secured transactions assignment 23

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Secured TransactionsAssignment 23

Maintaining Perfection Through Changes of Name, Identity, and Use

2

The Big PicturePart Two: The Creditor Third Party Relationship

Chapter 6: Perfection

Chapter 7: Maintaining Perfection

Assignment 22: Through lapse and bankruptcy

Assignment 23: Through changes in name, identity and use of collateral

Assignment 24: Through interstate movements of debtors and collateral

Chapter 8-9: Priority

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The Big PicturePart Two: The Creditor Third Party Relationship

Chapter 6: Perfection

Chapter 7: Maintaining Perfection

Assignment 22: Through lapse and bankruptcy

Assignment 23: Through changes in name, identity and use of collateral

Assignment 24: Through interstate movements of debtors and collateral

Chapter 8-9: Priority

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Perfection-maintenance ProblemS1 Filing

Debtor’s name

Collateraldescription

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S1 Filing

Debtor’s name


Changes

Perfection-maintenance Problem

Name changeSale to new ownerCollateral transformedChange of useProceeds exchangeNew debtor

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S1 Filing S2 Search

Debtor’s name


New name

New owner

Differentdescription

Changes



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S1 Filing S2 Search

Debtor’s name


New name

New owner


Changes

Two approaches mixed:



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S1 Filing S2 Search

Debtor’s name


Changes


1. Filer updates the filings as changes occur



New name

New owner


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S1 Filing S2 Search

Debtor’s name


Changes


1. Filer updates the filings as changes occur

2. Searcher must discover history of name and description



New name

New owner


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Name Changes, §9-507(c)

Filing

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Filing

A seriously misleading name change creates a four-month window.

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Filing

Seriously misleadingname change


4 months

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Filing


4 months


If filer amends within four months, filing is valid for all collateral

Amendment

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Filing


4 months



Amendment

If collateral is acquired this date

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Filing


4 months



If filer does not amend within four months, filing is valid against collateral acquired before the end of four months


Now

16


Filing


4 months





Now

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Filing


4 months




If filer amends late, amendment is effective, Comment 4. but priority is only from the Amendment

Amendment

If collateral is acquired this date If acquired this date

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Change in owner (debtor), §9-507(a)

S1 files againstSam Seller

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Change in owner (debtor), §9-507(a)Sam sells the

collateralto Beth Buyer


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“A filed financing statement remains effective with respect to collateral that is sold . . . even if the secured party knows of . . . the disposition.”


Sam sells the collateral

to Beth Buyer

21



S1 filing is effective. How would S2 find it?

Beth Buyerborrowsfrom S2



to Beth Buyer

22




Comment 3. “[A]ny person seeking to determine whether a debtor owns collateral free of security interests must inquire as to the debtor’s source of title and, if circumstances seem to require it, search in the name of a former owner.”



to Beth Buyer


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Comment 3. “[A]ny person seeking to determine whether a debtor owns collateral free of Every searcher must inquire as to the debtor’s source of title and, if circumstances seem to require it, search in the name of a former owner.”



to Beth Buyer


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Filing

Physical/use change incollateral Search

Changes in collateral: Physical/use

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Filing

§9-507(b). A financing statement is not rendered ineffective if, after the financing statement is filed, the information provided in the financing statement becomes seriously misleading under Section 9-506.


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Filing


The financing statement remains effective


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Filing


The financing statement remains effective

The secured party may not remain perfected. E.g., auto parts become an auto; auto use changed from equipment to inventory.


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Filing

Collateral exchangedfor proceeds Search

Changes in collateral: Proceeds

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Filing

Three kinds of changes:



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Filing


Type 0: The description still indicates the collateral (No change)



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Filing



Type 1: The description is seriously misleading, but the filing is in the right office for the new collateral.



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Filing



Type 1: The description is seriously misleading, but the filing is in the right office for the new collateral.

Type 2: The filing is in the wrong office for the new collateral



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9-315(c). A security interest in proceeds is a perfected security interest if the security interest in the original collateral was perfected.


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(d) A perfected security interest in proceeds becomes unperfected on the 21st day after [attachment] unless


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(d) A perfected security interest in proceeds becomes unperfected on the 21st day after [attachment] unless:

(1) The following conditions are satisfied:

(A) a filed financing statement covers the original collateral

(B) . . . a security interest [in the proceeds] may perfected by filing in [that same office]

(C) the proceeds are not acquired with cash proceeds


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(2) the proceeds are identifiable cash proceeds; or


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(2) the proceeds are identifiable cash proceeds; or

(3) the security interest in the proceeds is perfected . . . when the security interest attaches or within 20 days . . .


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More Big PicturePerfection requires:

1. Attachment and

2. Compliance with perfection requirements

§9-308(a). [A] security interest is perfected if it has attached and all of the application requirements for perfection in Sections 9-301 through 9-316 have been satisfied.

If secured party doesn’t have a security interest, secured party isn’t perfected.

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Problem 23.1, page 407GBT is monitoring collateral of Bonnie’s Boat World, Inc. The

description is: “inventory, accounts, and chattel paper”

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a. Bonnie took an inventory boat home; used it personally. Is the boat still inventory? §9-102(a)(48)

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a. Bonnie took an inventory boat home; used it personally. Is the boat still inventory? §9-102(a)(48) No.

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a. Bonnie took an inventory boat home; used it personally. Is the boat still inventory? §9-102(a)(48) No. Is GBT still perfected?

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Type 1 change, inventory to equipment. §9-507(b). No new filing needed. (Assuming no boat certificate of title law.)

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b. Bonnie transferred ownership to herself. What evidence would exist?

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b. Bonnie transferred ownership to herself. What evidence would exist? Maybe a bill of sale, check.

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Does GBT still have SI? §9-315(a).

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Does GBT still have SI? §9-315(a). Perfected? §9-507(a).

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c. BBW trades an inventory boat for a forklift.

Does GBT have a security interest in the forklift? Yes. §9-315(a)(2).

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Is that security interest perfected? Yes. §9-315(d)(1).

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Is that security interest perfected? Yes. §9-315(d)(1).

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Problem 23.1, page 407Description of collateral: “inventory, accounts, and chattel paper”

d. Inventory boat sold for cash, cash used to buy forklift.

Does GBT have a security interest in forklift? §9-315(a)(2)

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Is GBT perfected in the forklift? §9-315(d)(3).

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Is GBT perfected in the forklift? §9-315(d)(3). Not after 20 days

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e. Inventory boat suffered insured storm damage. Does GBT have a security interest in the insurance claim? Yes. §9-102(a)(64)

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GBT is not named as a loss payee. Is GBT perfected in the insurance proceeds?

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Only for 20 days. §9-109(d)(8); §9-315(c) and (d)

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How can GBT continue perfection after 20 days?

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Is GBT perfected in the forklift? §9-315(d)(3). Not after 20 days.




How can GBT continue perfection after 20 days?

Be named loss payee on policy. §9-315(d)(3) governs.

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Problem 23.2, page 408

Filing

GBT files against Southwest Appliance Corporation in that name

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Filing Name change Now

6 months


Six months ago, debtor changed its name to Southwest General, Inc.

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6 months



Is GBT’s filing seriously misleading?

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6 months



Is GBT’s filing seriously misleading? Almost certainly. 9-506(c).

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Filing


§9-507(c). The seriously misleading name change created a four-month window for amending our financing statement. We missed it. Where do we stand?

4 months

Now

66


Filing



Not perfected in recently acquired inventory.

Now

4 months

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Filing




a. What do we do now?

Now

4 months

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Filing




a. What do we do now? Amend.

Amendment

4 months

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Filing





Then what is our priority date?

Amendment

4 months

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Filing





Then what is our priority date? Filing date (collateral acquired through four months); amendment date (collateral acquired after four months). §9-507 Comment 4.

Amendment

4 months

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Filing


4 months

b. What if GBT’s collateral had been a construction crane?

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Filing


4 months


The financing statement remains effective against the crane

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Filing


4 months



Do we need to amend?

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Filing

Seriously misleadingname change Sale

4 months



c. What if Southwest sells the crane for $235,000?


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Filing


4 months






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Filing


4 months





The financing statement is not effective against the cash


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Filing







GBT is perfected in the cash §9-315(c) and (d)(2)

Sale

4 months


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Filing







GBT is perfected in the cash §9-315(c) and (d)(2)

What if Southwest buys a replacement crane? §9-315(d)(3)

Sale

4 months


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GBT’s proposed loan: $500,000 to RLE, secured by:

1. Equipment

2. Inventory (minus “lawn dogs manufactured by Suti”)

3. Accounts

4. Money in bank accounts


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1. Equipment


3. Accounts


Prior financing statement: “Lawn dogs manufactured by Suti.”


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1. Equipment


3. Accounts



Could that security interest be attached to more than the lawn dogs?


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1. Equipment


3. Accounts




Yes. As proceeds, Problem 10.4.


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1. Equipment


3. Accounts




Yes. As proceeds, Problem 10.4. Or by SA description


84


1. Equipment


3. Accounts





Could that security interest be perfected in more than the lawn dogs?


85


1. Equipment


3. Accounts





Could that security interest be perfected in more than the lawn dogs?

Yes, accounts, barter, cash. §9-315(c), (d)(1), (d)(2)


86

October’s description of collateral: “equipment, inventory, accounts, chattel paper, general intangibles, fixtures, money, and bank accounts.”

a. Does October have a security interest in debtor’s bank account at Gargantuan?

Yes. By description

Yes. If proceeds.

b. Is October perfected in the bank account?

As original collateral: Only if October has “control”

As proceeds: Yes, to the extent “identifiable,” §9-315(d)(2)

c. Does it matter how long the proceeds are in the account?

Problem 23.5

87



Yes. By description

Yes. If proceeds.





Problem 23.5

88



Yes. By description

Yes. If proceeds.





Problem 23.5

89



Yes. By description

Yes. If proceeds.





Problem 23.5

90



Yes. By description

Yes. If proceeds.





Problem 23.5

91



Yes. By description

Yes. If proceeds.





Problem 23.5

92



Yes. By description

Yes. If proceeds.




c. Does it matter how long the proceeds are in the account? No

Problem 23.5

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Yes. By description

Yes. If proceeds.





d. Does it matter if Beaver commingles other money in the account?

Problem 23.5

94



Yes. By description

Yes. If proceeds.





d. Does it matter if Beaver commingles other money in the account? No.

Problem 23.5

secured transactions assignment 23

Documents

changes occur2

month window

filer amends

collateralif filer

big picturepart

monthsif collateral

party relationshipchapter

secured transactionsassignment