Hypo → 2/1/00 – Bk filed FS in all of D’s EQ [No attachment] 2/2/00 – L loans $ to D, SA in all EQ 2/5/00 – L files FS in all EQ [PSI (9-308(a) attachment and filing)] 2/9/00 – Bk loans $ to D, SA in all EQ [PSI] 5/1/00 – Default as to both loans 9-322(a)(1) – Bk wins – filed first 1-201(25) – “Notice” – when actual knowledge exists Here, actual knowledge is irrelevant (Cmt 4). Dafters wanted to avoid factual inquires. Wanted efficiency, predictability, and workability. Therefore it makes no difference if BK knew of L on 2/9/00. • Both parties must file correct FS in the correct location to be perfected. (If Bk filed locally, then L would win because Bk would be UnPSCr)
Hypo → 10/1/00 – Bk loans $35K to D, gets SA in EQ 1 to secure the Present loan and Future Advances (to be made after original SA and FS are executed), Proper FS in proper place • 9-204(c) – allows FA clauses in SA 11/1/00 – L loans $25K to D, SA in EQ 1, Proper FS 12/1/00 – Bk loans $35K to D, no new SA (Bk now has an interest in $70K, Perfection occurred on 12/1/00 when the 2d $35K value was given) • Perfection in 2d $35K occurred after L loaned $25K 12/30/00 – D defaults. EQ 1 = $60K Bk can get the full $60 to offset its $70 loan to D. • When collateral is gone, a PSCr turns into UnPSCr, must sue D to get a $ judgment and seize unsecured collateral to get any $ back. Variation on above Hypo → 10/1/00 – Same except Bk does not include a FA clause 11/1/00 – L makes loan 12/1/00 – Bk loans $35K to D, New SA in EQ 1 to secure 2d $35K loan, New FS 12/30/00 – Default 9-322(a)(1) → First to file – Bk wins as to its first $35K loan
Bk can claim priority as to 2d $35K loan (see FA rules above) [2d loan is PSI → 9-203 requirements met, 9-308 requires the 9-310 and 9-501(a)(2) filing plus steps] Hypo → 1/1/00 – Bk 1, $ to Car Dealer, SA (all cars, P and AA), FS (all Inv) filed centrally 2/1/00 – Bk 2, $ to Car Dealer, Same SA, Same FS 2/5/00 – 10 New Cars. No PMSI (AA Collateral) Attachment is on 2/5/00 when D got right in the collateral. Both Bks are perfected as to the 10 cars at the same time on 2/5/00 Priority goes to First-to-File Cmt 5, 9-322
PMSI in Non-Inventory (exception to First-to-File Rule) 9-324 1. Comes into play when one or more CRs have a PMSI in the collateral 2. Ask: a. Have PMSI? (established under 9-103) b. What kind of collateral is involved? 3. 9-324(a) a. Super priority as to any SCrs (perfected or not) if Perfected PMSI is held b. Carries over to Identifiable Proceeds also if Perfected within 20 days of when D receives possession. 4. Don’t get to the 9-103 enabling PMSI language unless you first establish 9-203 attachment. If you have a SI, this is a special kind of SI. 5. May also run into problems establishing a PMSI when a check is written out to the D, properly enabling him to purchase the good sought. However, the D deposits it into his bank account that already has a positive balance. The First in, First out Rule may make it impossible to trace the money to prove that the BK actually enabled the D to purchase the EQ. Can ensure your PMSI if the check is made directly payable to the Seller. 6. 9-324(g) – Conflicting PMSIs → A SI securing an obligation incurred as all or part of the price of the collateral has priority over SI securing obligation incurred for value given to enable the D to acquire rights in the collateral. [Seller will probably always trump the Bank]
Brodie Hotel Supply → 6/64 – L possession of B’s EQ, B’s Restaurant L and B negotiated about L buying EQ in restaurant 11/2/64 – Bk $ to L; SA EQ 11/4/64 – BK FS EQ 11/12/64 – B Bill of Sale for EQ to L (=SA) 11/23/64 – B filed FS Default on both transactions Status of parties at default? B → PSI on 11/23 Bk → PSI on 11/10 How do you get to the PMSI supermajority language? (remember this) 9-322(a)’s “except” language 9-322(f)(1)’s “other provisions of this part(300s) lang. 9-324(a) → B has a super priority over PSCrs if he has a PMSI, and super priority as to the collateral’s identifiable proceeds if file within 20 days after D receives possession. The code does not define possession nor does it use the word “physical possession”. 9-313 Cmt. 3 speaks about possession. Reflecting on 9-324 Cmt. 3 “the twenty days do not commence until the collateral is subject to a security interest.” Looking at the comment, it appears the drafters definition of possession is that you have to have a security interest created. At what point in time did B have a SI in equipment? 11/12/64. At what time did B file? 11/23/64. Thus B filed eleven days later within 9-324(a)’s twenty day requirement for priority. This problem is kind of “screwy” in that in 6/64 Lyon in effect had a lease on Brodie’s EQ and the time could have started running at that time. Just something to think about. Hypo → 1/1/00 – Bk SA (P and AA EQ), $, FS 3/1/00 – Seller sold EQ 2 for $100K, financing $80K Bk gave $20K for down payment Ck payable to Seller and D → PMSI Seller sold on Credit for $80K, SA EQ 2, FS → PMSI 5/1/00 – Default on both loans; EQ 2 = $50K 9-324(g) – Conflicting PMSIs → Winner = Seller. Bk gets nothing
The money was sent directly back to the seller. Problem 3. It is a “tough job” for a Bk to establish 9-103(a)(2) when the debtor already has the collateral when the loan is made. Cmt.Problem 1. how can a loan made after the good enable the good. and (2) was the money in fact so used (the question in this case). Did this money enable the D? The Bank has the burden to show this. FS 37 . and (2) was the money in fact so used. Many states have a “first in. the Bk could make it a policy that no loan money is available if the collateral is already in possession of the Debtor. first out” (FIFO). 147 Hypo Two PMSI’s 1/1 Bk SA (P & AA EQ). p. SA Bk deposits $10K in D’s checking Acc’t Balance before deposit: $15K Balance after deposit: $25K 7/3 D buys and pays for machine with $10k check on checking account balance when check paid $22k. To avoid this. 147 Hypo 7/1 Bk $10k to D to buy machine. From a planning standpoint. p. but they already had the goods. All $15K has to go out before the $10K can be used (because the $15K was there before the loan). 3 “thus a security interest does not qualify as a PMSI if a D acquires property on unsecured credit and subsequently creates the SI to secure the purchase price. 147 Hypo 7/1 S sold goods on unsecured cr 7/7 D borrowed $50K from Bk Ck payable to D and S Does Bk have a PMSI? 9-103(a)(2): (1) the loan has to enable the debtor (the question in this case). you want to loan the money before. Problem 2. p. 9-103. Does Bk have a PMSI? 9-103(a)(2): (1) the loan has to enable the debtor. $. SA EQ#2. FS 3/1 S sold D EQ #2 $ 100k Bk advanced $20k to enable down payment Ck payable to D and endorsed to S S sold on credit for $80k. If someone has the good.
The significance of this: the seller is out $30k ($80k . then it is the first to file rule under (g)(2). b. 9-103(b)(1) “to the extent that goods are purchase money collateral”. Co.$50k). (2) there is no requirement to give to notice to anybody. the seller wins. Under this rule. no seller should release a good before you have filed. 9-324(g)(1) i. If you look at 9-324(b). prevents the bank from having a PMSI? a. You simply have to establish that you have a PMSI. and as far as a lender. But if it is between a seller and a lender.5/1 Default on loan and S’s contract EQ#2 = $50k Who is entitled to priority to $ and EQ#2? Two issues: (1) First Issue: Who wins between two PMSIs? a. (2) you have to file within 20 days the Debtor gains possession of the collateral. and FA. remember that the value of the collateral is the amount of the SI. 1. FS D owns EQ #1 Fin. never make a loan until you have filed and until you know the debtor has bought the good. and (3) the finance company does not have to be filed “before” the debtor gives possession. 9-324(a) on its face looks pretty simple. 13: (2) Second Issue: Whether the bank’s use of a SI. FS covered EQ #2 Default on both loans Who has priority as to EQ #2? 38 . including a AA Prop clause. 9-324. Also. FA). The bank says to the seller that “you finance it” unless we can get a subordination agreement under 9-339. P & AA. and then to go 9-103(f): a PMSI is good the extent of the PMSI is good. not the amount of the original value of the collateral. $. a. it makes no difference if it is clouded by AA Prop. Cmt. If you have two PMSI’s that is lenders. $ used to buy EQ #2 SA. Simply. Hypo 1/1/00 2/1/00 5/1/00 BK SA (All EQ. Not as simple as it seems: (1) the finance company has to establish the PMSI. gives priority to the seller. why then would a bank ever loan any money? i. but the lender is out entire $80k. there are two major differences from (a): (1) you have to search the records.
must establish that it has a PMSI in non-inventory or livestock. Cross-Collaterization a. E. they were perfected at the time the D got possession or within 20 days of possession. over conflicting SI in Chattel Paper or an Instrument constituting proceeds of the inventory. Finance Co. b. 9-324(a) tells us that other than (g) conflicting pmsi’s. in Proceeds of the Chattel Paper. b. including consumer goods. 2. if it’s consumer goods. 9-103(f)(3) → Refinancing – No transformation here (so long as it’s not a consumer good. Transformation Rules (addressing two situations in ways PMSI can be altered) a. PMSCr must send authenticated notification to the holder of the conflicting SI. If these requirements are satisfied. or in deposit accounts under 9-327. and a description of the Inventory is included. Perfected PMSI in Inventory has priority over conflicting SI in same inventory. they take first (even though they are not the first in time to file). If collateral is Inventory → 9-324(b) a. within 5 years before D receives possession. that a PMSI takes priority over a conflicting security interest and the same goods and identifiable proceeds if the PMSI is perfected when the debtor receives possession of the collateral or within 20 days thereafter.Start at general priority: Go to 9-322(a) which states “except as otherwise provided in this section” which then sends us to 9-322(f)(1) which states that (a) is subject to (g) and the “other provisions of this part (300s) which then sends us to 9-324(a). 9-103(f) and Cmt 4 [Item 1 can secure Item 2’s (now sold off) unpaid price. Had a PMSI in 1 and 2 was subject to PMSI. and in identifiable cash proceeds of the inventory that are received on or before delivery of the inventory to the buyer.] 3. stating that the PMSCr has or expects to acquire a PMSI in the D’s Inventory. in Kansas). it’s up to the courts to determine whether still a PMSI or not) (this rule applies to “all” transactions. 9-103(f)(1) → Seller sells additional goods – “Dual Status” Rule. inventory or livestock. PMSI in Inventory and Livestock (exception to First-to-File Rule) 1. Presence of a non-PMSI does not destroy the purchase money aspect so long as PMSI secures the price of the goods even though it secures the price of other items 39 . PMSI must be perfected when D receives possession c.
Sells D 5 Zoro Computers on credit transaction SA. of SI in Proceeds if Orig. The security interest of a consignor in goods that are the subject of a consignment is a purchase-money security interest in inventory. FS D in computer business Owns 10 IBM Computers 2/1/00 – Comp. The IBM’s and Zoros are inventory (9102(a)(48)(B)) Classify Parties → Bk – PSI in P and AA Inv. The key in knowing where to go in 9-324 is classifying the 40 . The Zoros are inventory 9-102(a)(48) and to be able to have priority. as well. Look to 9-203(b) and Manuf. Burden of Proof is on the party claiming PMSI (9103(g)). Therefore. 5. Falls under 9103(a)(2) seller provision. and account Classify Collateral → Account – 9-102(a)(2) includes both the 90 days to pay arrangement and the credit card transaction. Manf. FS and gives Bk good proper notice 2/5/00 – Zoros delivered 2/10/00 – 1 Zoro sold and paid for by Visa 2/11/00 – 1 Zoro sold and B given 90 days to pay 2/12/00 – Default on both debts. clearly has a PMSI which sends us to the general priority rules found in 9-322(a)(1) which send us to 9-322(f)(1) which sends us to 9-324’s priority rules when dealing with PMSI’s. Inclusion of FA and AA clause does not necessarily destroy the PMSI. Under 9-103(b)(2). $. cmt. you must perfect by filing centrally under 9-501(a)(2). visa slip. 10 IBMs and 3 Zoros. 9-103(d). Includes PSI in the Account and visa slip as Identifiable Proceeds (same analysis) Has PMSI as to the Zoros (9-103) 9-103(b) … to the extent that goods are purchase money collateral. Had all three which constitute a valid SA. manuf. 2 Manuf – PSI in the 5 Zoros.4. But you’re best off not risking it. FS in same place as Proceeds would require a FS Accounts require filing centrally as does Inventory! 9-313. Perfected if Orig. no attachment to IBMs). Perfected 9-315(d) → Automatic 21 days to perfect in proceeds. FA). Coll. (IBMs and Zoros) Includes PSI in the Account and visa slip as Identifiable Proceeds 9-203(f) → Automatically Covered 9-315(c) → Perf. Zoro hypo → 1/1/00 – Bk PSI (Inv P and AA. (SA description refers to Zoros. it looks like an argument can be made either way.
#1: $2000 Comp.. In this case. FA). Therefore.000. 5/1/00 – Default on both loans 41 . coll. that BWAC provided money for. FA. other inv. Example: 2/1 Seller sells 3 computers to D Comp. Paid BWAC $200 Computers #2 and #3 became collateral for $1800 unpaid on #1. the collateral under the PMSI is inventory (9-102(a) (48)(B)). AA) Inv.) See also. An account is not considered cash and does not fit under the “or the like” language. If an unpaid item is sold. Because the PMSI is inventory. #1 sold and D received $2. checks. #2: $3000 Comp. only Money and Checks would fit here. (P and AA. secures the remaining debt for the sold item. deposit account (9-102(a)(29)) or the like”. who wins as to Zoros 9-322(b)(1): the first-to-file rule applies to proceeds. Cross-Collateralization and Transformation Southtrust Bank → 1/1/00 – Bk PSI Inv. Note the inventory collateral section of 9-324(b) contains greater requirements to attain priority then PMSI’s which collateral fall under 9-324(a)’s general PMSI priority rules in which the PMSI collateral is classified as anything but livestock or inventory. $ 2/1/00 – inventory Seller invoices D $ to pay off invoices BWAC Buyer 1 Buyer 2 SA (FA. 9-324 comments 8-9 which states: an account is not an identifiable cash proceed.collateral of the PMSI. FS. #3: $5000 BWAC provided all the $ to buy 3/1 Comp. this sends us to 9-324(b) which specifies the general requirements of a PMSI having priority when the collateral is classified as inventory. Clearly Bk wins as to the 10 IBMs 9-324(b) → Requirements met by Manuf. Agreement → D pays off a percentage of invoice each month whether the item in the invoice is sold or not. not the visa slip or an account. Only Inv. Superpriority (very limited) for PMSI does not carry over to the visa slip and account because they’re not identifiable cash proceeds (9-102(a)(9): “money (1-201(24)).
→ Takes free even if Buyer knows of SI and SI is perfected. 9-317(b)) 4 common situations Goods are inventory a. 1-201(9) (p. and the collateral that is not substituted it purchase money collateral.D. (See also 9-315(a)(1). They had to be in one time in time subject to a PMSI. → If the Bk says to sell free of SI. the lender is considered to have a PMSI to the extent of the unpaid balance (including the $3K and the $5K. 1. If buyer is “a buyer in the ordinary course” 9-320(a). 9-103(b)(2): If the security interest is in inventory that is or was purchase-money collateral. Inv. The mere knowledge that the good is subject to a SI is not enough to prevent BIOC. All items in example (all computers) had to have been subject to a PMSI and are. on p. $ Buyer 9-315(a)(1) – SI follows Coll. like buying the entire inventory) (a) Buys a good 42 . ----] a. Day after sale. 9 would find that the FA and AA clause did not destroy BWAC’s PMSI.Revised Art. defaults w/ Bk • 2. Bk Appliance Dealer PSI Inv. then SI attaches to identifiable proceeds • EXCEPTION to 9-315(a)(1): 9-320(a) – (1) BIOC and (2) SI was created by Buyer’s Seller. incurred with respect to other inventory in which the secured party holds or held a purchase-money security interest See also 9-103(b)(2) Cmt. 4 What the effect is: so longu u as this was originally a purchase money loan. never get to BIOC in 9-320(a) because if CR authorizes sale free of SI. Must know that there’s an SI and that Seller can’t sell that good • Amend. unless CR authorizes sale free of SI.). That is the key. we’re just interested in proceeds. A. This is Cross-Collaterization and Transformation F. Buyer of Goods subject to Perfected Security Interest Is buyer “a buyer in the ordinary course” (BIOC) under 1-201(9) [amended def. also to the extent that the security interest secures a purchase-money obligation. ----) – BIOC (typically this applies if individual buys and it’s not an extraordinary event.
and (e) Before filing of FS covering the goods 43 . Look instead to Food Securities Act of 1985: 7 U.C.S. Cmt 4 – This provision does not apply to Farm Products. w/o knowledge) (b) Observation of reasonably commercial standards (the seller is a seller who sells such goods) EQ Goods are equipment b. Bk Cons. Bk Buyer $ • 9-315(a)(1) – SI follows because not BIOC • 9-320(a) – requires seller to be seller in goods of the kind.• (b) in good faith (c) w/o knowledge that sale violates rights of a 3d person in the goods (d) from person in business of selling goods of that kind 9-102(a)(43) Good Faith – (a) Honesty in fact (good heart. §1631 Goods are Consumer Goods d. • 9-320(b) – Requires the seller to have used or bought the good as a consumer good • Bk can go after Buyer b/c not BIOC and not a consumer good in the hands of the seller PSI EQ Appliance Dealer Goods are Farm Products c. Good Consumer Buyer PSI Cons Goods • 9-315(a)(1) – SI follows unless CR authorizes it free • 9-320(b) – (a) Consumer good in hands of the Seller and Buyer (b) Bought without knowledge of SI (c) For value (d) For consumer good purpose. Bk • PSI Farm Prod Farmer Farm Prod Buyer $ 9-320(a).
” 9-315. No title. SM is in bankruptcy and this would probably get Gordons anywhere. 2 makes a reference to PEB commentaries (pg. Hamm → Sold Coach Seller Hamms Hamms] $ entrusted Coach Coach Sold Gordons bkcy pet. Therefore 9-315(a)(1) applies. Gordons bought an interest subject to J. but trade was not complete → SM didn’t pay off J. (If CR knew of entrustment and did nothing to prevent it. • The Gordon can still sue SM under 2-312 breach of warranty. copy to $ Hamms entrusted the Coach to SM to try to sell it. Hamm type situation. may be able to estop CR from enforcing their SI based on the 9-315(a) language “unless the secured party authorized. • Entrusting Coach to SM not a sale.D. Cmt.D. • Transferring all rights means that since Hamms interest was subject to J.Gordon v. • Entrustment generally not a disposition under 9-315. 2-403(2) – Entrusting to a merchant in goods of the kind gives him power to transfer ALL rights of the entruster (Owner/Hamms) to the Buyer (Gordons) in the Ordinary Course of Business. w/ $ from Gentra. 3.D. 913-) which help in defining and arguing meanings of 9-315. SM Sunset Motors $ Gentra PN.D. This would probably still fail because this would probably not be in the ordinary course. Have Coach PSI Coach (noted on C of T) J. Look at 9-320. They first tried to argue 9320(a) and then entrustment under 2-403(2). SI (buying Coach on time) The lawyers for the Gordons attempted to find exceptions to 9-315(a)’s general language that SI follows the collateral.’s SI. 44 . Example 2 for an interesting example of how the drafters were trying to provide a little bit of protection for the buyers in a Gordon v. it was created by J. Credit[kept title. Cmt. • An argument could be made that the Hamm’s were using SM as an agent to sell.’s SI. • 9-320(a) argument fails for the Gordons because the SI was not created by SM (the seller) even though they were a buyer in the ordinary course.D. Credit.
1-201(9) – C1 was BIOC (meets all requirements) → 9-320(a) – C1 takes free of Bk’s SI Dealer and C1 default. PSI Inv.. PN. so long as all 4 requirements exist. C2 has no Special Buyer Protection under 9-320(b) because Dealer filed FS. Seller must be using good as a consumer good.V. SA. Bk can step into his shoes and since Dealer has right to recover the T. $ Manuf. then sells free of SI. Dealer has a PSI.V. Co. Because Dealer defaulted. G. FA $ TV Consumer 2 Dealer defaults and C2 has the T. Hypo → $ TV Bk Dealer Consumer 1 PN. Dealer will apply for C of T Buyer If Dealer doesn’t apply before default. 9-320(b) – Exception to 9-315(a)(1). SA.Garage Sale Hypo → chair Dealer Consumer PN. Fin. even if perfected. no C of T. • Art. 9 trumps C of T → Buyer in Ordinary Course wins • Some states say can’t get rights in vehicle with Certificate of Title 45 . If he is. MSO Car Dealer Car. no FS Sells chair for cash at garage sale Neighbor Dealer is PSCr – 9-309(1) – Automatic perfection with consumer goods in PMSI (9103). Co. #1) → $ Fin. so does the Bk. will claim it has the Manufacturer’s Statement of Origin (MSO) and Buyer can’t get Certificate of Title. except as otherwise provided in 9-311(b): C of T. Buyer of Inventory subject to C of T BIOC and the New Car (**Read 168.
& A/R to Allied 1984 CCFS (CR2) BCI (D2) PSI Inv. 9-325(a) – SI created by a D is subordinate to SI in same coll. Promise to get new title issued give back if $ paid Buyer H. & A/R 9-315(a)(1) → CCFS did not authorize disposition so SI continues to attach 9-315(a)(2) → Not only does this cover the Inv. not in ordinary course when buying all of another’s inventory.BIOC and the Used Car (**Read 169. D acquired Coll. & A/R. $ BCI sold Inv. and c. but also covers the Identifiable Proceeds of the Collateral (A/R) 2-403(1) → Allied gets the same rights as BCI had (remaining subject to a SI) The Court rejects the Bk’s First-to-File argument. to SI created by the other person. Bank of West → $ 1982 Bk (CR1) Allied (D1) PSI Inv. Double D 1.. b. 2. subj. Apply 9-325(a) and CCFS wins. created by another person if: a. There’s no period when the SI is unperfected 9-325(b) – You reach this section only if the interest being subordinated would have priority under 9-322 (First-to-File) or 9324 (PMSI). Case #2) → $ Bk Dealer Owner PSI Inv. Allowing that argument to stand would defeat the Notice Function of 9-310 Allied is not a Special Buyer. SI was Perfected when D acquired the Collateral. P & AA w/o consent of CCFS. FS car. C of T Get C of T’s and Car. 46 .
The significance is that if the buyer’s proceeds cannot be found (bank has right in them) (99% of time.C. Fed. Purchaser of Farm Products 1. The other major difference is “without knowledge” requirement is not present. the elevator could never be a buyer in the ordinary course because they had knowledge.9-507(a) – Effectiveness of FS for assets that are sold will continue as to the assets transferred. Under this definition. knowledge is irrelevant. If the bank does not give a notice. 9 has been preempted (under 9 it would survive). governs priority only • Opposite of 9-320(a). 47 . Under 7 U. The only exception is if the buyer has received “within one year of the sale” an appropriate notice ((e)(1) “appropriate written notice”. Under the UCC definition. Who has to give the notice? The SP has to give an appropriate written notice. and a bank should send receipt requested or certified as a simple matter of proof. §1631(d) (pg 1383) presumes that you buy free of SI (i) BIOC buys FP from Seller engaged in Farm Operations. to SI if written notice received by Buyer from SP within 1 year before sale of FP. the bank’s only real possibility is to sue the elevator in conversion. takes free of SI “created by the seller. A. the proceeds will be gone).C.S. (iv) The definition of “farm products” is not the same in this federal statute. the SP’s interest is cut off when sold. UCC governs Attach. 7 U.S. Food Securities Act of 1985. (ii) (e)(1) – Buyer takes subj. (v) Upshot: If you have a sale of a farm product that is subject to a SI. The significance is illustrated by the hypothetical below where the bank had actually given the elevator notice by phone. look to the federal rule because Art. “written notice received” should be taken seriously. § 1631 – sale of farm prod are subject to SI a. and Perf. § 1631(d). the presumption is that the SI is cut off. b.” even though SI is perfected and BIOC knows of it. (iii) (c)(1): BIOC does not have a good faith requirement. Stat.
Account Ds are 3d parties whose rights are protected under the 9-400s (See Artoc/Apex Hypo below) If someone is asserting a defense to the original SP and the SP has assigned. ck. (ii) for services rendered a. for party ck to Farmer Farmer’s wheat when sold 9/1 – F defaults on PN to Bk. 9-109 → covers both creation of SI in personal property (a) (1) and sales of accounts (a)(3).. the result is that the elevator ends up having to pay twice: the farmer. (i) Sale the accounts→ Bk acquires all rights and immediate access to the acc’ts (ii) SI in accounts→ Bk gives $ for SI in Acc’ts and gains access and rights to those acc’ts upon the Plumber’s default to Bk. If a Plumber has three acc’ts and needs the money now. elevator writes single to request jt. general intangibles including payment intangibles. If you satisfy the definition of an account. This is called “double jeopardy. etc . Comment 5(b) includes examples of general intangibles. Elevator – despite agreement to write jt. Cannot be an account. and the bank. b. I. c. This means that all of the article applies to both of these transactions. 2. but only applies to the sale of a business. 9-102(a). 3.Bk Farmer PN. (d)(4) restricts.” That concludes are discussion of priority in relation to buyers. she can either sell the acc’ts or put them up as collateral to secure a loan for the needed money. In the real world. ck. 9-102(a)(3) – Account D → Person who owes = account D a. . Rights to Payment on Accounts and General Intangibles 1. We are now going to talk about accounts. . 9-309(2) Automatic perfection in limited circumstances. Bk sues elevator in conversion. it cannot be a general intangible. and deposit accounts. the 9-400s assert rights. 48 . PSI in all 8/1 – sells wheat 7/15 – crops phone call to elev. (not on exam) 9-102(a)(42) – General Intangibles → Includes Software and Payment Intangibles. 9-102(a)(2) – Account → right to payment of a monetary obligation (i) property that has been or will be sold (includes both personal and real property).
9-102(a)(61) – Payment Intangibles → general intangible under which Acc’t D’s principal obligation is a monetary obligation. Factor’s interests → 9-109 → applies to sale of A/R. etc. Additional ones are a partnership interest.4. payment intangibles. BUT the sale of payment intangibles (below) is covered by Article 9. 184) 2/1 – $ to buy new Inv. 49 . 1267) – SI includes Buyer of Acc’ts 9-322 – First-to-File rule governs priority → no special protections for Buyers of Acc’ts Hypo → (pg. but are covered by Article 9. 5. Factor must file(9-310(a)) centrally (9-510(a)(2)) Conflict between two perfected secured parties. There are no special priority protections for buyers of accounts. 6. The first to file rule governs priority. Proceeds of inventory were automatically covered notwithstanding the accounts language in FS.Default Classify the Parties Bk: PSI in D’s accounts as of 2/1. p. dates from first filing. Priority governed by 9-322 – First-to-File. Factor: PSI in D’s accounts as of 4/1 because accounts can be sold. Are a subset of general intangibles. tax refund (payment intangible as a subset). whereas general intangible sales are not. Winner = Bk (Factor should’ve searched FS). 9-322(b)(1): priority. Factor is a Secured Party under 9-102(a)(72)(D) To perfect. 1-201(37) (amend. as to proceeds. 7. 9-102(a)(72)(D) – Secured Party → includes someone who buys accounts. Bk 2/15 – Goods sold D Retailer PSI P & AA A/R 90 days to pay (A/R) 9-102(a)(2)(i) 4/1 – sells A/R Factor – Files FS 5/1. Sale of general intangibles is not covered by Article 9.
covering not only original collateral. (9-203(f). and priority Bk = UnPSCr as to inv. but also proceeds. (d)). 184) 1/2 – Bk loaned D $. (c). 185) 1/2 – Bk loaned $.. automatic coverage and protection under 9-203(f) and satisfaction of 9-315(c)-(d). What kind of collateral is the promise to pay sales slips? The kicker is that you have something signed. FS centrally in St. Winner = Bk Hypo → (pg. A. FS centrally. SA in P & AA Inv.. Lender = PSCr in Acc’ts. No reference to proceeds in SA/FS Bk = PSCr in both Inv. you have to file. 9-322(b) – Since 2 PSCr. SA in P & AA Inv. 9) or Possession 50 . There is a different priority rule between 301(1) and (3) depending on whether you have tangible or intangible collateral. It is arguably an instrument. SI in all P & AA Acc’ts. it has to satisfy 3-104. 9-315(a) (2). FS centrally in St. Hypo → (pg. Office is located = State B determines perf. and priority 9-307(b)(3) – D located where Exec. The problem is.Hypo → (pg. no reference to proceeds State A Inventory located Bank FS State B Executive Office Lender FS 9-301(1) – D location governs perf. no reference to proceeds 2/1 – L loaned $. first-to-file rule controls. How do you perfect a SI in an account? Filing How do you perfect a SI in a instrument? Filing (new under Rev.) 2/1 – Lender $ to D. No reference to proceeds in SA or FS (Don’t need to refer to proceeds. and proceeds Lender = PSCr because he filed appropriately 9-322(a)(2) → PSCr wins over UnPSCr Accounts as original collateral. including those that are proceeds from sale of Inv. same descrip. and Acc’ts that are proceeds from sale of Inv. B. 185) Customers allowed to pay in 25 days or in monthly installments with a finance charge – Retailer retains these sales slips with customer agreeing to pay. SI in Accounts. FS centrally.
can’t set off the $5K of debt Lockbox security arrangement (pg. 1173) SP controls PO Box. to SI if: (1) in good faith AND in ordinary course of purchaser’s business.Therefore. AND (2) CP doesn’t indicate that it’s been assigned (no legend) (b) CP purchaser has priority over CP SI claimed other than merely as proceeds of inventory subj. a Bk must perfect by filing a FS centrally. Not Uni ($5K) Pay to Lockbox 9-404(a)(2) – If Apex got Notice of Artoc’s Apex Oil (Account D) interest. also have priority in its proceeds (d) Instrument purchaser has priority over instrument SI perfected by filing if (1) purchaser gives value and takes possession in good faith AND (2) without knowledge that purchase violates rights of the secured party. 933 explaining special rule) (a) CP purchaser has priority over CP SI claimed merely as proceeds of inventory subj. 7 51 . Artoc/Apex Hypo → SI in all A/R Uni (D) (Assignor) Artoc (Bk) (Assignee) Sold Gas ($10K) EQ Invoice subj. Buyers of Chattel Paper (exception to First-to-File Rule) 1. So the check is made payable to the debtor at a certain PO Box which is in the possession of the Bank and then the bank has instant and ensured access to proceeds. and banks do this to make sure that the proceeds are not commingled. pg. 9-102(a)(2)(vii) – Account from use or credit or charge card (Doesn’t fit cleanly but it’s where the Drafters intended it to fit). 9-330 (See also. Since it’s an account. Cmt 6. 7 (c) Have priority in CP as a purchaser. and file a FS with a broad description. to SI if: (1) Purchaser gives new value AND takes possession of CP OR obtains control of CP in good faith AND (2) without knowledge that purchase violates the rights of the secured party Cmt 6. This saves warehouse space. to Artoc SI Apex to pay to Artoc. B. PEB Comm. This is a way that the bank controls the proceeds. in this situation. A very common way in situations where there is a troubled financial debtor. don’t take possession. the purchaser gives new value AND takes possession of CP.
7 RVs for CP RV Dealer CP $ GW Buyer (SA. What this section does is it takes care of the new value requirement in the context of a PMSI. Summary: The super-priority in inventory can carry over to chattel paper if the PMSI holder can satisfy the requirements of 9-330. rights and SP possession. purchaser of CP or Instrument has knowledge that purchase violates the rights of the secured party. 9-312 says that filing is permitted for perfecting CP. Bk gave new value (no possession) 52 . Cmt 6. If CP or Instrument indicate that it’s been assigned to an identified secured party other then purchaser (legend). and CP 2/1 – D sold Fridge to B for CP (installment sales K and PN) 2/4 – D assigns B’s CP to Bk. Does the super priority carry over to proceeds? If the chattel paper replaces inventory subject to a PMSI. D sold CP to GW D defaulted to R Fin R Fin and GW both want CP Buyers are Acc’t Ds 9-102(a)(3) R Fin → PSI in Inv.(e) (f) Separate and distinct definition of “new value” if dealing with PMSI. PN=chat. 9-313 allows CR to perfect with possession. pap) Buyer (SA. the bracketed language says that the super priority carries over to the chattel paper. If CP are Proceeds (9-102(a)(64)) then 9-203(f) says SI attaches to CP. (d) allow R Fin to have PSI in CP as Proceeds because filed in same place GW → PSI in Proceeds b/c 9-203 value. PN=chat. pap) Rex Financial →  $ R Fin PSI in all Inv. R Fin could have protected itself by (a) Taking possession of CP (GW can’t win if no possession) (b) Stamping R Fin has an interest on the CP in the CP’s legend Hypo → (problem 1. 9-313 possession perfects GW has priority (exception to first-to-file) under special rule: 9-330(a). pg. PN=chat. 199) 1/1 – Bk gave $ to Dealer Dealer gave Bk PSI in P & AA Inv. 9-315(c). pap) Buyer (SA. Go to 9-324(b) bracketed language.
Dealer defaults and conflict between Bank and Finance Company. Bk’s interest/name not stamped on CP legend. SA → CP (9-102(a)(11)) C Negotiable PN → Instrument D Lease (chattel paper) Fin. (same analysis for the lease) (d) Bk perfected interest in Instrument by filing for proceeds (not by possession). & Proceeds Acc’t Sells all and poss. 9-315(a)(2)) Perfection: 9-315(c)-(d). Hypo → (problem 2. 9-330 does not. → PSI AD’s Acc’ts. Co. Instrument App. Co. How? Attachment: 9-203(f). = PSI in CP 9-330(b) → Bk not claiming CP as mere proceeds (Bk gave new value) (c) → requires “actual” knowledge that purchase violates the rights of the SP. automatic perfection for 21 days and will continue forever if you can show that requirements of (d) are satisfied. Co. 53 . CP. gave new value and had actual knowledge of Bk’s FS but did not know D had assigned B’s CP to Bk Bk = PSI in Inv. Winner = Fin. = Acc’ts → PSI CP and Instrument → PSI 9-330 First-to-File Rule applies to Acc’ts. Winner = Bk 9-330 CP and Instrument special priority protections (a) Bk is claiming CP merely as proceeds. All the proceeds (accounts: got to file centrally) (chattel paper: can take possession or file centrally) (promissory note (negotiable instrument): 9-312(a) tells us that a SI in instrument may be perfected by filing centrally) (lease: chattel paper (9-102(a)(11)) treated the same way). except Acc’t & Cash A B PN. Winner = Fin. Fin. Co. PN which can now file to perfect).3/1 – D sold B’s CP to Fin. Dealer PSI in Inv. and CP Fin. who took possession. 199) $ Bk App. Co. Co. Bk = PSI as to all proceeds from sale of inventory (Includes Neg.
9-109(d)(13) – Art. 9-104 – How to Control Deposit Accounts (a)(1): SP is the Bank where the Deposit Account is maintained (a)(2): D. SP. (Both savings and checking accounts fit in here) A deposit account is not a general intangible. J. 6. 7. Get here by 9-322(f)(1). 9-102(a)(29) – Deposit Account → accounts maintained with a bank. 9-312(b)(1) – Perfection of a Deposit Account → only by Control (do not need a written agreement under 9-203(3)(D) and filing has nothing to do with the perfection of deposit accounts. 9-109(a)(1) – Deposit Accounts covered so long as they are commercial accounts. Control is the method needed to perfect). and Bk have authenticated record of agreement that Bank will comply with SP’s orders (a)(3): SP becomes the customer of the account (b): D can maintain the right to direct disposition of the funds from the deposit account without destroying SP’s control. 3. Bank cannot set-off against SP that has perfected their SI in the Deposit Account by Control under 9-104(a)(3) c. a.Hypo → $ TV Bk App Dealer Buyer → Defaults to AD OR PSI all Inv. 2. CP Buys TV and returns it 9-330(c) – Good that comes back is treated as a proceed of CP → Bk still has an interest in it. 9-327 → Priority of SI in Deposit Accounts go to the SP having control of the deposit account under 9-104 9-340 – Set-offs → a. Major exception to first-to-file rule. 5. Personal property. 54 . 9-314(a). 9 does not cover consumer transaction deposit accounts. Deposit Accounts 1. 4. Bank can set-off against SP that holds a SI in Deposit Account b. and it must be referenced as “deposit accounts” in a FS to be able to perfect as original collateral.
as a Dep. The negative inference is that under (b)(2). The question that remains then is: are these cash proceeds identifiable? We have no direct definition of identifiable. Cmt. However.Hypo → Cap Fed SI – Inv. The Bank perfected by control (9-312(b) (1). Cap Fed clearly has a SI in the proceeds under 9-203(f) and 9-315(a)(2). and Sav.. 55 . Acc’ts and Inv) 2/1 – Landers opens in Bank a Checking Account w/ $ from Sale of Inventory Bk loans $ to L on unsecured basis 3/1 – Default on both loans Assume there are only proceeds in the bank account. Acc’t in Bk Lander Nursery CF files FS covering all dep. so they have attachment. Under the proceeds attachment and perfection provisions. if you do not have anything commingled. sends written notice to Bk of its SI Cap Fed did none of the requirements for control of a Dep. Cap Fed has a PSI in the Checking Account as Proceeds Hypo → Cap Fed Landers SI in Inv. so it’s inclusion in the FS does not create an interest in it. they have identifiable cash proceeds and they are therefore perfected. Acc’t in 9-104. Cap Fed has the burden of showing this. If you look at 9-104(a)(1). The Bank has a SI. since only proceeds went into that Checking Acc’t. the deposit account is maintained in the bank that has the SI. Acc’t on behalf of Cap Fed. 3. acc’ts and Inv. so UnPSCr as to the Savings Acc’t The Checking Acc’t wasn’t included in the SA. 9-315 talks about the concept and subsection (b)(2) is relevant when you are dealing with commingling. you have identifiable cash proceeds if this account is set up only to take proceeds from the sale of inventory. and once they show it. therefore they are perfected. The question is then: Is Cap Fed perfected? Go to 9-315(d)(2) which sends us to identifiable cash proceeds (9-102(a)(64)(a)). and savings account at Bank 1/2 – Cap Fed files FS (All Dep. Are they cash proceeds? 9-102(a)(9) defines cash proceeds and one of the possibilities is a cash account.
Cks are covered under “holder in due course” rules in 9-331 56 . a. Cap Fed wins. a SI held by Bank in which the deposit account is maintained. whichever occurs first. If we look just at this. and Bank wins. controls. But. the time of filing covers proceeds as well. even though Cap Fed filed first. 9-332 – Transferee of $ takes free of SI unless in collusion with D in violating the rights of the SP. The CR has more of a duty to control the proceeds (lockbox. etc. The Bank is going to win. 9-327(3) says that the bank wins: “except as otherwise. Under 9327 (priority of SI in deposit accounts). 9-332 deals with $ and dep. This is the garden variety case that 9-327 deals with. 9-327 TRUMPS 9-322. no SA Ck Ck Cking Acc’t Buyer D D defaults on unsecured loan Cking account has positive balance Bk=debtor.” Under (b)(1). and the Bank (SI in deposit account as “original collateral”) What rules do we look to decide who wins? 9-322(a)(1) is normally where we start: “the first to file. Cash Proceeds 9-322(b) 1.” Under this. This gets us to 9-327. Cmt 4. How do we know if 9-327 controls 9-322? 9322(f)(1) tells us that you have to look to other provisions “of this part” (300s). require a separate acc’t. K.We now have a conflict between two perfected secured creditors. Bank reduces amount in bank account to offset the unpaid debt owed to the bank (SetOff) HYPO $ Bk PN. Bank defeats Cap Fed. Collusion today requires more than awareness. acc’t funds.) b. The same is true of transfers of funds from a deposit acc’t. the rules were different in the past. has priority over a SI held by another secured party. we cannot stop. Cap Fed (based on proceeds). D=debtor. It means that Cap Fed needs to police it’s collateral pretty darn closely.
Lowest Intermediary Balance Rule Upon AD’s default. The presumption is that non-proceeds go out first. constructive trust theory). (lowest intermediate balance. Bk = PSI in Inv. Common law and equitable tracing principles. TV for CP-ck Fridge for ck Buyer Buyer Proceeds Non-proceeds 57 . first-in first-out. must have: (1) Control (9-104) OR (2) Identifiable Cash Proceeds Hypo → Cash Proceeds and Bank Accounts PSI Inv. Bk wants to claim ckg acc’t. Salad Dressing Rule for Tracing Proceeds (majority rule) (non-proceeds go out first) **Look at what exactly goes in and what exactly goes out and apply this rule: So long as the lowest intermediate balance of the commingled account > the amount of the proceeds. those proceeds are deemed to remain in the account. and Proceeds 9-315(a)(2) – the proceeds must be identifiable to continue.For a CR to have a PSI in a bank acc’t. and Proceeds Bk AD All cks Cks for repairs Ckg Acc’t AD Repair Shop ck Supplier of goods to AD You know have two commingled proceeds going into checking account under 9-315(b)(2).
on unsecured basis (Balance $22K PSI in Tractors and proceeds Before $199K)Dealer HCC Dealer is paying off a junior creditor $199K ck before PSI with Priority. those proceeds are deemed to remain in the account. It is clear that this rule is not very effective to PSP. there should be no problem with the jr.Transfer of Funds From Deposit Account The drafters added 9-332 to answer many of these questions. On pg. while (a) deals with you actually going to the bank and getting the money. The presumption is that non-proceeds go out first. That resulted in comingling proceeds and the bank’s money. acc’t Problem arose because the general acc’t had a negative balance that D kept drawing on. CR taking the money Chrylser Credit → [227cb] Cks went into the general acc’t and then to cash coll. This tracing rule is probably the most favorable for a secured party. HCC Credit → Bk $212K Ck $ . (b): “a transferee from a deposit account takes the funds free of a SI in the deposit account unless the transferee acts in collusion with debtor in violating the rights of the secured party. 58 . the second paragraph contains the general wording of the “lowest intermediate balance” rule. This rule essentially is this: So long as the lowest intermediate balance of the commingled account > the amount of the proceeds. Must trace.” “Collusion” is not defined in the code. There are two subparts and (b) deals with a transfer of funds from a deposit account (check). (lowest intermediate balance tracing is the norm) Chrysler should have had debtor deposit proceeds directly into cash collateral account. The PSI in identifiable proceeds isn’t destroyed so long as you can trace and lay claim to any proceeds at all that might be left in an acc’t. 230. So long as Buyer no collusion is apparent. and then look at what has gone out of that account.
Cmt 5 – can do this if acting in good faith b.These issues can come up in bankruptcy. Upon default. There’s an Insecurity clause 1-208 (i) Insecurity clause → CR anticipates that D will default and demands payment of entire debt. seizure and execution sale (9601) (need to give notice) “Default” → Not defined in UCC (9-601) left to the parties to K a. 9-102(a)(43) (this good faith definition has a subjective and objective requirement). When and how 5. 9-609 → Self-Help Repossession. 9-601 → General rights of secured party after default 6. 9-602 → Certain rights cannot be waived 7. Cumulative Remedies → 9-601(c) – May proceed simultaneously with 2 different remedies (But you’ll only get one satisfaction) a. (ii) Insecurity clauses have a good faith requirement 1201(19). only need attachment) may enforce his SI in the collateral a. 3. 4. Judgment. § 5. 1-203 – implied duty of good faith 2. No consent but peaceable repossession (9-609) c. 9-607 → Account D 9. a. There’s an acceleration clause (i) Acceleration → Default occurs.C. and transfers from a bank account that contains proceeds. CR demands payment of the entire debt. DEFAULT A. There’s a missed payment b. V. Judicial replevin action to enforce SI (need to give notice) d. a SP (no requirement that SP be Perfected. writ of execution.109 defines default as (i) failure to make a payment (ii) anticipatory missed payment (even though D is still current) Default occurs when a. U. the battle between creditors. 2 aspects: (i) Obtaining Collateral (ii) Disposing of Collateral → Surplus or Deficiency Issues 59 . c. 9-604 If security interest covers real property or fixtures 8.C.C. D voluntarily turns collateral over b. Enforcement of a Security Agreement 1.
5.b. c. Parties can put a notice requirement into the K.112). U. → D response 9-625 → Commercially Unreasonable Sale remedies OR → CR did not seek commercially reasonable resolution Penney Rule: Unless SA says otherwise. 9 remedies: 9-625(b).C. SP can seize property without notice to D. e. 5.C.110. At this time. not required in Art.C. Cmt 3. 5. 9-602 – D may not waive any of the rules in the sections listed 9-624: permissible waivers: a limited exception to 9602’s prohibition of waivers by debtors and obligors.C. he must make it explicitly clear to D that he intends to find D in default the next time (Ex.C. Waiver f. Permits some post-default waivers in limited cases. 60 . Failure to comply with Art. the SP is considered to have waived enforcement. 9 anywhere. SP has accepted late payments. Cmt. d. 9-601 – K terms and Common law determines whether default has occurred or has been waived → If CR has waived default. g. 3. (c) damages for D and also common law remedies. and must specifically tell debtor that this late shit is over and the next late payment is their ass). (U.111 → Notice required 30 days prior for commercially reasonable standard in consumer cases (i) Have to wait 10 days b/t default and Notice to Cure (ii) Have to wait 20 days between Notice to Cure and Repossession Breach of Peace – 9-609(b) → SP may proceed without judicial process if not in breach of peace. An agent or independent contractor of the SP is also held under breach of peace. when default occurs (There’s no such thing as a bad seizure of collateral) No notice needs to be given. Not required in 9-609.C.
(ii) (b) Every aspect of disposition must be commercially reasonable. 9-611. Also. **The proceeds are then required to be applied in the order set forth in 9-615(a). but usually not at private (only if collateral is of a type customarily sold in recognized market or is of a type which is the subject of widely distributed standard price quotations ((c)(2)). but only time at a private sale. The reasoning is to let the debtor/guarantor have sufficient time in attempting to secure parties to bring price up to help stop or limit potential deficiency. some form of advertisement must precede a public sale. 7: There are two distinctions between private and public: (1) the secured party can normally buy at public. (2) the debtor is entitled to notice of time and place in a public sale. Cmt.10. a SP can dispose of the collateral in its present condition or following any commercially reasonable preparation or processing. 61 . Disposition of the Collateral a. 9-612 → Notification before Disposition of Collateral (i) Who is to be notified and by what date. and can be sold as a unit or in parcels. “Commercially reasonable” is not defined in the code. (iv) 9-611(c) Who is to be notified including the debtor (9102(a)(28)) and the secondary obligor (encompasses a guarantor) (9-102(a)(71)). Look to factors of 9-627 to help determine if “commercially reasonable” (iii) (c) The sale of the collateral can be by public sale (auction) or private sale. Cmt. 2: Private sells are encouraged. (ii) 9-611(a)(2) D’s waiver right to notice post-default is allowed (iii) 9-611(b) CR shall send reasonable authenticated notification → Requires a writing (oral is not enough) under 9102(a)(74) “Send” and also “Authenticate” and “Record”. (iv) (d) (e) warranties are included in the sale price and may be disclaimed b. 9-610 → (i) (a) After default.
There is no safe harbor for searching the records. (b) In a non-consumer transaction. 9-615(d): If the SI secures indebtedness. 9-627. 9-613(3)(A): minor errors are tolerated 9-613(5): model form 9-614: special revisions for consumer goods 9-615. g. CR has complied with (c)(3)(B)’s ten day rule. f. the debtor is liable for any deficiency. SP requests a search of records under D’s name and gets no response or sends notice to all those who appear. Deficiencies and Surpluses 9-615(a): governs proceed distribution. 9-611(c)(3)(B): (v) 9-611(e) Safe Harbor – If between 20 and 30 days before notification date.The notice to the debtor and secondary obligor can be waived under 9-624(a). 9-316: In a consumer goods transaction. 9-613(1): general requirements. 9-616 → Proceeds. Cmt 2. notice sent after default and at least 10 days before disposition is considered reasonable. courts indicate that this may toll the ten days until received. the secured party must provide the debtor or obligor with an explanation of how the deficiency or surplus was calculated. 9-615(f) (how to calculate a deficiency when the purchaser at disposition is a relative of SP) Rebuttable Presumption Rule → 9-626(a)(4) (i) Presume that it’s commercially reasonable c. the secured party must account to the debtor for any surplus and. d. 9-627(a) → Just because a greater amount could have been obtained doesn’t preclude SP from establishing that the disposition was done in a commercially reasonable manner Value of the Collateral → 9-610. (vi) 9-612: Timeliness of notice (a) the notification must be sent within a reasonable time which is a question of fact. 9-614 → What must be contained in the Notification. Cmt 10 (low price is questionable). unless otherwise agreed. e. 62 . 9-613. (10 days is the norm) If creditor deposits in mail.
(iv) U.) Situations. and the debtor is liable for any deficiency. Under (b). (a)(1): “may identify an account debtor” (the customer: the person who is obligated on the account). 9-607(a): we have here an exception to the general rule that you have to have default before the secured creditor can enforce the security interest. that avoids giving specific notice.9-608 If D puts this in question. Strict Foreclosure – keep the collateral in satisfaction of the debt (ii) 9-109(a): if it is a loan secured by accounts. 63 . § 5.e. 9-608(b): this is the significant difference between a secured transaction (i. 9-109(a)(3): sale of accounts is also covered by Article 9. ***The important distinction between this and what we have learned so far. perfection. the debtor is not entitled to any surplus and the obligor is not liable for any deficiency. Account Debtor Skim 9-615(d)-(e) 9-607. 9-615(d) – (e): (d) general rule with regard to non-sales: the secured creditor has to account for any surplus. What this provides is that even before default. SP has burden of proving commercially reasonable (iii) Depending on what SP proves or fails to prove is a commercially reas. secured creditor does not have to account for a surplus and has no right to go back after the debtor for a deficiency. it says that if the underlying transaction is a sale of accounts.103: rebuttable presumption not applicable for consumer transactions. “Lock-box agreements are very common (payments go to a PO box).C. can notify customer.C. What difference does it make whether transaction is sale or transaction? The key difference deals with deficiencies in surpluses. price. In effect. the deficiency will be adjusted accordingly.C. priority. and in any event after default (you can have an agreement that provides that a secured party can move against collateral before technical default. it is a secured transaction covered by Article 9.11. Under (e)(1): the debtor is not entitled to any surplus and the obligor is not liable for any deficiency. loan) and the sale of an account. This means that all the rules apply: attachment. (a) “if so agreed.
they have no right to seek any deficiency. Art. 348-350 of text) 1. tib can avoid) B. 9-505(a) → Consignor/Lessor may file FS If it’s a lease.Example: Plumber $5000 worth of accounts Customers Sell accounts For $4000 Bank Suppose Bank notifies customers to pay and the customers only pay $3000. 9 covers all of the consignment issues except for the 9-600s enforcement provisions Treated as a PMSI in Inv. 2. however a transaction creates a SI: if requirement. b. § 365. B. That is a surplus and they do not have to account for it back to Plumber. and requirement (one of (a)-(d)). (C of T. Consignment 1. That is the significant difference between surplus and deficiency in secured transactions in sales or loans. If you take the same transaction and make it a loan instead of a sale. no FS. Based on facts of each case. The question is. 9 governs “regardless of form”: a. 9-103(d) Definition of Consignment: 9-102(a)(20) → Delivers (1-201(14)) goods to a merchant (2-104) (A) Who deals in goods of that kind 64 . On the other hand. MISCELLANEOUS A. the plumber is liable for deficiency and is also due surplus under 9-615(d). VI. suppose that all the customers pay and they get $5000. 1-201(37)(2 ¶) → How to determine if it’s a real lease or a SI. 3. 544 say tib can assume or reject it if it wants. Leases (read pg. can the Bank go back against the plumber? The answer is NO. 2.C. If a Sale/SI is created and not a Lease – 9-109(a)(1) says that Art.
(i) different names. The garage’s claim is a “statutory lien” (status lien: involuntary creation. for personal property. (2) it is possible to have a common law lien and it is not covered except for priority rules under 9-333. 7. general involuntary liens are not covered. 9-102(a)(20) 6. 9-109(a)(4) 5. there was never an agreement. (ii) not an auctioneer. Security 8-102(a)(15) a. C. and (iii) not generally known by its creditors to be substantially engaged in selling goods of others (B) Goods greater than $1000 (C) Not Consumer goods immediately before delivery (D) Transaction not create SI that secures an obligation See also the following relevant sections: 4. It goes on. 9-319 8.S. …”the first and prior lien on such property is hereby created”: covers the reasonable cost of labor and parts and material. 9-322(a)(1) Statutory Liens How to deal with statutory lien/bank conflicts: start at 9-109(a) which applies to the bank’s SI. 2nd paragraph goes on…classic mechanic lien. 9-103(d): says a consignor is treated as having a PMSI in inventory. 58-201). Liens.A. EXCEPTIONS (9-109(d)) (1): does not apply to an agricultural lien (non-possessary) (the state of KS is the only state that did not adopt this 9-109(d)(1). statutory liens are involuntary liens. General proposition. 9. Comment 10 to 9-109 (very important to read) …with few exceptions. they are not covered. In short. Investment Property 9-102(a)(49) → Classify Collateral 1.S. K. it is not a mechanic’s lien even though the garage is a mechanic (you must find a state statute that gives the garage a right in this car. and have 9-333 with deals with priority. We start with the proposition that they are not covered by Art.A. K. 9-109(d) suggests that involuntary liens not created by an agreement that Article 9 does not cover. 9-333: Priority of Certain Liens Arising by Operation of Law trumps the bank unless the statute provides otherwise. We have some exceptions including ag. Certificated 8-102(a)(4) (i) Bearer Form 8-102(a)(2) 65 . 58-201: the key is that after the comma.
2. has cert. 8-106(b) → Purchaser with possession of registered certificated security and it’s indorsed or registered in purchaser’s name c. that E indorses in blank on back of cert. 3. registered on A’s books. 9-314 → Perfection by Control under 9-106. Get a securities entitlement if a securities intermediary receives a financial asset from the person or acquires one on their behalf.. (e) OR Registered Certificated Security and delivered to SP under 8-301 and pursuant to D’s SA a. 3. (7). 3. 8-106(a) → Purchaser has control of certificated security in bearer form upon delivery (possession) 8-301 b. 9-106. 8-106(d) → Purchaser of security entitlement who is an entitlement holder or a securities intermediary who has agreed to act at direction of the purchaser 9-313(a) → Possession of certificated security – Automatic upon attachment 9-328 → Control trumps Filing Hypo → • E owns 1000 shares of A Inc. 8-301 → “Delivery” OR Investment Property and SP has control pursuant to SA. Bk has possession of cert. • Bk not registered with A Inc. 5. (9) Securities Account 8-501→ Account in which a financial asset is or may be credited. • Bk loans $100K pursuant to oral K granting BK a SI in stk and Bk takes possession of cert. 2. = $200K.2. 8-106 a. a. Value Rights Authenticated Agreement with appropriate description under 9108(d). and accepts it for credit to their securities account (ii) → Attachment 9-203(b) 1. Attachment met under 9-203(b)(3)(C) Perfection established through control under 8-106(b) 66 . Registered Form 8-102(a)(13) Securities Entitlement 8-102(a)(17). 4. 8-106 → “Control” → Perfection 1.
What you have to think about is that it is a former chattel that has been affixed to the real estate in such a way that a reasonable person would think they are part of the real estate.D. dishwashers are probably fixtures. There is a direct reference to 9-502(b)-(c) and there are some very “specific” requirements to a fixture filing (legal description and who owner is). but they maintain a separate identity. fridge are not fixtures. window air-conditioning units. bricks. you must to look to state law to determine if you have a fixture or not (do not need to know for exam). Fixture Priority Kind of like the first-to-file rule. Carpets. Washer/dryer. etc. Other sections needed to be aware of: there is a special fixture filing defined at 9-102(a)(40) and is a special kind of FS that is referred to as a fixture filing. glass.) A classic example of a fixture is a furnace. Fixtures are included in the sale price of real estate unless excluded in the sales contract. The first to record is going to win unless you can find an exception. The classic conflict is between a real estate mortgage and a holder of a SI in the fixture. By in large. There are other definitions to look at: 9-102(a)(44)(i). Real Estate related collateral Fixtures 9-109(a)(1): applies to personal property and fixtures. light fixtures. curtain rods (not drapes). Other illustrations of fixtures: built-in range. AND (3) the security interest if perfected by a fixture 67 . stove. (2) the interest of the encumbrancer or owner arises before the goods become fixtures. The question then becomes. 9-334(d): a perfected interest in fixtures has priority over if the debtor has possession if: (1) PMSI. “what is a fixture?” Fixture (9-102(a)(41)): we have a definition that is not very helpful. A major exception is 9-334(d) which is very similar to PMSI in 9-324. You file it locally where the real estate is located (one of the few exceptions to the central filing rule). and 9-334(a): in effect a definition: building materials incorporated into improvements into the land are not fixtures (lumber. Where do you file it? 9-501(a)-(b).
How do we classify (payments to debtor on loan) under Article 9: 9-102(a)(11): you have to have a monetary interest and a security interest in specific goods. Cmt 7. puts everyone on the same field. social and economic. Congress has in effect said that Article 9 will determine priority for most things. By in large. The payments are person property thus the bank must comply with Article 9. The payments for Green Acre is not a security interest in specific goods. Taxpayers pay for it. You file in a federal court system. The prize is a discharge from debts. and a little bit of background §547(b) (507 text): Bankruptcy is a federal statute 11 U. The payments for Green Acres is an account. They are accounts.” The second rationale is creditor equality. 9-102(a)(2) … for property that has been or will be sold. including a lease or rents thereunder. 9-109(d)(11)…does not apply to the creation or transfer of an interest in or lien on real property. What happens if we have a default on both A and B? *********** Issue arises in the real world whether accounts on real property are general intangibles or accounts. plain and simple.S. We know that collateral is defined under 9-109(a)(12) and is extremely broad.C. and someone has to pay (lose money) from this. There are also costs to bankruptcy. Pure real estate interests are not covered by Article 9. § 101. There will be a new bankruptcy code introduced in Congress next year and there is good chance it will pass. 68 .: talks about promissory notes (obligation to pay for is secured by real estate). The definition of account is much broader than it was before the revision of the code. 9-109(d)(11) E. Bankruptcy Two of the “so-called” avoidance powers. 9-109(a)(1) tells us that Article 9 applies to personal property and fixtures. in regards to priorities. That is the importance of being a secured creditor. We are giving people and opportunity to have a “fresh start. You “do not” walk away from security interests and valid liens. Bankruptcy is about financial failures.filing before the goods become fixtures or within 20 days thereafter.
all things stop. value of collateral. The importance of the avoidance power as a lien creditor is that it always defeats unsecured creditor. unsecured creditors fair badly. 511-512) Incredibly important power of bankruptcy court. Obviously. it is of prime importance that these liens be attacked by a trustee. In liquidation. Extremely important concept: Stay (pg. Therefore. The stay effects all the debtors property. they have a secured claim for value of collateral and an unsecured claim for the remaining. Secured claims can be secured either by personal property or real estate. NO one can do anything without approval. If the value of the property exceeds the value of the unpaid debt. Discharge (pg.In the material. Avoidance Powers of the TIB § 544(a)(1). If undersecured. We are looking at personal property. liquidation (Chapter 7): debtor says “I quit” 2. and 2. The trustee will attack those b/c they are trying to get as much money for the unsecured creditors as he can. You can be oversecured or undersecured. you have to submit it to the trustee. 512cb). or anything without court approval. A trustee will marshal assets together and if you are going to claim a PSI. Two types of Bankruptcy: 1. unsecured creditors get from least (nothing) to most 10 cents on the dollar. reorganization (Chapter 11) Unsecured creditors share in property that is not subject to liens. 11) In all liquidation bankruptcies. What is the value of a SI? Controlled by two things: 1. Certain statutory liens are avoidable. you have an oversecured creditor and they can only give the value of the debt (no windfalls). Lien creditor (9-317(a)(2)) Strong-arm clause: the TIB becomes a lien creditor on all property immediately when bankruptcy petition is filed. there is a discussion of secured claims (pg. one-year statute of limitations (TIB can go back one year and look at any transfer debtor has made and essentially any gift made for not “reasonable equivalent value” the TIB can come get it back. a trustee will be created. 513) A valid lien survives bankruptcy. Two things about it: 1. 69 . Don’t have to show any fraudulent intent. The value of the collateral controls the value of the lien. any action. § 548(a) is an “amazing power” that Congress gave the TIB. Once it is filed. (read pg. amount of unpaid debt.
2055) gives TIB. § 101(54): incredibly broad definition Can be voluntary/involuntary. under certain circumstances.S.S.C. personal property. Essentially. Basic Requirements Five Elements (+ two other requirements) § 547 Threshold Requirements Before you get to the elements: the trustee may avoid any transfer of an interest in the debtor in property (must be a transfer and that transfer must involve interest in property) A “transfer” is defined at 11 U. sale. § 101(45) c. § 101(31) and it is not always easy to determine. transfer is made on or within 90 days before the debt of the filing petition. or between ninety days and one year before the date of the filing of the petition . we are not covering. definition of insolvency is found 7 U. the transfer must be made when the debtor was insolvent. Property can be cash. That is there. it talks about who this “insider” language is applied to: relative 7 U. and establishing insolvency would be hard for TIB without (f) 4. the transfer had not been made. real estate § 547(b) Requirements 1.C. to set aside. a. more than such creditor would receive under Chapter 7. 2.S.C. a. ii. the transfer has to be to or for the benefit of the creditor. First thing is we are not covering sub(c) which is the exceptions to the TIB claims. §547(f) says for purposes of this section. a. Of the interest in any property of the debtor. first part before “or”: look at the day petition was filed and count back 90 days and see if the transfer occurred within that period b.C. Importance is that under (g). gift.S.§ 547(b) Preferential transfers by debtor (pg. unlike § 548. specific goods. and 70 . The transfer must be for or on the account of an antecedent debt owned by the debtor before such transfer was made. the transfer does not have to be to a creditor. the TIB has the burden of establishing each requirement. the transfer enables such creditor to receive. § 101(31)) a. and b. if such creditor at the time of such transfer was an insider (7 U. § 31(a) insider language. if debtor is individual.C. that if the transfer occurs within 90 days there is a presumption of insolvency (very important presumption) i.S. second part: under 7 U. 3. the transfer can go back one year if an “insider” but only 90 days if by someone else 5.
= $20K Not paying other creditors Bkcy pet filed 7/15 Can TIB avoid the seizure under § 547(b). it is satisfied. #1: yes. #5: key question: did this transfer enable the CR to get more than this CR would have gotten if the transfer never would have been made? YES. Problem 1. #4: yes. we have a voluntary transfer of money. (g) says that TIB has presumption of proving elements. the debtor is presumed to be insolvent during the 90 days before. Has there been a transfer? Yes. $20. p.000 unsecured Cr obtained judicial lien and sheriff seized prop. Would your answer be different if petition was filed 8/15? (insider) look at § 547(f): says that for purposes of § 547. this is less than 90 (76 days). under 101(54). #2: the debt pre-existed the payment. 583 5/1 D owed Cr $20. If the creditor gets more than they would have gotten without transfer. Is this a transfer? 71 . preferential would have been 90%.583 5/1 D owed Cr $20. the presumption does not result if you have insolvency outside the 90 days. knowledge is irrelevant. If they would have gotten 10%. 7/15 1a. Then we look at the five enumerated requirements. 1c. what would this creditor have gotten in the liquidation if the transfer had never been made. chapter 7 no one ever gets 100% on the dollar. such creditor received payment of such debtor to the extend provided by the provisions of this title ** simply put. Who has the burden of proving insolvency? §547(f & g) 1b. BUT.c. p. Payment of cash is a transfer.000 unsecured D paid Cr in cash $20K Not paid other creditors Bkcy pet filed Can TIB avoid the payment? What we are looking at is 547(b). Does it matter if Cr knew about D’s financial condition? NO. the money. under 547(b). #3: 547(f): there is a presumption if 90 days before bkcy.
Requirements 1-4 are met. the trustee may recover for the benefit of the estate. The seizure of the property gives the creditor a specific interest in the debtors property. They would have been an unsecured creditor and %99. Therefore element #5 is not satisfied because it did not prefer this creditor (this creditor did not get more if the transfer would have never occurred. 4? Yes. the property transferred by the initial transferee to the transferor. Problem 2. Element are required. Here the debtor is getting an interest “involuntarily”. 5? Did this transfer enable creditor more than it would have gotten had the seizure never occurred. 3? Yes. 2? Yes. They would have received $11K had the transfer never occurred. and the bank received 100% of the payment.99 time. The 5th requirement: did this transfer (payment) enable the creditor to get more than it would have gotten had the transfer not been made? What would the bank have received in a chapter 7 liquidation? Look at the value of the collateral and the amount of the unpaid debt. we would now have $2K which is a preferential transfer.” A couple more transfer issues: § 547(b) transfer 1/2 5/1 Bk loand $ to D on unsecured CR Bk learns D in financial difficulty D grants Bk PSI in EQ#1 72 . 584 Looks at whether the creditor is “preferentially treated” 9/1/90 11/1/91 12/1/91 12/1/91 Bk 1 year $10K loan Dr gave PSI to Ks in EQ = $15K Dr pd BK $10K + Interest Dr was insolvent Dr filed Bcky pet Dr filed Bkcy pet Can TIB avoid the payment under § 547(b)? There was a transfer ( a payment). 1? Yes. less. So if the collateral is worth less than the unpaid debt. TIB can avoid it. We then go through the rest of the five requirements under 547(b). This is covered as well.) If the collateral was only worth $9 and the unpaid debt was $11K. they would have a $2K preferential treatment. p. § 550(a) “to the extent that a transfer is avoidable.Transfer is defined at 101(54).
AFTER-ACQUIRED PROPERTY 2/1 3/1 5/1 Bk PSI in D’s P and AA EQ D buys new EQ without $ from BK Bankruptcy Can TIB avoid Bk’s PSI in new EQ? Under 9-203(b).6/1 D files Bkcy pet Can TIB avoid Bk’s PSI? 544(a)(1): the answer is no. The TIB can defeat a PSCr. All 7 requirements are satisfied. priority dates at 2/1 73 . A lien creditor loses to a PSI. therefore this transfer cannot be avoided and you cannot satisfy 547(b)(2). thus avoid. because it is for the benefit of the creditor. What about 547(b)? What is the issue? The transfer occurred on 5/1 because that is when the SI (voluntary interest of property of debtor). Under Article 9. when the SI was created. What does not happen is this is not a transfer on an account of an anacedent debt. there are three requirements for attachment. What about § 547(b)? Was their a transfer? Yes. This is an example of where perfection does not help. look at 9-317(a)(1). When the debt and transfer occur at the time. Ethical question: will the bank try to keep the operation afloat for 90 days at least to get out of 5? 547(b) Transfer 1/2 1/3 Bk loans $ to D D grants Bk PSI in EQ#1 D files Bkcy pet Can TIB avoid this transfer? Under 544(a)(1) (lien creditor 9-317(a)(2)) cannot use. there is no transfer. Then you go through the rest of the requirements: 1-5: are fulfilled. Under Article 9. the priority date occurs on 2/1 because filing or perfection whichever occurs first. The debt had to pre-exist the transfer in property. What about the second requirement? Yes.
therefore a TIB beats a PSCR. This represents a major difference between Article 9 and the bankruptcy code. 1-2 relate to where a transfer occurs. do not need to know them. We are looking at (e)(3) which says “a transfer is not made until a debtor obtains rights in the collateral” Not until 3/1 for purposes of ). We are looking at (e)(3) which says “a transfer is not made until a debtor obtains rights in the collateral” Not until 3/1 for purposes of §547(b). You can then acquire all the requirements of § 547(b). § 541(a)(1) will not work for TIB because you have a perfected secured CR at the date of BKCY. When did the transfer occur under § 547? (e)(3) (pg. § 547(b) will work because of (e)(3). do not need to know them. The key to remember in addition is that you have to have the transfer within the 90 days. 2059). If the equipment is purchased before. 74 . will not work. In short. 1-2 relate to where a transfer occurs.**CONGRESS changed this rule in respect to Bkcy.
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