Maintaining Perfection

Question 1

Change in Debtor’s Name

1. General Rule

Answer 1

1. General Rule - UCC 9-507(c) – if the name that a filed financing statement provides for a debtor … becomes seriously misleading …(1) the financing statement is effective to perfect … in collateral acquired … before, or within four months after, the filed financing statement becomes seriously misleading;
   
   1. Effect of Late Amendment Filing - Comment 4 to 9-507 – if the amendment is filed more than four months after the change, that amendment is effective against collateral acquired more than four months after the change, but only from the time of the filing of the amendment.

Question 2

Change in Owner

1. General Rule

Answer 2

1. Changes in Owner (New Debtor) – UCC 9-507(a) – A filed financing statement remains effective with respect to collateral that is sold … even if the secured party knows of the … disposition.
   
   1. Secured Creditor’s Duty to Inquire - Comment 3 to 9-507 – Any 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 the name of the former owner.

Question 3

Changes in Collateral

1. Changes in Physical Use
2. Proceeds

Answer 3

Changes in Collateral

1. Changes in Physical Use - – UCC 9-507(b) - a filed financing statement remains effective (despite misdescription due to change in character of collateral)
   
   1. Exception - creditor not perfected if financing statement in wrong office for changed collateral.
2. Proceeds - a security interest attaches to any identifiable proceeds and automatically pefects if the original collateral was perfected.
   
   1. Exception - perfected security interest in proceeds becomes unperfected 21 days after attachment unless:
      
      1. (a) financing statement on original collateral, (b) could perfect in proceeds by filing in same office, and (c) proceeds not cash.
      2. Proceeds are cash
      3. perfection when security interest attaches or within 20 days.

Question 4

Relocation of Debtor and Collateral

1. General Rule
2. Exceptions
   3.

Answer 4

Relocation of Debtor

1. General Rule – UCC 9-301(1) – Except as otherwise provided in this section, while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection and priority.
2. Exceptions
   
   1. Fixtures, Timber, Goods - UCC 9-301(3) - while tangible negotiable documents, goods, instruments, money, or tangible chattel paper is located in a jurisdiction, the local law of that jurisdiction governs:
      
      1. (A) perfection of a security interest in the goods by filing a fixture filing;
      2. (B) perfection of a security interest in timber to be cut; and
      3. (C) the effect of perfection or nonperfection and the priority of a nonpossessory security interest in the collateral.
   2. Possessory Security Interests – UCC 9-301(2) - While collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority..
   3. Agricultural Liens – UCC 9-302 - While farm products are located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority.
   4. Goods Covered by Certificate of Title - The local law of the jurisdiction under whose certificate of title the goods are covered governs perfection, the effect of perfection or nonperfection, and the priority.

Question 5

Where is the Debtor Located for Purposes of Perfection?

1. Individuals
2. Registered Organization
3. Registered Organization (Chartered by the U.S.)
4. United States
5. Unregistered Organizations -
6. Unregistered Organizations with Chief Executive Office in a Non-Filing Jurisdiction

Answer 5

Where is the Debtor Located for Purposes of Perfection?

1. Individuals – UCC 9-307(b)(1) – the debtor’s principal residence
2. Registered Organization – UCC 9-307(e) – State of incorporation
3. Registered Organization (Charted by the U.S.) – UCC 9-307(f) – Place designated by the U.S. or the District of Columbia
4. United States – UCC 9-307(f) – District of Columbia
5. Unregistered Organizations - UCC 9-307(b)
   
   1. If only one location = place of busiess.
   2. If more than one location = at its chief executive office. With Chief Executive Office in a Filing Jurisdiction –
6. Unregistered Organizations with Chief Executive Office in a Non-Filing Jurisdiction – UCC 9-307(c) – District of Columbia.
   
   1. Note –
      
      1. all states have a filing system so this will only apply when dealing with other countries.
      2. Non-filing jurisdiction means a state or country that doesn’t require filing as a prerequisite for obtaining perfection.

Question 6

When Does a Security Interest Lose Perfection

1. General Rule
2. Exception

Answer 6

1. UCC 9-316(a) - A properly perfected security interest remains perfected until the earliest of:
   
   1. (1) the time perfection would have ceased under the law of that jurisdiction;
   2. (2) the expiration of four months after a change of the debtor’s location to another jurisdiction; or
   3. (3) the expiration of one year after a transfer of collateral to a person that thereby becomes a debtor and is located in another jurisdiction.
2. Exception - if the secured creditor re-perfects in the new jurisdiction before the expiration of the events specified above, they remain perfected.

Question 7

Accession and Commingled Goods

1. Accession
2. Affect of Accession on Priority
3. Comingled Goods
4. Effect of Commingled Goods on Priority

Answer 7

Problems of Accession

1. Accession - goods that are physically united with other goods in such a manner that t_he identity of the original goods is not lost._
   
   1. Priority -
      
      1. Certificate of Title Rule - a security interst in the whole has priority over a security interest in the accession if the whole is perfected under a state’s certificate of title statute.
      2. Foreclosure/Repossession - secured creditor in the accession can’t repossess or foreclose unless secured creditor has priority over every person having an interest in the whole.
2. Commingled Goods - goods that are physically united with other goods in such a manner that their identity is lost in a product or mass.
   
   1. no security interest in original good, but rather security interest transfers to comingled product.
3. Effect of Commingled Goods on Priority -
   
   1. Perfection - If a security interest in collateral is perfected before the collateral becomes commingled goods, the security interest that attaches to the product or mass under subsection (c) is perfected.
   2. Priority - If more than one security interest attaches to the same commingled product
      
      1. Security interest perfected when goods became commingled perfects over unperfected security interest.
      2. If more than one were perfected when goods became commingled, then they share pro rata in the value of the collateral when it became commingled.