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1 Secured Transactions Assignment 18 Financing Statements: Other Information.

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1 1 Secured Transactions Assignment 18 Financing Statements: Other Information

2 2 The Big Picture Part One: The Creditor-Debtor Relationship Part Two: The Creditor Third Party Relationship Chapter 6-7: Perfection Assignment 16: Filing Systems Assignment 17: Financing Statements: The Debtor’s Name Assignment 18: Financing Statements: Other Information Chapter 8-9: Priority

3 3 The Big Picture Part One: The Creditor-Debtor Relationship Part Two: The Creditor Third Party Relationship Chapter 6-7: Perfection Assignment 16: Filing Systems Assignment 17: Financing Statements: The Debtor’s Name Assignment 18: Financing Statements: Other Information Chapter 8-9: Priority

4 4 The Big Picture Part One: The Creditor-Debtor Relationship Part Two: The Creditor Third Party Relationship Chapter 6-7: Perfection Assignment 16: Filing Systems Assignment 17: Financing Statements: The Debtor’s Name Assignment 18: Financing Statements: Other Information Chapter 8-9: Priority

5 5 The Big Picture Theory of the filing system: First takers communicate their interests to later takers Problems: 1. They must be filing and searching in the same system 2. They must be filing and searching in the same name 3. Searcher may need more information To weed out the false positives: “Is this my debtor? Is this my collateral?” To make additional inquiry (of the secured party) So financing statement should contain eight more pieces of information

6 6 The Big Picture Theory of the filing system: First takers communicate their interests to later takers Problems: 1. They must be filing and searching in the same system 2. They must be filing and searching in the same name 3. Searcher may need more information To weed out the false positives: “Is this my debtor? Is this my collateral?” To make additional inquiry (of the secured party) So financing statement should contain eight more pieces of information

7 7 The Big Picture Theory of the filing system: First takers communicate their interests to later takers Problems: 1. They must be filing and searching in the same system 2. They must be filing and searching in the same name 3. Searcher may need more information To weed out the false positives: “Is this my debtor? Is this my collateral?” To make additional inquiry (of the secured party) So financing statement should contain eight more pieces of information

8 8 The Big Picture Theory of the filing system: First takers communicate their interests to later takers Problems: 1. They must be filing and searching in the same system 2. They must be filing and searching in the same name 3. Searcher may need more information To weed out the false positives: “Is this my debtor? Is this my collateral?” To make additional inquiry (of the secured party) So financing statement should contain eight more pieces of information

9 9 The Big Picture Theory of the filing system: First takers communicate their interests to later takers Problems: 1. They must be filing and searching in the same system 2. They must be filing and searching in the same name 3. Searcher may need more information. Is this filer ahead of me? To weed out the false positives: “Is this my debtor? Is this my collateral?” To make additional inquiry (of the secured party) So financing statement

10 10 The Big Picture Theory of the filing system: First takers communicate their interests to later takers Problems: 1. They must be filing and searching in the same system 2. They must be filing and searching in the same name 3. Searcher may need more information. Is this my debtor? (False positives)

11 11 The Big Picture Theory of the filing system: First takers communicate their interests to later takers Problems: 1. They must be filing and searching in the same system 2. They must be filing and searching in the same name 3. Searcher may need more information. Is this my debtor? (False positives) Is this my collateral?

12 12 The Big Picture Theory of the filing system: First takers communicate their interests to later takers Problems: 1. They must be filing and searching in the same system 2. They must be filing and searching in the same name 3. Searcher may need more information. Is this my debtor? (False positives) Is this my collateral? How do I find the secured creditor to ask?

13 13 The Big Picture Theory of the filing system: First takers communicate their interests to later takers Problems: 1. They must be filing and searching in the same system 2. They must be filing and searching in the same name 3. Searcher may need more information. Is this my debtor? (False positives) Is this my collateral? How do I find the secured creditor to ask? So a financing statement should contain five more pieces of information

14 14 What should be in a financing statement: 1.Name of the debtor 2.Name of the secured party 3.Indication of collateral 4.Mailing address of secured party 5. Mailing address of debtor 6. Individual or organization?

15 15 What must be in a financing statement: 1. To qualify for filing: §9-516(b) 1.Name of the debtor 2.Name of the secured party 3.Not an indication of collateral 4.Mailing address of secured party 5. Mailing address of debtor 6. Individual or organization?

16 16 What must be in a financing statement: 1. To qualify for filing: §9-516(b) 1.Name of the debtor 2.Name of the secured party 3.Not an indication of collateral 4.Mailing address of secured party 5. Mailing address of debtor 6. Individual or organization? These three items need not be correct

17 17 What must be in a filed financing statement: 2. Against a reliance purchaser: §9-506(a) 1.Name of the debtor; not seriously misleading, §9- 502(a), 9-506(c) 2.Name of the secured party; can’t seriously mislead but might give rise to an estoppel, §9-506 Comment 2 3.Indication of collateral; not seriously misleading

18 18 What must be in a filed financing statement: 2. Against a reliance purchaser: §9-506(a) 1.Name of the debtor; not seriously misleading, §9- 502(a), 9-506(c) 2.Name of the secured party; can’t seriously mislead but might give rise to an estoppel, §9-506 Comment 2 3.Indication of collateral; not seriously misleading The totality of information included must not be seriously misleading, §9-506(a).)

19 19 What must be in a filed financing statement: 2. Against a reliance purchaser: §9-506(a) 1.Name of the debtor; not seriously misleading, §9- 502(a), 9-506(c) 2.Name of the secured party; can’t seriously mislead but might give rise to an estoppel, §9-506 Comment 2 3.Indication of collateral; not seriously misleading The totality of information included must not be seriously misleading, §9-506(a).) The defective filer loses to purchasers who give value in reasonable reliance upon incorrect 9-516(b)(5) information. (Hardly anyone.)

20 20 What must be in a filed financing statement: 3. Against a bankruptcy trustee §9-506(a) 1.Name of the debtor; not seriously misleading, §9- 502(a), 9-506(c) 2.Name of the secured party must be present but need not be right, §9-506 Comment 2 3.Indication of collateral; not seriously misleading The totality of information included must not be seriously misleading, §9-506(a).) The defective filer loses to no one.

21 21 Terminology Initial financing statement – UCC-1, shown in §9-521(a), text at page 264

22 22 Terminology Initial financing statement – UCC-1, shown in §9-521(a), text at page 264 Amendments – form at §9-521(b) Assignment: Transfers the secured party’s rights (optional) Continuation statement: Makes the financing statement effective for five more years Termination statement: Makes the financing statement ineffective. Party Information change: Changes to names and addresses

23 23 Terminology Initial financing statement – UCC-1, shown in §9-521(a), text at page 264 Amendments – form at §9-521(b) Assignment: Transfers the secured party’s rights (optional) Continuation statement: Makes the financing statement effective for five more years Termination statement: Makes the financing statement ineffective. Party Information change: Changes to names and addresses Financing statement – The initial financing statement plus all amendments. §9-102(a)(39)

24 24 Problem 18.1, page 324 You have to file the financing statement now, but don’t know the debtor’s address a.Leave the debtor’s address blank? Or fill in the address of the lot next door?

25 25 Problem 18.1, page 324 You have to file the financing statement now, but don’t know the debtor’s address a.Leave the debtor’s address blank? Or fill in the address of the lot next door? Answer: the SOS will rightfully reject a blank filing, §9- 516(b)(5)(C)(iii), but must accept an erroneous filing b.You include the phony address and the SOS rejects. Are you perfected? Answer: §9-516(d). c. What if the SOS accepts?

26 26 Problem 18.1, page 324 You have to file the financing statement now, but don’t know the debtor’s address a.Leave the debtor’s address blank? Or fill in the address of the lot next door? Answer: the SOS will rightfully reject a blank filing, §9- 516(b)(5)(C)(iii), but must accept an erroneous filing b.You include the phony address and the SOS rejects. Are you perfected? Answer: §9-516(d). c. What if the SOS accepts? Answer: You are at least lien-perfected. §9-520(c).

27 Problem 18.2, page 324 We represent a trustee in bankruptcy We have the rights of a lien creditor who levied at bankruptcy, Bankruptcy Code §544 UCC §9-317(a). A security interest is subordinate to the rights of a person that becomes a lien creditor before the earlier of the time: (A)The security interest is perfected; or (B)[A security agreement is entered into] and a financing statement is filed Financing statement must be sufficient. §

28 28 Problem 18.2, page 324 UCC-1 itemCorrect information Information on the form AuthorityOK? Secured party address 123 Main St. Madison, WI Blank9-516 cmt cmt cmt cmt cmt cmt cmt cmt cmt cmt cmt cmt 3

29 29 Problem 18.2, page 324 UCC-1 itemCorrect information Information on the form AuthorityOK? Secured party address 123 Main St. Madison, WI Blank9-516 cmt cmt 3 OK cmt cmt cmt cmt cmt cmt cmt cmt cmt cmt 3

30 30 Problem 18.2, page 324 UCC-1 itemCorrect information Information on the form AuthorityOK? Secured party address 123 Main St. Madison, WI Blank9-516 cmt cmt 3 OK Indication of collateral Case # , CD CA. Proceeds of any lawsuit 9-108(e), cmt 5 last ¶ cmt cmt cmt cmt cmt cmt cmt cmt 3

31 31 Problem 18.2, page 324 UCC-1 itemCorrect information Information on the form AuthorityOK? Secured party address 123 Main St. Madison, WI Blank9-516 cmt cmt 3 OK Indication of collateral Case # , CD CA. Proceeds of any lawsuit 9-108(e), cmt 5 last ¶ Not OK cmt cmt cmt cmt cmt cmt cmt cmt 3

32 32 Problem 18.2, page 324 UCC-1 itemCorrect information Information on the form AuthorityOK? Secured party address 123 Main St. Madison, WI Blank9-516 cmt cmt 3 OK Indication of collateral Case # , CD CA. Proceeds of any lawsuit 9-108(e), cmt 5 last ¶ OK? Secured party name Wardcorp, Inc. Wills Furniture 9-503(c) cmt cmt cmt cmt cmt cmt cmt 3

33 33 Problem 18.2, page 324 UCC-1 itemCorrect information Information on the form AuthorityOK? Secured party address 123 Main St. Madison, WI Blank9-516 cmt cmt 3 OK Indication of collateral Case # , CD CA. Proceeds of any lawsuit 9-108(e), cmt 5 last ¶ OK? Secured party name Wardcorp, Inc. Wills Furniture 9-503(c) cmt 2 OK? cmt cmt cmt cmt cmt cmt 3

34 34 Problem 18.2, page 324 UCC-1 itemCorrect information Information on the form AuthorityOK? Secured party address 123 Main St. Madison, WI Blank9-516 cmt cmt 3 OK Indication of collateral Case # , CD CA. Proceeds of any lawsuit 9-108(e), cmt 5 last ¶ OK? Secured party name Wardcorp, Inc. Wills Furniture 9-503(c) cmt 2 OK? Secured party name Lynn M. LoPucki Elizabeth Warren 9-506(a) and cmt cmt cmt cmt cmt 3

35 35 Problem 18.2, page 324 UCC-1 itemCorrect information Information on the form AuthorityOK? Secured party address 123 Main St. Madison, WI Blank9-516 cmt cmt 3 OK Indication of collateral Case # , CD CA. Proceeds of any lawsuit 9-108(e), cmt 5 last ¶ OK? Secured party name Wardcorp, Inc. Wills Furniture 9-503(c) cmt 2 OK? Secured party name Lynn M. LoPucki Elizabeth Warren 9-506(a) and cmt 2 Not OK? cmt cmt cmt cmt 3

36 36 Problem 18.2, page 324 UCC-1 itemCorrect information Information on the form AuthorityOK? Secured party address 123 Main St. Madison, WI Blank9-516 cmt cmt 3 OK Indication of collateral Case # , CD CA. Proceeds of any lawsuit 9-108(e), cmt 5 last ¶ OK? Secured party name Wardcorp, Inc. Wills Furniture 9-503(c) cmt 2 OK? Secured party name Lynn M. LoPucki Elizabeth Warren 9-506(a) and cmt 2 Not OK? Indication of collateral Ovens at 514 E Washington Ovens at 621 State St cmt cmt 3

37 37 Problem 18.2, page 324 UCC-1 itemCorrect information Information on the form AuthorityOK? Secured party address 123 Main St. Madison, WI Blank9-516 cmt cmt 3 OK Indication of collateral Case # , CD CA. Proceeds of any lawsuit 9-108(e), cmt 5 last ¶ OK? Secured party name Wardcorp, Inc. Wills Furniture 9-503(c) cmt 2 OK? Secured party name Lynn M. LoPucki Elizabeth Warren 9-506(a) and cmt 2 Not OK? Indication of collateral Ovens at 514 E Washington Ovens at 621 State St Not OK cmt cmt 3

38 38 Problem 18.2, page 324 UCC-1 itemCorrect information Information on the form AuthorityOK? Secured party address 123 Main St. Madison, WI Blank9-516 cmt cmt 3 OK Indication of collateral Case # , CD CA. Proceeds of any lawsuit 9-108(e), cmt 5 last ¶ OK? Secured party name Wardcorp, Inc. Wills Furniture 9-503(c) cmt 2 OK? Secured party name Lynn M. LoPucki Elizabeth Warren 9-506(a) and cmt 2 Not OK? Indication of collateral Ovens at 514 E Washington Ovens at 621 State St Not OK Indication of collateral EquipmentBlank9-108, 502 (a)(3), 504

39 39 Problem 18.2, page 324 UCC-1 itemCorrect information Information on the form AuthorityOK? Secured party address 123 Main St. Madison, WI Blank9-516 cmt cmt 3 OK Indication of collateral Case # , CD CA. Proceeds of any lawsuit 9-108(e), cmt 5 last ¶ OK? Secured party name Wardcorp, Inc. Wills Furniture 9-503(c) cmt 2 OK? Secured party name Lynn M. LoPucki Elizabeth Warren 9-506(a) and cmt 2 Not OK? Indication of collateral Ovens at 514 E Washington Ovens at 621 State St Not OK Indication of collateral EquipmentBlank9-108, 502 (a)(3), 504 Not OK

40 40 Problem 18.3, page 325 Smith has $26K judgment; sees these filed financing statements: Financing statement Financing statement Financing statement Trimble store Financing statement

41 41 Problem 18.3, page 325 Security agreement? Smith has $26K judgment; sees these filed financing statements: a. If Glacier Bank’s Security Agreement covers the Trimble Store and one of the financing statements was intended to, could Glacier be perfected? Financing statement Financing statement Financing statement Trimble store Financing statement

42 42 Problem 18.3, page 325 Security agreement? Smith has $26K judgment; sees these filed financing statements: a. If Glacier Bank’s Security Agreement covers the Trimble Store and one of the financing statements was intended to, could Glacier be perfected? Teel arguably? Pickle no. Financing statement Financing statement Financing statement Trimble store Financing statement

43 43 Problem 18.3, page 325 a. If Glacier Bank’s Security Agreement covers the Trimble Store and one of the financing statements was intended to, could Glacier be perfected? Teel arguably? Pickle no. b. What should we do? Smith has $26K judgment; sees these filed financing statements: Financing statement Financing statement Financing statement Trimble store Financing statement Security agreement?

44 44 Problem 18.3, page 325 Security agreement? a. If Glacier Bank’s Security Agreement covers the Trimble Store and one of the financing statements was intended to, could Glacier be perfected? Teel arguably? Pickle no. b. What should we do? Call Glacier and ask? Smith has $26K judgment; sees these filed financing statements: Financing statement Financing statement Financing statement Trimble store Financing statement

45 45 Problem 18.4, page 325 We represent Glacier Bank. We were supposed to have the Trimble store, but Trimble is not in our SA description. Smith has $26K judgment; sees these filed financing statements: Financing statement Financing statement Financing statement Trimble store Financing statement Security agreement

46 46 Problem 18.4, page 325 We represent Glacier Bank. We were supposed to have the Trimble store, but Trimble is not in our SA description. a.Smith’s lawyer calls. What should we say? Smith has $26K judgment; sees these filed financing statements: Financing statement Financing statement Financing statement Trimble store Financing statement Security agreement Glacier Smith Us Lawyer

47 47 Glacier Smith Us Lawyer Problem 18.4, page 325 We represent Glacier Bank. We were supposed to have the Trimble store, but Trimble is not in our SA description. a.Smith’s lawyer calls. What should we say? b.Different if call is from another bank? § Smith has $26K judgment; sees these filed financing statements: Financing statement Financing statement Financing statement Trimble store Financing statement Security agreement

48 48 Problem 18.3, page 325 Security agreement? a. If Glacier Bank’s Security Agreement covers the Trimble Store and one of the financing statements was intended to, could Glacier be perfected? Teel arguably? Pickle no. b. What should we do? Call Glacier and ask? No. Levy or fold? Smith has $26K judgment; sees these filed financing statements: Financing statement Financing statement Financing statement Trimble store Financing statement

49 49 Problem 18.5, page 325 Walter’s Department Store wants to file financing statements on thousands of consumer debtor customers.

50 50 Problem 18.5, page 325 Walter’s Department Store wants to file financing statements on thousands of consumer debtor customers. a.Does Walter’s need permission?

51 51 Problem 18.5, page 325 Walter’s Department Store wants to file financing statements on thousands of consumer debtor customers. a.Does Walter’s need permission? §9-509(a). A person may file an initial financing statement... only if the debtor authorizes the filing in an authenticated record or pursuant to (b) or (c).

52 52 Problem 18.5, page 325 Walter’s Department Store wants to file financing statements on thousands of consumer debtor customers. a.Does Walter’s need permission? §9-509(a). A person may file an initial financing statement... only if the debtor authorizes the filing in an authenticated record or pursuant to (b) or (c). (b) By authenticating... a security agreement, a debtor... authorizes the filing of an initial financing statement.

53 53 Problem 18.5, page 325 Walter’s Department Store wants to file financing statements on thousands of consumer debtor customers. a.Does Walter’s need permission? §9-509(a). A person may file an initial financing statement... only if the debtor authorizes the filing in an authenticated record or pursuant to (b) or (c). (b) By authenticating... a security agreement, a debtor... authorizes the filing of an initial financing statement. b.What should Walter’s use as a description of collateral? Problem 9.2.

54 54 Problem 18.5, page 325 Walter’s Department Store wants to file financing statements on thousands of consumer debtor customers. a.Does Walter’s need permission? §9-509(a). A person may file an initial financing statement... only if the debtor authorizes the filing in an authenticated record or pursuant to (b) or (c). (b) By authenticating... a security agreement, a debtor... authorizes the filing of an initial financing statement. b.What should Walter’s use as a description of collateral? Problem 9.2. Same as in the security agreement. §9-509(b), §9-625(e)

55 55 Problem 18.5, page 325 Walter’s Department Store wants to file financing statements on thousands of consumer debtor customers a.Does Walter’s need permission? §9-509(a). A person may file an initial financing statement... only if the debtor authorizes the filing in an authenticated record or pursuant to (b) or (c). (b) By authenticating... a security agreement, a debtor... authorizes the filing of an initial financing statement. b.What should Walter’s use as a description of collateral? Problem 9.2. Same as in the security agreement. §9-509(b), §9-625(e) What if the customer’s receipt is the security agreement?

56 56 Problem 18.5, page 325 Walter’s Department Store wants to file financing statements on thousands of consumer debtor customers a.Does Walter’s need permission? §9-509(a). A person may file an initial financing statement... only if the debtor authorizes the filing in an authenticated record or pursuant to (b) or (c). (b) By authenticating... a security agreement, a debtor... authorizes the filing of an initial financing statement. b.What should Walter’s use as a description of collateral? Problem 9.2. Same as in the security agreement. §9-509(b), §9-625(e) What if the customer’s receipt is the security agreement? c.What practical problems do you foresee?

57 57 Bank files Problem 18.6, page Bank files a financing statement against Pablo

58 58 Bank files Problem 18.6, page 326 Clean search 1.Bank files a financing statement against Pablo 2.Bank searches and finds the record clean

59 59 Bank files Problem 18.6, page 326 SA signed Clean search 1.Bank files a financing statement against Pablo 2.Bank searches and finds the record clean 3.Pablo signs a security agreement.

60 60 Bank files Problem 18.6, page 326 SA signed Competing filing Clean search 1.Bank files a financing statement against Pablo 2.Bank searches and finds the record clean 3.Pablo signs a security agreement. 4.Bank learns creditor 2 filed. Is Bank first?

61 61 Bank files Problem 18.6, page 326 SA signed Competing filing Clean search 1.Bank files a financing statement against Pablo 2.Bank searches and finds the record clean 3.Pablo signs a security agreement. 4.Bank learns creditor 2 filed. Is Bank first? 9-509(a). [Bank] may file an initial financing statement... only if the debtor authorizes the filing in an authenticated record.

62 62 Bank files Problem 18.6, page 326 SA signed Competing filing Clean search 1.Bank files a financing statement against Pablo 2.Bank searches and finds the record clean 3.Pablo signs a security agreement. 4.Bank learns creditor 2 filed. Is Bank first? 9-509(a). [Bank] may file an initial financing statement... only if the debtor authorizes the filing in an authenticated record (b) By authenticating... a security agreement, a debtor authorizes the filing of an initial financing statement

63 63 Bank files Problem 18.6, page 326 SA signed Competing filing Clean search 1.Bank files a financing statement against Pablo 2.Bank searches and finds the record clean 3.Pablo signs a security agreement. 4.Bank learns creditor 2 filed. Is Bank first? 9-509(a). [Bank] may file an initial financing statement... only if the debtor authorizes the filing in an authenticated record (b) By authenticating... a security agreement, a debtor authorizes the filing of an initial financing statement 9-510(a). A filed record is effective only to the extent that it was filed by a person that may file it under 9-509

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