1. 1 Secured Transactions Assignment 10 Proceeds, Products, and Value- Tracing: State Law

2. 2 The Big Picture Chapters 1and 2. Creditors’ Remedies 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)

3. 3 §9-102(a)(64) “Proceeds”... means the following property: (A)whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral (B)whatever is collected on, or distributed on account of, collateral (C)rights arising out of collateral (D)to the extent of the value of collateral, claims arising out of the loss... of,... or... damage to, the collateral. (E)to the extent of the value of collateral... insurance payable by reason of the loss... of... or damage to, the collateral. Basic Concepts

4. §9-102(a)(64) “Proceeds”... means the following property: (A)whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral 4 Basic Concepts Debtor Buyer Collateral Proceeds Secured Security interest

5. §9-102(a)(64) “Proceeds”... means the following property: (A)whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral (B)whatever is collected on, or distributed on account of, collateral 5 Basic Concepts Debtor Account debtors Secured Account Security interest in “accounts”

6. 6 §9-102(a)(64) “Proceeds”... means the following property: (A)whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral (B)whatever is collected on, or distributed on account of, collateral (C)rights arising out of collateral (D)to the extent of the value of collateral, claims arising out of the loss... of,... or... damage to, the collateral. (E)to the extent of the value of collateral... insurance payable by reason of the loss... of... or damage to, the collateral. Basic Concepts Debtor Account debtors Payment Secured Security interest in “accounts” $

7. 7 §9-102(a)(64) “Proceeds”... means the following property: (A)whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral (B)whatever is collected on, or distributed on account of, collateral (C)rights arising out of collateral (D)to the extent of the value of collateral, claims arising out of the loss... of,... or... damage to, the collateral. (E)to the extent of the value of collateral... insurance payable by reason of the loss... of... or damage to, the collateral. Basic Concepts Debtor Collateral Proceeds Secured Security interest

8. 8 §9-102(a)(64) “Proceeds”... means the following property: (A)whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral (B)whatever is collected on, or distributed on account of, collateral (C)rights arising out of collateral (D)to the extent of the value of collateral, claims arising out of the loss... of,... or damage to, the collateral. (E)to the extent of the value of collateral... insurance payable by reason of the loss... of... or damage to, the collateral. Basic Concepts Debtor Tortfeasor Collateral Loss claim Security interest

9. 9 Collateral: 100 Claim “arising from” loss of collateral: 300 Recovery: 100 Proceeds: ? §9-102(a)(64) “Proceeds”... means the following property: (A)whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral (B)whatever is collected on, or distributed on account of, collateral (C)rights arising out of collateral (D)to the extent of the value of collateral, claims arising out of the loss... of,... or damage to, the collateral. Basic Concepts Debtor Tortfeasor Collateral Loss claim

10. 10 Collateral Collateral: 100 Claim “arising from” loss of collateral: 300 Recovery: 100 Proceeds: 100, not 33 §9-102(a)(64) “Proceeds”... means the following property: (A)whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral (B)whatever is collected on, or distributed on account of, collateral (C)rights arising out of collateral (D)to the extent of the value of collateral, claims arising out of the loss... of,... or damage to, the collateral. Basic Concepts Debtor Tortfeasor Loss claim

11. 11 Loss claim Collateral §9-102(a)(64) “Proceeds”... means the following property: (A)whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral (B)whatever is collected on, or distributed on account of, collateral (C)rights arising out of collateral (D)to the extent of the value of collateral, claims arising out of the loss... of,... or damage to, the collateral. (E)to the extent of the value of collateral... insurance payable by reason of the loss... of,... or damage to, the collateral. Basic Concepts Debtor Insurance Company

12. 12 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral Basic Concepts

13. 13 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral Basic Concepts Debtor ZBank Security Interest (Cow)

14. 14 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral Basic Concepts Debtor Cow $2K ZBank Security Interest (Cow) Cow buyer

15. 15 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral Basic Concepts Debtor Cow $2K ZBank Security Interest (Cow) Cow buyer

16. 16 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral Basic Concepts Debtor Cow $2K ZBank Security Interest (Cow) Cow buyer

17. 17 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral Basic Concepts Debtor Cow ZBank Security Interest (Cow) Bean seller Cow buyer $2K Beans

18. 18 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral Basic Concepts Debtor Cow ZBank Security Interest (Cow) Bean seller Cow buyer $2K Beans

19. 19 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral Basic Concepts Debtor Cow ZBank Security Interest (Cow) Bean seller Cow buyer $2K Beans But bean seller takes the $2K free of the SI. §9-332(a). “A transferee of money takes the money free of a security interest....”

20. 20 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral Basic Concepts Debtor ZBank Security Interest (Cow) Bean seller Cow buyer Cow buyer 2 Cow $2K$2.5K Beans

21. 21 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral Basic Concepts Debtor ZBank Security Interest (Cow) Bean seller Cow buyer Cow buyer 2 Cow $2K $2.5K Beans

22. §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral Basic Concepts Debtor ZBank Security Interest (Cow) Bean seller Cow buyer Cow buyer 2 Cow $2K $2.5K Beans §9-332(a). “A transferee of money takes the money free of a security interest....” Cow buyer does not take the $2.5K free of the SI.

23. 23 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral (b) Proceeds that are commingled with other property are identifiable proceeds (1) if the proceeds are goods, to the extent provided by §9- 336 §9-336. “commingled goods” means good that are physically united with other goods in such a manner that their identity is lost in a product or mass. Examples: Grain in a grain silo. Steel in an automobile. Basic Concepts

24. 24 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral (b) Proceeds that are commingled with other property are identifiable proceeds (1) if the proceeds are goods, to the extent provided by §9- 336 §9-336. “commingled goods” means good that are physically united with other goods in such a manner that their identity is lost in a product or mass. Examples: Grain in a grain silo. Steel in an automobile. Basic Concepts

25. 25 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral (b) Proceeds that are commingled with other property are identifiable proceeds (1) if the proceeds are goods, to the extent provided by §9- 336 §9-336. “commingled goods” means good that are physically united with other goods in such a manner that their identity is lost in a product or mass. Examples: Grain in a grain silo. Steel in an automobile. Basic Concepts

26. 26 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral (b) Proceeds that are commingled with other property are identifiable proceeds (1) if the proceeds are goods, to the extent provided by §9- 336 §9-336. “commingled goods” means good that are physically united with other goods in such a manner that their identity is lost in a product or mass. Examples: Grain in a grain silo. Steel in an automobile. Basic Concepts

27. 27 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral (b) Proceeds that are commingled with other property are identifiable proceeds (1) if the proceeds are goods, to the extent provided by §9- 336 and (2) if the proceeds are not goods, to the extent that the secured party identifies the proceeds by a method of tracing... permitted under law other than this article Example: Money commingled in a bank account Basic Concepts

28. 28 §9-315(a)(1) a security interest... continues in collateral not- withstanding... disposition thereof unless the secured party authorized the disposition free of the security interest.... and (2) a security interest attaches to any identifiable proceeds of collateral (b) Proceeds that are commingled with other property are identifiable proceeds (1) if the proceeds are goods, to the extent provided by §9- 336 and (2) if the proceeds are not goods, to the extent that the secured party identifies the proceeds by a method of tracing... permitted under law other than this article Example: Money commingled in a bank account Basic Concepts

29. 29 The lowest intermediate balance rule: Basic Concepts

30. 30 The lowest intermediate balance rule: [T]he proceeds of the disposition of collateral remain in a commingled account as long as the account balance is equal to or exceeds the amounts of the proceeds. – Oriental Rug Basic Concepts

31. 31 The lowest intermediate balance rule: [T]he proceeds of the disposition of collateral remain in a commingled account as long as the account balance is equal to or exceeds the amounts of the proceeds. – Oriental Rug Basic Concepts Proceeds Non- proceeds

32. 32 The lowest intermediate balance rule: [T]he proceeds of the disposition of collateral remain in a commingled account as long as the account balance is equal to or exceeds the amounts of the proceeds. – Oriental Rug Basic Concepts Non-proceeds Proceeds Non- proceeds

33. 33 The lowest intermediate balance rule: [T]he proceeds of the disposition of collateral remain in a commingled account as long as the account balance is equal to or exceeds the amounts of the proceeds. – Oriental Rug Basic Concepts Proceeds Non- proceeds Non-proceeds Proceeds Non-proceeds Proceeds

34. Segregated bank account. A bank account containing only a single secured creditor's collateral. Basic Concepts 34

35. Segregated bank account. A bank account containing only a single secured creditor's collateral. Assume: Bank takes a security interest in “all inventory” Basic Concepts 35

36. Segregated bank account. A bank account containing only a single secured creditor's collateral. Assume: Bank takes a security interest in “all inventory” Basic Concepts Segregated account Loan proceeds $ 36

37. Payments Segregated bank account. A bank account containing only a single secured creditor's collateral. Assume: Bank takes a security interest in “all inventory” Basic Concepts Segregated account Loan proceeds $ Suppliers 37

38. Payments Segregated bank account. A bank account containing only a single secured creditor's collateral. Assume: Bank takes a security interest in “all inventory” Basic Concepts Segregated account Loan proceeds $ Suppliers Debtor’s inventory Goods 38

39. Payments Segregated bank account. A bank account containing only a single secured creditor's collateral. Assume: Bank takes a security interest in “all inventory” Basic Concepts Segregated account Loan proceeds $ Debtor’s inventory Goods Customers 39 Suppliers

40. Payments Segregated bank account. A bank account containing only a single secured creditor's collateral. Assume: Bank takes a security interest in “all inventory” Basic Concepts Segregated account Loan proceeds Payments $ Debtor’s inventory Goods Customers 40 Suppliers

41. Payments 41 Segregated bank account. A bank account containing only a single secured creditor's collateral. Assume: Bank takes a security interest in “all inventory” Basic Concepts Segregated account General account Loan proceeds Payments Owner investment Proceeds of other loans Tax refunds Sale of non collateral All other expenditures $ $ $ $ $ Debtor’s inventory Goods Customers Suppliers

42. 42 Problem 10.1, page 179 Firstbank’s description of collateral: “equipment, inventory, and accounts” 1.Does this description cover the proceeds of this collateral? Yes. 2.Does this description cover the products of this collateral? Only if the products are proceeds or after acquired inventory or accounts. 3.The offspring of this collateral? 4.Substitutions for this collateral? 5.Additions to this collateral? 6.Replacements for this collateral?

43. 43 Problem 10.1, page 179 Firstbank’s description of collateral: “equipment, inventory, and accounts” 1.Does this description cover the proceeds of this collateral?

44. 44 Problem 10.1, page 179 Firstbank’s description of collateral: “equipment, inventory, and accounts” 1.Does this description cover the proceeds of this collateral? Yes. §9-203(f).

45. 45 Problem 10.1, page 179 Firstbank’s description of collateral: “equipment, inventory, and accounts” 1.Does this description cover the proceeds of this collateral? Yes. §9-203(f). 2.Does this description cover the products, offspring, substitutions, additions or replacements of this collateral?

46. 46 Problem 10.1, page 179 Firstbank’s description of collateral: “equipment, inventory, and accounts” 1.Does this description cover the proceeds of this collateral? Yes. §9-203(f). 2.Does this description cover the products, offspring, substitutions, additions or replacements of this collateral? Only if the products are (1) proceeds or (2) after acquired inventory or accounts.

47. 47 Problem 10.2, page 179 Firstbank’s description of collateral: “equipment, inventory, and accounts” a.Does this description cover the money now in Polly’s bank account? Only if it is proceeds. b.A parrot that Polly took in payment of an overdue account? Yes. “Proceeds includes “whatever is collected on... Collateral.” §9-102(a)(64)(B). c.A new computer Polly bought to replace the one she owned at the time she granted the security interest? Not unless it is proceeds. After-acquired equipment is not included. d.Myna bird

48. 48 Problem 10.2, page 179 Firstbank’s description of collateral: “equipment, inventory, and accounts” a.Does this description cover the money now in Polly’s bank account? Only if it is proceeds. b.A parrot that Polly took in payment of an overdue account? Yes. “Proceeds includes “whatever is collected on... Collateral.” §9-102(a)(64)(B). c.A new computer Polly bought to replace the one she owned at the time she granted the security interest? Not unless it is proceeds. After-acquired equipment is not included. d.Myna bird

49. 49 Problem 10.2, page 179 Firstbank’s description of collateral: “equipment, inventory, and accounts” a.Does this description cover the money now in Polly’s bank account? Only if it is proceeds. b.A parrot that Polly took in payment of an overdue account? Yes. “Proceeds includes “whatever is collected on... Collateral.” §9-102(a)(64)(B). c.A new computer Polly bought to replace the one she owned at the time she granted the security interest? Not unless it is proceeds. After-acquired equipment is not included. d.Myna bird

50. 50 Problem 10.2, page 179 Firstbank’s description of collateral: “equipment, inventory, and accounts” a.Does this description cover the money now in Polly’s bank account? Only if it is proceeds. b.A parrot that Polly took in payment of an overdue account? Yes. “Proceeds includes “whatever is collected on... Collateral.” §9-102(a)(64)(B). c.A new computer Polly bought to replace the one she owned at the time she granted the security interest? Not unless it is proceeds. After-acquired equipment is not included. d.Myna bird

51. 51 Problem 10.2, page 179 Firstbank’s description of collateral: “equipment, inventory, and accounts” a.Does this description cover the money now in Polly’s bank account? Only if it is proceeds. b.A parrot that Polly took in payment of an overdue account? Yes. “Proceeds includes “whatever is collected on... collateral.” §9-102(a)(64)(B). c.A new computer Polly bought to replace the one she owned at the time she granted the security interest? Not unless it is proceeds. After-acquired equipment is not included. d.Myna bird

52. 52 Problem 10.2, page 179 Firstbank’s description of collateral: “equipment, inventory, and accounts” a.Does this description cover the money now in Polly’s bank account? Only if it is proceeds. b.A parrot that Polly took in payment of an overdue account? Yes. “Proceeds includes “whatever is collected on... collateral.” §9-102(a)(64)(B). c.A new computer Polly bought to replace the one she owned at the time she granted the security interest? Not unless it is proceeds. After-acquired equipment is not included. d.Myna bird

53. 53 Problem 10.2, page 179 Firstbank’s description of collateral: “equipment, inventory, and accounts” a.Does this description cover the money now in Polly’s bank account? Only if it is proceeds. b.A parrot that Polly took in payment of an overdue account? Yes. “Proceeds includes “whatever is collected on... collateral.” §9-102(a)(64)(B). c.A new computer Polly bought to replace the one she owned at the time she granted the security interest? Not unless it is proceeds. After-acquired equipment is not in this description. d.Myna bird

54. 54 Firstbank’s description of collateral: “equipment, inventory, and accounts” d. Myna bird Polly bought and paid for with plumbing work? Problem 10.2, page 179

55. 55 Firstbank’s description of collateral: “equipment, inventory, and accounts” d. Myna bird Polly bought and paid for with plumbing work? No. Distinguish two situations: Plumbing work account Myna bird Plumbing work bird contractMyna bird Problem 10.2, page 179

56. 56 Firstbank’s description of collateral: “equipment, inventory, and accounts” d. Myna bird Polly bought and paid for with plumbing work? No. Distinguish two situations: Not collateral Collateral Proceeds Plumbing work account Myna bird Not collateral Not collateral Not collateral Plumbing work bird contractMyna bird Problem 10.2, page 179

57. 57 Firstbank’s description of collateral: “equipment, inventory, and accounts” d. Myna bird Polly bought and paid for with plumbing work? No. Distinguish two situations: Not collateral Collateral Proceeds Plumbing work account Myna bird Not collateral Not collateral Not collateral Plumbing work bird contractMyna bird §9-102(a)(2) an “account” is a “monetary obligation” Problem 10.2, page 179

58. 58 Problem 10.3, page 180 ELP’s description of collateral: “Horace and all proceeds, products, and profits therefrom.” Horace won a race. Does ELP’s description cover the purse? §9-102(a)(64) “Proceeds”... means the following property: (A) whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral (B) whatever is collected on, or distributed on account of, collateral (C) rights arising out of collateral Products: the result of fabrication or processing (Black’s) Profits: (1) excess of revenues over expenses, (2) “a right in the soil of another”

59. 59 Problem 10.3, page 180 ELP’s description of collateral: “Horace and all proceeds, products, and profits therefrom.” Horace won a race. Does ELP’s description cover the purse? §9-102(a)(64) “Proceeds”... means the following property: (A) whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral Products: the result of fabrication or processing (Black’s) Profits: (1) excess of revenues over expenses, (2) “a right in the soil of another”

60. 60 Problem 10.3, page 180 ELP’s description of collateral: “Horace and all proceeds, products, and profits therefrom.” Horace won a race. Does ELP’s description cover the purse? §9-102(a)(64) “Proceeds”... means the following property: (A) whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral (B) whatever is collected on, or distributed on account of, collateral Products: the result of fabrication or processing (Black’s) Profits: (1) excess of revenues over expenses, (2) “a right in the soil of another”

61. 61 Problem 10.3, page 180 ELP’s description of collateral: “Horace and all proceeds, products, and profits therefrom.” Horace won a race. Does ELP’s description cover the purse? §9-102(a)(64) “Proceeds”... means the following property: (A) whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral (B) whatever is collected on, or distributed on account of, collateral (C) rights arising out of collateral Products: the result of fabrication or processing (Black’s) Profits: (1) excess of revenues over expenses, (2) “a right in the soil of another”

62. 62 Problem 10.3, page 180 ELP’s description of collateral: “Horace and all proceeds, products, and profits therefrom.” Horace won a race. Does ELP’s description cover the purse? §9-102(a)(64) “Proceeds”... means the following property: (A) whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral (B) whatever is collected on, or distributed on account of, collateral (C) rights arising out of collateral Products: the result of fabrication or processing (Black’s) Profits: (1) excess of revenues over expenses, (2) “a right in the soil of another”

63. 63 Problem 10.3, page 180 ELP’s description of collateral: “Horace and all proceeds, products, and profits therefrom.” Horace won a race. Does ELP’s description cover the purse? §9-102(a)(64) “Proceeds”... means the following property: (A) whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral (B) whatever is collected on, or distributed on account of, collateral (C) rights arising out of collateral Products: the result of fabrication or processing (Black’s) Profits: (1) excess of revenues over expenses, (2) “a right in the soil of another”

64. 64 Problem 10.4, page 180 Billie gave a SI in “inventory.” Billie First- bank “Inventory”

65. 65 Problem 10.4, page 180 Billie gave a SI in “inventory.” Billie is selling everything but the inventory to Joey. Billie Leasehold Furniture Fixtures Equipment First- bank “Inventory” Joey Goodwill Accounts Trademarks

66. 66 Problem 10.4, page 180 Billie gave a SI in “inventory.” Billie is selling everything but the inventory to Joey. We represent Joey. Is the security interest in inventory of concern? Billie Leasehold Furniture Fixtures Equipment First- bank “Inventory” Joey Goodwill Accounts Trademarks

67. 67 Problem 10.4, page 180 Billie gave a SI in “inventory.” Billie is selling everything but the inventory to Joey. We represent Joey. Is the security interest in inventory of concern? Billie Leasehold Furniture Fixtures Equipment First- bank “Inventory” Joey Goodwill Accounts Trademarks Could Firstbank have a security interest in the accounts?

68. 68 Problem 10.4, page 180 Billie gave a SI in “inventory.” Billie is selling everything but the inventory to Joey. We represent Joey. Is the security interest in inventory of concern? Billie Leasehold Furniture Fixtures Equipment First- bank “Inventory” Joey Goodwill Accounts Trademarks Could Firstbank have a security interest in the accounts? Other items?

69. 69 Problem 10.4, page 180 Billie gave a SI in “inventory.” Billie is selling everything but the inventory to Joey. We represent Joey. Is the security interest in inventory of concern? Billie Leasehold Furniture Fixtures Equipment First- bank “Inventory” Joey Goodwill Accounts Trademarks Could Firstbank have a security interest in the accounts? Other items? In re Shirel, page 154. “No reasonable third party would understand that a security interest was created in the refrigerator by merely looking to the description itself.”

70. 70 Problem 10.5, page 180 ELP lends Golan $35K secured by XT-100. XT-100 Copier #XEX30

71. 71 Problem 10.5, page 180 ELP lends Golan $35K secured by XT-100. a.Fire destroys copier. Loss insured. What is ELP’s collateral? XT-100 Copier #XEX30 Insurance payable

72. 72 Problem 10.5, page 180 ELP lends Golan $35K secured by XT-100. a.Fire destroys copier. Loss insured. What is ELP’s collateral? b.Insuror pays. Golan deposits. What is ELP’s collateral? XT-100 Copier #XEX30 Insurance payable Check Bank account DepositsWithdrawalsBalance Start$5,000 Insurance$35,000$40,000

73. 73 Problem 10.5, page 180 ELP lends Golan $35K secured by XT-100. a.Fire destroys copier. Loss insured. What is ELP’s collateral? b.Insuror pays. Golan deposits. What is ELP’s collateral? c.Golan writes check for rental. What is ELP’s collateral? XT-100 Copier #XEX30 Insurance payable Check Bank account Check to rent DepositsWithdrawalsBalance Start$5,000 Insurance$35,000$40,000 Rent check$2,000$38,000

74. 74 Problem 10.5, page 180 ELP lends Golan $35K secured by XT-100. a.Fire destroys copier. Loss insured. What is ELP’s collateral? b.Insuror pays. Golan deposits. What is ELP’s collateral? c.Golan writes check for rental. What is ELP’s collateral? XT-100 Copier #XEX30 Insurance payable Check Bank account DepositsWithdrawalsBalance Start$5,000 Insurance$35,000$40,000 Rent check$2,000$38,000 Next check$32,000$6,000 d. Golan writes check to IRS. What is ELP’s collateral? Check to rent Check to IRS

75. 75 Problem 10.6, page 180 Golan writes check for new copier. What is ELP’s collateral? XT-100 Copier #XEX30 Insurance payable Check Bank account DepositsWithdrawalsBalance Start$5,000 Insurance$35,000$40,000 Rent check$2,000$38,000 Next check$32,000$6,000 §9-332(b) Check to rent New copier

76. 76 Problem 10.6, page 180 Golan writes check for new copier. What is ELP’s collateral? XT-100 Copier #XEX30 Insurance payable Check Bank account DepositsWithdrawalsBalance Start$5,000 Insurance$35,000$40,000 Rent check$2,000$38,000 Next check$32,000$6,000 §9-332(b) Check to rent New copier

77. 77 Golan writes check for new copier. What is ELP’s collateral? $6,000 and probably the new copier. XT-100 Copier #XEX30 Insurance payable Check Bank account DepositsWithdrawalsBalance Start$5,000 Insurance$35,000$40,000 Rent check$2,000$38,000 Next check$32,000$6,000 Problem 10.6, page 180 Check to rent New copier

78. Three Possible Results $29,000 of the check was our proceeds. –But it would create a security interest for an amount less than the value of the collateral and less than the amount of the debt. Unusual Only the $6,000 in the bank account remains identifiable. –The remainder of the money loses its "identifiability" when it is commingled in the check with non-proceeds money. The new XT-100 is our collateral –Value of our collateral expands