Quiz 34: Secured Transactions in Personal Property
Refer to the case Webb v Interstate Land Corp Case Issue The issue is whether a purchaser of the property (plaintiff) has a claim on a collateral item, an electronic sign, on that property, or whether the collateral item belongs to the secured creditor (defendant). Trial court held for plaintiff, defendant appealed. Relevant Terms, Laws, and Cases Utah 70A-9-313 - Utah State UCC gives a creditor security interest to fixtures on real property as long as they filed financial statement under the fixture categories. Opinion Appeals court affirmed the decision. The court found that the electronic sign was considered a fixture of the property and according to their State's UCC 70A-9-313 must be filed with the property. Since, the defendant failed to file correctly, the plaintiff as a purchaser has priority over the sign.
Refer to the case In re McLeod v Sears, Roebuck Co. Case Issue The issue is whether the company (defendant) which sold a debtor (plaintiff) items on credit has a valid purchase money security interest on those items. Relevant Terms, Laws, and Cases Security agreement - is a contract that has a security interest, collateral. For example, a creditor may loan money to the debtor with a property that belongs to the debtor as collateral. The creditor may repossess the collateral if the debtor defaults. UCC 9-203 - states how security interest is created. 1. A security agreement, e.g. a loan with collateral, is formed. There is sufficient description of the collateral. 2. Value is given 3. Debtor has rights in collateral Purchase Money Security Interest (PMSI) - security interest based on conditional sale. If the sale was financed by a creditor (can be seller itself, or a third party such as bank), then the creditor would have the PMSI on the sold items as collateral. PMSI do not need to be filed to be perfected. (Note perfected secured creditors have higher priority over other creditors). Opinion The bankruptcy court held for the defendant. The issue debtor contended was that the PMSI was invalid because the description was insufficient. However, the court disagreed. Court argued it didn't matter if the debtor owned similar items that wasn't sold by the defendant as long as the sales slip mentioned the description of the items sufficiently and can be identified; the slip mentions the name of the items and what it is. Hence, the defendant has a valid PMSI to those items.
Definitions UCC 9-306 - holds that the security interest on collateral extends to proceeds of the collateral. Proceeds typically include money from sales, and insurance of the collateral. Discussion The insurance paid is a proceed to the collateral and under UCC 9-306 the bank's security interest extends to it. The bank is correct to assert is claim over the insurance money that was paid when the collateral was partly destroyed.