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Secured Transactions Assignment 9 Collateral and Obligations Covered
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The Big Picture Chapter 1. Creditors’ Remedies Under State Law Chapter 2. Creditors’ Remedies in Bankruptcy Chapter 3. Creation of Security Interests Assignment 8: Formalities for Attachment Assignment 9: What Collateral and Obligations are Covered? Assignment 10: Proceeds (State Law) Assignment 11: Proceeds (Bankruptcy) Assignment 12: Skip
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The Big Picture Chapter 1. Creditors’ Remedies Under State Law Chapter 2. Creditors’ Remedies in Bankruptcy Chapter 3. Creation of Security Interests Assignment 8: Formalities for Attachment Assignment 9: What Collateral and Obligations are Covered? Assignment 10: Proceeds (State Law) Assignment 11: Proceeds (Bankruptcy) Assignment 12: Skip
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The Big Picture Chapter 1. Creditors’ Remedies Under State Law Chapter 2. Creditors’ Remedies in Bankruptcy Chapter 3. Creation of Security Interests Assignment 8: Formalities for Attachment Assignment 9: What Collateral and Obligations are Covered? Assignment 10: Proceeds (State Law) Assignment 11: Proceeds (Bankruptcy) Assignment 12: Skip
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Two issues in Assignment 9 What collateral secures the obligations? Asset “Collateral” Debt “Obligation” Lien Security interest What obligations are secured?
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Two issues in Assignment 9 What collateral secures the obligations? Asset “Collateral” Debt “Obligation” Lien Security interest What obligations are secured? Whatever the security agreement says
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Contract interpretation and validity Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3
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Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3 Contract interpretation and validity
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Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3 Contract interpretation and validity
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Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3 Contract interpretation and validity
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Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid- turnover assets 5.But see §9-108 comment 3 Contract interpretation and validity
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Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid- turnover assets 5.But see §9-108 comment 3 Contract interpretation and validity
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Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3 Validity (of descriptions) 9-203(b)(3)(A) requires a description 9-108 permits 1.Specific 2.Category 3.UCC category 4.Quantity 5.Computational formula 6.Any other if “objectively determinable” 7.Not “all assets” 8.Not “commercial tort claims 9.Not “consumer goods” “Much litigation has arisen over whether a description in a security agreement is sufficient to include after- acquired collateral if the agreement does not explicitly so provide. This question is one of contract interpretation and is not suceptible to a statutory rule. Accordingly, this seciton contains no reference to descriptions of after-acquired property. Contract interpretation and validity
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Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3 Validity (of descriptions) 9-203(b)(3)(A) requires a description 9-108 permits 1.Specific 2.Category 3.UCC category 4.Quantity 5.Computational formula 6.Any other if “objectively determinable” 7.Not “all assets” 8.Not “commercial tort claims 9.Not “consumer goods” “Much litigation has arisen over whether a description in a security agreement is sufficient to include after- acquired collateral if the agreement does not explicitly so provide. This question is one of contract interpretation and is not susceptible to a statutory rule. Accordingly, this section contains no reference to descriptions of after-acquired property.” Contract interpretation and validity
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Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3 Validity (of descriptions) 9-203(b)(3)(A) requires a description 9-108 permits 1.Specific 2.Category 3.UCC category 4.Quantity 5.Computational formula 6.Any other if “objectively determinable” 7.Not “all assets” 8.Not “commercial tort claims 9.Not “consumer goods” Contract interpretation and validity
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Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3 Validity (of descriptions) 9-203(b)(3)(A) requires a description 9-108 permits 1.Specific 2.Category 3.UCC category 4.Quantity 5.Computational formula 6.Any other if “objectively determinable” 7.Not “all assets” 8.Not “commercial tort claims 9.Not “consumer goods” Contract interpretation and validity
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Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3 Validity (of descriptions) 9-203(b)(3)(A) requires a description 9-108 permits 1.Specific 2.Category 3.UCC category 4.Quantity 5.Computational formula 6.Any other if “objectively determinable” 7.Not “all assets” 8.Not “commercial tort claims 9.Not “consumer goods” Contract interpretation and validity
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Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3 Validity (of descriptions) 9-203(b)(3)(A) requires a description 9-108 permits 1.Specific 2.Category 3.UCC category 4.Quantity 5.Computational formula 6.Any other if “objectively determinable” 7.Not “all assets” 8.Not “commercial tort claims 9.Not “consumer goods” Contract interpretation and validity
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Validity (of descriptions) 9-203(b)(3)(A) requires a description 9-108 permits 1.Specific 2.Category 3.UCC category 4.Quantity 5.Computational formula 6.Any other if “objectively determinable” 7.Not “all assets” 8.Not “commercial tort claims 9.Not “consumer goods” Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3 Contract interpretation and validity
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Validity (of descriptions) 9-203(b)(3)(A) requires a description 9-108 permits 1.Specific 2.Category 3.UCC category 4.Quantity 5.Computational formula 6.Any other if “objectively determinable” 7.Not “all assets” 8.Not “commercial tort claims 9.Not “consumer goods” Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3 Contract interpretation and validity
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Validity (of descriptions) 9-203(b)(3)(A) requires a description 9-108 permits 1.Specific 2.Category 3.UCC category 4.Quantity 5.Computational formula 6.Any other if “objectively determinable” 7.Not “all assets” 8.Not “commercial tort claims 9.Not “consumer goods” Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3 Contract interpretation and validity
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Validity (of descriptions) 9-203(b)(3)(A) requires a description 9-108 permits 1.Specific 2.Category 3.UCC category 4.Quantity 5.Computational formula 6.Any other if “objectively determinable” 7.Not “all assets” 8.Not “commercial tort claims 9.Not “consumer goods” Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3 Contract interpretation and validity
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Validity (of descriptions) 9-203(b)(3)(A) requires a description 9-108 permits 1.Specific 2.Category 3.UCC category 4.Quantity 5.Computational formula 6.Any other if “objectively determinable” 7.Not “all assets” 8.Not “commercial tort claims” 9.Not “consumer goods” Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3 Contract interpretation and validity
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Validity (of descriptions) 9-203(b)(3)(A) requires a description 9-108 permits 1.Specific 2.Category 3.UCC category 4.Quantity 5.Computational formula 6.Any other if “objectively determinable” 7.Not “all assets” 8.Not “commercial tort claims” 9.Not “consumer goods” Interpretation 1.Generally: The rules of contract govern 2.The security agreement speaks as of its execution 3.“All equipment” means “all equipment presently owned” 4.Exception for inventory, accounts, other rapid turnover assets 5.But see §9-108 comment 3 Contract interpretation and validity
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After-Acquired Property Definition: Collateral acquired after security agreement is signed Issue: Must the description say “after-acquired” to include it? §9-204(a) A security agreement may provide for after acquired §9-108. Cmt 3. “Much litigation has arisen over whether a description in a security agreement is sufficient to include after- acquired collateral if the agreement does not explicitly so provide. This question is one of contract interpretation and is not susceptible to a statutory rule.... Accordingly, this section contains no reference to descriptions of after-acquired collateral. Case law: Cases turn on the facts. Most likely outcomes: “All inventory” is held to include after-acquired inventory “All equipment” is held not to include after-acquired 25
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§9-108(a)(6) “Objectively determinable” by whom? Using what additional information? 26 Rules for interpretation and validity
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§9-108(a)(6) “Objectively determinable” by whom? Using what additional information? 1.Example: “inventory” is goods held for sale – depends on debtor’s intention – OK 27 Rules for interpretation and validity
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§9-108(a)(6) “Objectively determinable” by whom? Using what additional information? 1.Example: “inventory” is goods held for sale – depends on debtor’s intention – OK 2.Example: “Crops growing on real estate described by ASCS Farm Serial Number J-528” – OK 28 Rules for interpretation and validity
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§9-108(a)(6) “Objectively determinable” by whom? Using what additional information? 1.Example: “inventory” is goods held for sale – depends on debtor’s intention – OK 2.Example: “Crops growing on real estate described by ASCS Farm Serial Number J-528” – OK 3.Example: “The equipment in the restaurant at 123 Main Street.” (Consider the possibility it will be moved.) – OK 29 Rules for interpretation and validity
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§9-108(a)(6) “Objectively determinable” by whom? Using what additional information? 1.Example: “inventory” is goods held for sale – depends on debtor’s intention – OK 2.Example: “Crops growing on real estate described by ASCS Farm Serial Number J-528” – OK 3.Example: “The equipment in the restaurant at 123 Main Street.” (Consider the possibility it will be moved.) – OK 4.Example: “Creditor shall have a security interest in all items purchased on this account” – Not OK, Shirel 30 Rules for interpretation and validity
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§9-108(a)(6) “Objectively determinable” by whom? Using what additional information? 1.Example: “inventory” is goods held for sale – depends on debtor’s intention – OK 2.Example: “Crops growing on real estate described by ASCS Farm Serial Number J-528” – OK 3.Example: “The equipment in the restaurant at 123 Main Street.” (Consider the possibility it will be moved.) – OK 4.Example: “Creditor shall have a security interest in all items purchased on this account” – Not OK, Shirel Shirel is an exception. Most courts allow extrinsic evidence. Otherwise, most descriptions would fail 31 Rules for interpretation and validity
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In re Shirel “It is understandable for a creditor to desire one catchall phrase which creates a security agreement in every possible situation. However, in doing so, it may not ignore one of the primary reasons for creating a security agreement, which is to give notice to a third party. [If that is the case why is it a private agreement nobody can read?] This can only be achieved by describing what property is subject to the security interest.” Judge Bohanon does not seem to understand the difference between a security agreement and a financing statement.
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Problem 9.1, page 160 35 a.“All equipment and inventory” §9-108(b)(3), “a type of collateral defined in the Uniform Commercial Code” b.“All items purchased with the card” c.“Restaurant equipment located at 123 Main Street.” Debtor has a restaurant there. d.“All of the debtor’s consumer goods” §9-108(e) e.“All goods other than consumer goods.” §9-108(b)(3) UCC category. §9-108(c), supergeneric?
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Problem 9.2, page 161 36
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Problem 9.2, page 161 37 Description of collateral in Shirel (page 152): “Respondent will have a security interest in all ‘merchandise’ purchased with the credit card.”
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Problem 9.2, page 161 38 Description of collateral in Shirel (page 152): “Respondent will have a security interest in all ‘merchandise’ purchased with the credit card.” Holding: Description insufficient because it does not reasonably describe the collateral. Respondent is unsecured.
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Problem 9.2, page 161 39 Description of collateral in Shirel (page 152): “Respondent will have a security interest in all ‘merchandise’ purchased with the credit card.” Holding: Description insufficient because it does not reasonably describe the collateral. Respondent is unsecured. Our client’s (Walter’s Department Store) description of collateral (page 161): “Cardholder grants Walter’s a security interest in all items purchased on the account.”
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Problem 9.2, page 161 40 Description of collateral in Shirel (page 152): “Respondent will have a security interest in all ‘merchandise’ purchased with the credit card.” Holding: Description insufficient because it does not reasonably describe the collateral. Respondent is unsecured. Our client’s (Walter’s Department Store) description of collateral (page 161): “Cardholder grants Walter’s a security interest in all items purchased on the account.” Insufficient, but why....
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Problem 9.2, page 161 41 Some statements from Shirel: The form says “respondent will have a security interest in all ‘merchandise’ purchased with the credit card.” page 152.
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Problem 9.2, page 161 42 Some statements from Shirel: The form says “respondent will have a security interest in all ‘merchandise’ purchased with the credit card.” page 152. [T]he phrase “all merchandise” is... too liberal, too imprecise, and is not a description.... [I]t does not set forth a graphic or detailed account of the purported collateral.” A “sufficient description might have been a refrigerator” p 153-4
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Problem 9.2, page 161 43 Some statements from Shirel: The form says “respondent will have a security interest in all ‘merchandise’ purchased with the credit card.” page 152. [T]he phrase “all merchandise” is... too liberal, too imprecise, and is not a description.... [I]t does not set forth a graphic or detailed account of the purported collateral.” A “sufficient description might have been a refrigerator” p 153-4 “One of the primary reasons for creating a security agreement... is to give notice to a third party. This can only be achieved by describing what property is subject to the security interest.”
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Problem 9.2, page 161 44 Some statements from Shirel: The form says “respondent will have a security interest in all ‘merchandise’ purchased with the credit card.” page 152. [T]he phrase “all merchandise” is... too liberal, too imprecise, and is not a description.... [I]t does not set forth a graphic or detailed account of the purported collateral.” A “sufficient description might have been a refrigerator” p 153-4 “One of the primary reasons for creating a security agreement... is to give notice to a third party. This can only be achieved by describing what property is subject to the security interest.” What can we do to satisfy Judge Bohanon?
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Problem 9.2, page 161 45 Some statements from Shirel: The form says “respondent will have a security interest in all ‘merchandise’ purchased with the credit card.” page 152. [T]he phrase “all merchandise” is... too liberal, too imprecise, and is not a description.... [I]t does not set forth a graphic or detailed account of the purported collateral.” A “sufficient description might have been a refrigerator” p 153-4 “One of the primary reasons for creating a security agreement... is to give notice to a third party. This can only be achieved by describing what property is subject to the security interest.” What can we do to satisfy Judge Bohanon? 16 CFR 444.1 prohibits taking... a nonpossessory security interest in household goods other than a purchase money security interest.
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Problem 9.4, page 161 46 Description: “crops growing on the debtor’s farm in Osprey County, about 14 miles from Tilanook” NowPlantingHarvest SA signed Crop in ground
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Problem 9.4, page 161 47 Description: “crops growing on the debtor’s farm in Osprey County, about 14 miles from Tilanook” a.Does First National have a SI in these crops? NowPlantingHarvest SA signed Crop in ground
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Problem 9.4, page 161 48 Description: “crops growing on the debtor’s farm in Osprey County, about 14 miles from Tilanook” a.Does First National have a SI in these crops? Make any difference if there were crops in the ground when the security agreement was signed? NowPlantingHarvest SA signed Crop in ground
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Problem 9.4, page 161 49 SA signed Description: “crops growing on the debtor’s farm in Osprey County, about 14 miles from Tilanook” a.Does First National have a SI in these crops? Make any difference if there were crops in the ground when the security agreement was signed? NowPlantingHarvest Crop in ground
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Problem 9.4, page 161 50 SA signed Description: “crops growing on the debtor’s farm in Osprey County, about 14 miles from Tilanook” a.Does First National have a SI in these crops? Make any difference if there were crops in the ground when the security agreement was signed? Future crops or none! NowPlantingHarvest Crop in ground
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Problem 9.4, page 161 51 Description: “crops growing on the debtor’s farm in Osprey County, about 14 miles from Tilanook” a.Does First National have a SI in these crops? Make any difference if there were crops in the ground when the security agreement was signed? Future crops or none! Charles v. Fidelity State Bank (D. Kan. 1987) (“Crops growing” is present tense; for future crops the security interest should say “crops to be grown.”) NowPlantingHarvest SA signed Crop in ground
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Problem 9.4, page 161 52 Description: “crops growing on the debtor’s farm in Osprey County, about 14 miles from Tilanook” a.Does First National have a SI in these crops? Make any difference if there were crops in the ground when the security agreement was signed? Future crops or none! Charles v. Fidelity State Bank (D. Kan. 1987) (“Crops growing” is present tense; for future crops the security interest should say “crops to be grown.”) b. What advice for the Gillams? NowPlantingHarvest SA signed Crop in ground
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Description: “crops growing on the debtor’s farm in Osprey County, about 14 miles from Tilanook” a.Does First National have a SI in these crops? Make any difference if there were crops in the ground when the security agreement was signed? Future crops or none! Charles v. Fidelity State Bank (D. Kan. 1987) (“Crops growing” is present tense; for future crops the security interest should say “crops to be grown.”) b. What advice for the Gillams? Who is right is not determinative. Title to the crops is “clouded.” Problem 9.4, page 161 53 NowPlantingHarvest SA signed Crop in ground
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Problem 9.5, page 162 54 First National’s description: “crops growing on the debtor’s farm in Osprey County, about 14 miles from Tilanook”
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Problem 9.5, page 162 55 First National’s description: “crops growing on the debtor’s farm in Osprey County, about 14 miles from Tilanook” Issue: Does First National have a security interest in sheep, wool, and lambs?
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Problem 9.5, page 162 56 First National’s description: “crops growing on the debtor’s farm in Osprey County, about 14 miles from Tilanook” Issue: Does First National have a security interest in sheep, wool, and lambs? a.Our client wants an “opinion letter.” What’s it to us?
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Problem 9.5, page 162 57 First National’s description: “crops growing on the debtor’s farm in Osprey County, about 14 miles from Tilanook” Issue: Does First National have a security interest in sheep, wool, and lambs? a.Our client wants an “opinion letter.” What’s it to us? (1) Reputation and (2) negligence liability
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Problem 9.5, page 162 58 First National’s description: “crops growing on the debtor’s farm in Osprey County, about 14 miles from Tilanook” Issue: Does First National have a security interest in sheep, wool, and lambs? a.Our client wants an “opinion letter.” What’s it to us? (1) Reputation and (2) negligence liability b. Are sheep, wool, and lambs “crops?”
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Problem 9.5, page 162 59 First National’s description: “crops growing on the debtor’s farm in Osprey County, about 14 miles from Tilanook” Issue: Does First National have a security interest in sheep, wool, and lambs? a.Our client wants an “opinion letter.” What’s it to us? (1) Reputation and (2) negligence liability b. Are sheep, wool, and lambs “crops?” Websters: “A plant or animal or plant or animal product that can be grown and harvested extensively for profit and subsistence
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Problem 9.5, page 162 60 First National’s description: “crops growing on the debtor’s farm in Osprey County, about 14 miles from Tilanook” Issue: Does First National have a security interest in sheep, wool, and lambs? a.Our client wants an “opinion letter.” What’s it to us? (1) Reputation and (2) negligence liability b. Are sheep, wool, and lambs “crops?” Websters: “A plant or animal or plant or animal product that can be grown and harvested extensively for profit and subsistence Black’s: “Products of the soil, as are annually grown, raised and harvested. The term includes fruit grown on trees, and grass used for pasturage.”
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Problem 9.6, page 162 61 We are advising a secured creditor on the coverage of its security interest.
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Problem 9.6, page 162 62 We are advising a secured creditor on the coverage of its security interest. The description: “All of Debtor’s equipment, including replacement parts, additions, repairs, and accessories incorporated therein or affixed thereto. Without limitation the term ‘equipment’ includes all items used in recording, processing, playing back, or broadcasting moving or still pictures, by whatever process.”
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Problem 9.6, page 162 63 We are advising a secured creditor on the coverage of its security interest. The description: “All of Debtor’s equipment, including replacement parts, additions, repairs, and accessories incorporated therein or affixed thereto. Without limitation the term ‘equipment’ includes all items used in recording, processing, playing back, or broadcasting moving or still pictures, by whatever process.” The disputed collateral: Video equipment similar to that owned at time of security agreement signing, but acquired later.
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Problem 9.6, page 162 64 We are advising a secured creditor on the coverage of its security interest. The description: “All of Debtor’s equipment, including replacement parts, additions, repairs, and accessories incorporated therein or affixed thereto. Without limitation the term ‘equipment’ includes all items used in recording, processing, playing back, or broadcasting moving or still pictures, by whatever process.” The disputed collateral: Video equipment similar to that owned at time of security agreement signing, but acquired later. The issue: Does the description cover the disputed collateral?
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Problem 9.6, page 162 65 We are advising a secured creditor on the coverage of its security interest. The description: “All of Debtor’s equipment, including replacement parts, additions, repairs, and accessories incorporated therein or affixed thereto. Without limitation the term ‘equipment’ includes all items used in recording, processing, playing back, or broadcasting moving or still pictures, by whatever process.” The disputed collateral: Video equipment similar to that owned at time of security agreement signing, but acquired later. The issue: Does the description cover the disputed collateral? The law: “§9-201(a). [A] security agreement is effective according to its terms....”
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Problem 9.6, page 162 66 We are advising a secured creditor on the coverage of its security interest. The description: “All of Debtor’s equipment, including replacement parts, additions, repairs, and accessories incorporated therein or affixed thereto. Without limitation the term ‘equipment’ includes all items used in recording, processing, playing back, or broadcasting moving or still pictures, by whatever process.” The disputed collateral: Video equipment similar to that owned at time of security agreement signing, but acquired later. The issue: Does the description cover the disputed collateral? The law: “§9-201(a). [A] security agreement is effective according to its terms....”
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Problem 9.6, page 162 67 The court: "Addition" is defined in Black's Law dictionary as an "[e]xtension; increase; augmentation." This definition in no way contemplates that "additions" is sufficient to reasonably identify the after-acquired collateral.“
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Problem 9.6, page 162 68 The court: "Addition" is defined in Black's Law dictionary as an "[e]xtension; increase; augmentation." This definition in no way contemplates that "additions" is sufficient to reasonably identify the after-acquired collateral.“ Additions"... is listed among the words "replacement parts... repairs, and accessories,"
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Problem 9.6, page 162 69 The court: "Addition" is defined in Black's Law dictionary as an "[e]xtension; increase; augmentation." This definition in no way contemplates that "additions" is sufficient to reasonably identify the after-acquired collateral.“ Additions"... is listed among the words "replacement parts... repairs, and accessories," and... clearly and unambiguously refers to items like replacement parts, repairs, and accessories, which can be incorporated in or affixed to the existing equipment...
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Problem 9.6, page 162 70 The court: "Addition" is defined in Black's Law dictionary as an "[e]xtension; increase; augmentation." This definition in no way contemplates that "additions" is sufficient to reasonably identify the after-acquired collateral.“ Additions"... is listed among the words "replacement parts... repairs, and accessories," and... clearly and unambiguously refers to items like replacement parts, repairs, and accessories, which can be incorporated in or affixed to the existing equipment... Had the parties chosen to do so, they could have easily included language clearly stating that after-acquired equipment would be included....
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Default assignment changes In Assignment 10, add problem 10.7 to the default set.
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Problem 9.7, page 162 72 A riddle (real case):
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Problem 9.7, page 162 73 A riddle (real case): 1. Wisconsin Bank makes loan against the “fixtures and equipment” of a lessee bar (no after acquired property clause)
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Problem 9.7, page 162 74 A riddle (real case): 1. Wisconsin Bank makes loan against the “fixtures and equipment” of a lessee bar (no after acquired property clause) 2. Six years later, the debtor absconds to Minnesota.
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Problem 9.7, page 162 75 A riddle (real case): 1. Wisconsin Bank makes loan against the “fixtures and equipment” of a lessee bar (no after acquired property clause) 2. Six years later, the debtor absconds to Minnesota. The Bank retakes possession and finds no collateral.
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Problem 9.7, page 162 76 A riddle (real case): 1. Wisconsin Bank makes loan against the “fixtures and equipment” of a lessee bar (no after acquired property clause) 2. Six years later, the debtor absconds to Minnesota. The Bank retakes possession and finds no collateral. 3. Bank prosecutes debtor for the crime of removing collateral from the state in violation of a security agreement
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Problem 9.7, page 162 77 A riddle (real case): 1. Wisconsin Bank makes loan against the “fixtures and equipment” of a lessee bar (no after acquired property clause) 2. Six years later, the debtor absconds to Minnesota. The Bank retakes possession and finds no collateral. 3. Bank prosecutes debtor for the crime of removing collateral from the state in violation of a security agreement Debtor admitted taking the fixtures and the equipment from the bar to Minnesota, but said he had taken no collateral to Minnesota.
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Problem 9.7, page 162 78 A riddle (real case): 1. Wisconsin Bank makes loan against the “fixtures and equipment” of a lessee bar (no after acquired property clause) 2. Six years later, the debtor absconds to Minnesota. The Bank retakes possession and finds no collateral. 3. Bank prosecutes debtor for the crime of removing collateral from the state in violation of a security agreement Debtor admitted taking the fixtures and the equipment from the bar to Minnesota, but said he had taken no collateral to Minnesota. How can that be?
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Problem 9.8 Security Agreement Drafting 1.You are the secured party; I am the debtor. 2.Assume the collateral I display in class is owned by me. 3.Assume that I will sign the document on receipt (provided you are not trying to get more than I said I would give). 4.The interest will secure $1,000 you will loan me after I sign. 5.Omit all provisions not necessary to achieve validity. 6.Do not make up any facts. 7.Submit your document by email exactly as per website instructions. 8.This assignment is due by 11:59 PM Thursday, February 7, 2013. 9.Grading is pass/fail based on validity. 10.Questions? 79
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