UCC For Secured Transactions
(Revised Article 9)
(Revised Article 9)
UCC For Secured Transactions (Revised Article 9)
Art. 9 Secured Transactions: UCC Article 9 applies to:
(1) a transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract;
(2) an agricultural lien;
(3) a sale of accounts, chattel paper, payment intangibles, or promissory notes;
(4) a consignment; and
(5) a security interest. However, interest in a secured obligation is not affected by the fact that the obligation is itself secured by a transaction or interest to which this article does not apply.
Example Case 1:
A number of years ago I filed a UCC-1 for a client of mine on a customer located in Chicago. After approximately three years had passed, my client called me frantically that his customer had filed for bankruptcy, and was not responding to his demands that the goods he had given him on consignment, which were valued at over one million dollars, should be returned to him immediately. I asked him to send me all of the information regarding the bankruptcy and discovered that there was a hearing with the bankruptcy judge the following week. The UCC –1 which I filed provided that the security interest would be a Purchase Money Security Interest and therefore the goods on consignment in the possession of the customer in Chicago should be returned to my client.
I convinced my client that the best advice would be for both of us to get on a plane and to attend the hearing, at which time we would meet with the customer and his attorney who would be attending the hearing and demand the return of the goods. We did so, and after a long discussion with the client and his attorney, providing proof of our Purchase Money Security Interest, we proceeded to go to my client’s customer’s office and we successfully retrieved all of my client’s goods that were there (approximately 80% of all the goods that were on consignment), and the balance of the goods that were out with his customers were returned a month later.
By having filed the UCC-1 properly and gotten a Purchase Money Security Interest, along with taking the initiative and hopping on a plane to Chicago, I was able to assist my client in retrieving his goods, and saving them from the hands of his customer’s other creditors.
Example Case 2:
In another bankruptcy case, Whitehall Jewelers, the attorneys representing the bankrupt insisted that each one of the individual creditors provide proof that his security interests were filed properly. It turned out that a large number of creditors had improperly filed their UCC’s, having filed in the wrong jurisdictions, having misspelled the debtors name, our having not met the exact requirements to get a Purchase Money Security Interest. Had the attorneys continued to proceed to demand proof, these creditors would have lost their security interest and have lost their goods to the existing prior secured creditors who filed properly.
By knowing the exact requirements of the UCC to acquire a Purchase Money Security Interest, my filing was never challenged, and my client received his goods in a timely manner.
Example Case 3:
I am on occasion asked by a number of clients whether they are able to file a security interest on their customer which is located in a foreign country. The answer is complex, and depends on the specific country in which their customer is located. In one occasion, my client’s customer had many distribution centers located in the Caribbean. In the Caribbean it is very difficult, if not impossible, to secure the consignment goods. Even if my client filed a security interest and complied with all of the requirements of the specific Caribbean localities, the chances of having such security interest enforced in my client’s favor would be questionable at best.
However, after further inquiry, I discovered that although my client’s customer was selling the goods in the Caribbean, he maintained his official business location in Florida. By doing this research on the client’s customer I was able to file UCC in Florida and acquire a Purchase Money Security Interest on the goods, allowing my client to do the business he had hoped to conclude.
Once again, going beyond the initial response that the business could not be secured, I was able to achieve a successful outcome for my client.