1 Secured Transactions Assignment 16 The Personal Property Filing Systems

1

Secured TransactionsAssignment 16

The Personal Property Filing Systems

2

The Big Picture

Part One: The Creditor-Debtor Relationship

DebtorCreditor

3

The Big Picture


Part Two: The Creditor-Third Party Relationship

Debtor

Creditor

Creditor

PMSI Tax lien

Seller

Buyer

4

The Big Picture


Part Two: The Creditor-Third Party RelationshipChapter 6: Perfection

Debtor

Creditor

Creditor

PMSI Tax lien

Seller

Buyer

5

The Big Picture



Chapter 7: Maintaining Perfection

Debtor

Creditor

Creditor

PMSI Tax lien

Seller

Buyer

6

The Big Picture




Chapter 8: The Concept of Priority

Debtor

Creditor

Creditor

PMSI Tax lien

Seller

Buyer

7

The Big Picture




Chapter 8: The Concept of Priority

Chapter 9: Particular Priority Contests

Debtor

Creditor

Creditor

PMSI Tax lien

Seller

Buyer

8

The right to be paid in full in preference to others.

Priority: The Basic Idea

9


Example 1:

2nd

1st


10


Example 1: 1st gets all available value

2nd

1st


11



Example 2:

2nd

1st


12



Example 2: 1st is paid in full; 2nd gets the remainder

2nd

1st


13




Example 3:2nd

1st


14




Example 3: 1st and 2nd are paid in full2nd

1st


15

General rule: The first to attach and perfect a security interest has priority

Perfection: Public notice given by a proper method

Rationale:

- First’s treatment is fair because debtor agreed to it

- Later’s treatment is fair because they knew about first

Rejected rules:

Distribution based on status (wages, taxes, child support, etc., bankruptcy; government bailout $)

The right to trace value given (Louisiana vendor’s lien; statutory liens, author’s manuscript)

Priority: Who gets it?

16

1. Filing

2. Possession

3. Control

4. Automatic perfection

5. Levy

Methods of Perfection

17

To whom it may

concern: I’m first,

Filer

Filing system

To whom it may


Filer

To whom it may


Filer

To whom it may


Filer

To whom it may


Filer

To whom it may


Filer

To whom it may


Filer

To whom it may


Filer

To whom it may


Filer

To whom it may

concern: I’m first.-- Filer

Securedparty

For most collateral, a Secured Party can perfect multiple ways:

Or

Possession

18

To whom it may


Filer

Filing system

To whom it may


Filer

To whom it may


Filer

To whom it may


Filer

To whom it may


Filer

To whom it may


Filer

To whom it may


Filer

To whom it may


Filer

To whom it may


Filer

To whom it may

concern: I’m first.-- Filer

Securedparty

Searcher

For most collateral, a Secured Party can perfect multiple ways

The searcher must look for both.

Or And

Possession

19

UCC Searches

http://countyclerk.oklahomacounty.org/registrar-of-deeds/rod-search

http://www.azsos.gov/scripts/ucc_search.dll

http://corp.sec.state.ma.us/corp/psearch/default.asp

http://corp.sec.state.ma.us/corp/psearch/default.asp

20

The problem: Thousands of filing systemsReal estate and fixture filing systems in each of 3,000 counties

UCC filing system in each of 50 states

Automobile title filing system in each of 50 states

Mobile home title filing systems in many states

Boat title filing systems in many states

Alcoholic beverage license filing systems in Florida, etc.

Patent filing system (Washington)

Trademark filing system (Washington)

Copyright filing system (Washington)

Ship mortgage filing system (Coast Guard)

Aircraft filing system (Oklahoma City)

Railroad stock filing system

UNCITRAL mobile goods filing system (proposed)

21














22














23














24














25














26













UNCITRAL mobile goods filing system (international aircraft)

27













UNCITRAL mobile goods filing system (international aircraft)

Designation as loss payee on a policy of insurance

28













UNCITRAL mobile goods filing system (internationalaircraft)

Designation as a loss payee on a policy of insurance

For communication to occur, Filer must file in the right system and Searcher must search in that system

29

Which filing system?

§9-109(a). This article applies to a transaction . . . that creates a security interest in personal property or fixtures by contract

30



§9-310(a). Except as otherwise provided in subsection (b) (possession, control, automatic perfection) . . . a financing statement must be filed to perfect all security interests

31




§9-310(b). A financing statement is not necessary to perfect a security interest . . . in property subject to a statute, regulation, or treaty described in §9-311(a)

32





§9-311(a). [T]he filing of a financing statement is not necessary or effective to perfect a security interest in property subject to

(1) A statute ... of the United States [that] preempts §9-310(a)

33





§9-311(a). [T]he filing of a financing statement is not necessary or effective to perfect a security interest in property subject to

(1) A statute ... of the United States [that] preempts §9-310(a)

(2) [A certificate of title statute of this state]

34


§9-501(a). [I]f the local law of this State governs perfection of a security interest . . . the office in which to file a financing statement . . . is:

(1) the office designated for the filing of a mortgage . . . if the financing statement is filed as a fixture filing

35


§9-501(a). [I]f the local law of this State governs perfection of a security interest . . . the office in which to file a financing statement . . . is:

(1) the office designated for the filing of a mortgage . . . if the financing statement is filed as a fixture filing

(2) the office of the Secretary of State in all other cases . . .

36


§9-109(a)§9-310(a)

37


§9-109(a)§9-310(a)

Real property system

§9-501(a)(1)

38


§9-109(a)§9-310(a)


UCCfiling system

§9-501(a)(1)

§9-501(a)(2)

39


§9-109(a)§9-310(a)


UCCfiling system

§9-311(a)

§9-310(b)(3)

§9-501(a)(1)

§9-501(a)(2)

40


§9-109(a)§9-310(a)


UCCfiling system

Federal filing systems

§9-311(a)

§9-310(b)(3)

(1)

§9-501(a)(1)

§9-501(a)(2)

41


§9-109(a)§9-310(a)


UCCfiling system


§9-311(a)

State certificateof title systems

§9-310(b)(3)

(1)

(2)

§9-501(a)(1)

§9-501(a)(2)

50

Problem 16.1, page 293

30k

Leonard owes our client, Felicia, $30k for alimony and child support. Felicia has a judgment.

Auto

51


30k


Leonard owes Bernie $36k for money loaned. Leonard gives Bernie a perfected security interest.

Auto

52


30k



a. Where does Felicia stand?

Auto

53


$36k

30k



a. Where does Felicia stand? Subordinate, not yet perfected.

Bernie

Felicia

Auto

54


$36k

30k

$30k




b. Can she go ahead with the levy? §9-401.

Bernie

Felicia

Auto

55


$36k

30k

$30k




b. Can she go ahead with the levy? §9-401. What will happen if she does?

Bernie

Felicia

56


$36k

30k

$30k





Bernie has priority. §9-317(a)(2)

Bernie

Felicia

57


30k





Bernie has priority. §9-317(a)(2)

d. Before either has a lien, why should Leonard get to decide who gets paid?

Auto

58


Contract: “The priority of a secured creditor over other financial creditors can be justified on the grounds that non-secured creditors grant a loan knowing that some assets are subject to security interests or could be subjected to security interests without their permission. If particular creditors will not tolerate other creditors having security interests in the borrower’s assets, they can refuse to make a loan or make it only if the borrower agrees not to subject its assets to any security interests.” Leebron

59


Property: “It seems clear enough that security interests, under Article 9 and real estate law alike, are interests in property. The legal regime for security interests reflects property law functionally as well as doctrinally. We believe it follows that the law should honor the transfer or retention of security interests on the same normative grounds on which it respects the alienation of property generally.”

Harris & Mooney

60

Mark StevieCartsale


$4K

61

Mark StevieCartsale

Problem 16.3, page 294GeneralFinance

Securityinterest GFC

$5K

$4K

62

Mark StevieCartsale



$5K

Is Stevie a BFP?$4K

63

Mark StevieCartsale



$5K

Is Stevie a BFP?Can GFC take his cart? $4K

64

GeneralFinance

Mark StevieCartsale



$5K

§9-315(a). A security interest . . . continues in collateral notwith-standing sale unless the secured party authorized the disposition free of the security interest . . .


65

GeneralFinance

Mark StevieCartsale



$5K


§9-201(a). [A] security agreement is effective according to its terms . . . against purchasers of the collateral . . . .


66

GeneralFinance

Mark StevieCartsale



$5K



§1-103(b) Unless displaced by [particular UCC provisions] the principles of law and equity . . . supplement [UCC] provisions.


67

GeneralFinance

Mark StevieCartsale



$5K




§1-304. Every contract or duty within [the UCC] imposes an obligation of good faith in its performance and enforcement.


68

GeneralFinance

Mark StevieCartsale


Securityinterest





What do we tell Stevie?

69

GeneralFinance

Mark StevieCartsale


Securityinterest





What do we tell Stevie?Is GFC’s conduct “virtually fraudulent?”

70

GeneralFinance

Mark StevieCartsale


Securityinterest





What do we tell Stevie?Is GFC’s conduct “virtually fraudulent?”

What is the relevance of other GFC cases?

71

LehmanBrothers

First Alliance

Homeowners

Predatoryloans


Securityinterest





72

LehmanBrothers

First Alliance

Homeowners

Predatoryloans


Securityinterest





Ninth Circuit, 2006: Lehman Brothers may have “aided and abetted” the First Alliance fraud.

73






th Circuit, 2006: Le General Finance may have “aided and abetted” Mark’s fraud.

GeneralFinance

Mark StevieCartsale

Securityinterest

74


§9-109(a)§9-310(a)


UCCfiling system


§9-311(a)

State certificateof title systems

§9-310(b)(3)

(1)

(2)

§9-501(a)(1)

§9-501(a)(2)

Security interests in “personal property or fixtures”

75

a. Where do we file on Keith Pipes’ tools? §9-109, 9-501(2).

UCC filing system

Where do we search?

b. Bernie Wolfson’s patent? §9-109(c)(1); 9-311(a)(1)

UCC filing system (Cybernetic)

Where do we search?


76Assignment


UCC filing system

Where do we search?



Where do we search?

If Wolfson sold the patent to Sheepson, and Sheepson granted a security interest, how would we discover that?


Wolfson SheepsonPTO Issuance

77

Securityinterest


UCC filing system

Where do we search?



Where do we search?



Wolfson SheepsonPTO

Bank2 Bank1

AssignmentIssuance

Securityinterest

78

Securityinterest


UCC filing system

Where do we search?



Where do we search?



Wolfson SheepsonPTO

Bank2 Bank1

AssignmentIssuance

Securityinterest

Shouldn’t the system have required all filings in the PTO?

79


UCC filing system

Where do we search?



Where do we search?


c. Nyl Ikcupol’s royalties?


80


UCC filing system

Where do we search?



Where do we search?


c. Nyl Ikcupol’s royalties? Accounts? Copyright receivables?


81


UCC filing system

Where do we search?



Where do we search?


c. Nyl Ikcupol’s royalties? Accounts? Copyright receivables?

Broadcast Music v. Hirsch, page 290. File in UCC records. Shouldn’t we take the copyrights as collateral?


82

d. Where do we file on the Indiana auto dealer’s auto inventory? § 9-311(a)(2) and (d); 9-501(a)(2)

Secretary of State, UCC

Dealer’s autos not for sale? § 9-311(a)(2)

Secretary of State, Division of Motor Vehicles

Dealer’s accounts from sale of automobiles? §9-501(a)(2)


Dealer’s trademark? Note 14, page 290



83

84

85

Aneta Ferguson, The Trademark Filing Trap, 49 Idea 197 (2009)

86


87


88


89

90


Search File

File Search

Disburse

Disburse

We represent a bank, taking security interests. If first to file wins, should we search first or file first?

91


Search File

File Search

Disburse

DisburseCompetingFiling 2

CompetingFiling 2

We represent a bank, taking security interests. If first to file wins, should we search first or file first? Is this filing a problem?

92


Search File

File Search

Disburse

DisburseCompetingFiling 2

CompetingFiling 2


93


File Search Disburse


Answer:

1. File first.

2. Search through the date of filing.

3. If the search results show the filing to be first, disburse.

CompetingFiling 2

CompetingFiling 3

CompetingFiling 1

Documents

1 Secured Transactions Assignment 16 The Personal Property Filing Systems