Assignment 9

Report
Secured Transactions
Assignment 9
Collateral and Obligations
Covered
The Big Picture
Chapter 1. Creditors’ Remedies Under State Law
Chapter 2. Creditors’ Remedies in Bankruptcy
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)
Assignment 12: Skip
The Big Picture
Chapter 1. Creditors’ Remedies Under State Law
Chapter 2. Creditors’ Remedies in Bankruptcy
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)
Assignment 12: Skip
The Big Picture
Chapter 1. Creditors’ Remedies Under State Law
Chapter 2. Creditors’ Remedies in Bankruptcy
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)
Assignment 12: Skip
Two issues in Assignment 9
Asset
“Collateral”
What collateral
secures the
obligations?
Lien
Security interest
Debt
“Obligation”
What
obligations are
secured?
Two issues in Assignment 9
Asset
“Collateral”
Lien
Security interest
What collateral
secures the
obligations?
Debt
“Obligation”
What
obligations are
secured?
Whatever the
security
agreement says
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
2. The security agreement
speaks as of its
execution
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
2. The security agreement
speaks as of its
execution
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
2. The security agreement
speaks as of its
execution
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
2. The security agreement
speaks as of its
execution
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
2. The security agreement
speaks as of its
execution
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapidturnover assets
5. But see §9-108
comment 3
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
2. The security agreement
speaks as of its
execution
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapidturnover assets
5. But see §9-108
comment 3
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
2. The security agreement
speaks as of its
execution
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
Validity (of descriptions)
9-203(b)(3)(A) requires a
description
“Much
litigation has arisen
over whether
9-108
permits a description in a
agreement is
1.security
Specific
to include after2.sufficient
Category
collateral if the
3.acquired
UCC category
4.agreement
Quantity does not explicitly
so provide. This question is
5. Computational formula
one of contract interpretation
6.and
Any
other
if “objectively
is not
suceptible
to a
determinable”
statutory rule. Accordingly,
7.this
Not
“all assets”
seciton
contains no
8.reference
Not “commercial
tort claims
to descriptions
of
9.after-acquired
Not “consumer
goods”
property.
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
2. The security agreement
speaks as of its
execution
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
Validity (of descriptions)
9-203(b)(3)(A) requires a
description
“Much
litigation has arisen
over whether
9-108
permits a description in a
agreement is
1.security
Specific
to include after2.sufficient
Category
collateral if the
3.acquired
UCC category
4.agreement
Quantity does not explicitly
so provide. This question is
5. Computational formula
one of contract interpretation
6.and
Any
other
if “objectively
is not
susceptible
to a
determinable”
statutory rule. Accordingly,
7.this
Not
“all assets”
section
contains no
8.reference
Not “commercial
tort claims
to descriptions
of
9.after-acquired
Not “consumer
goods”
property.”
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
2. The security agreement
speaks as of its
execution
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
Validity (of descriptions)
9-203(b)(3)(A) requires a
description
9-108 permits
1. Specific
2. Category
3. UCC category
4. Quantity
5. Computational formula
6. Any other if “objectively
determinable”
7. Not “all assets”
8. Not “commercial tort claims
9. Not “consumer goods”
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
Validity (of descriptions)
9-203(b)(3)(A) requires a
description
2. The security agreement
speaks as of its
execution
9-108 permits
1. Specific
2. Category
3. UCC category
4. Quantity
5. Computational formula
6. Any other if “objectively
determinable”
7. Not “all assets”
8. Not “commercial tort claims
9. Not “consumer goods”
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
Validity (of descriptions)
9-203(b)(3)(A) requires a
description
2. The security agreement
speaks as of its
execution
9-108 permits
1. Specific
2. Category
3. UCC category
4. Quantity
5. Computational formula
6. Any other if “objectively
determinable”
7. Not “all assets”
8. Not “commercial tort claims
9. Not “consumer goods”
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
Validity (of descriptions)
9-203(b)(3)(A) requires a
description
2. The security agreement
speaks as of its
execution
9-108 permits
1. Specific
2. Category
3. UCC category
4. Quantity
5. Computational formula
6. Any other if “objectively
determinable”
7. Not “all assets”
8. Not “commercial tort claims
9. Not “consumer goods”
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
Validity (of descriptions)
9-203(b)(3)(A) requires a
description
2. The security agreement
speaks as of its
execution
9-108 permits
1. Specific
2. Category
3. UCC category
4. Quantity
5. Computational formula
6. Any other if “objectively
determinable”
7. Not “all assets”
8. Not “commercial tort claims
9. Not “consumer goods”
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
Validity (of descriptions)
9-203(b)(3)(A) requires a
description
2. The security agreement
speaks as of its
execution
9-108 permits
1. Specific
2. Category
3. UCC category
4. Quantity
5. Computational formula
6. Any other if “objectively
determinable”
7. Not “all assets”
8. Not “commercial tort claims
9. Not “consumer goods”
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
Validity (of descriptions)
9-203(b)(3)(A) requires a
description
2. The security agreement
speaks as of its
execution
9-108 permits
1. Specific
2. Category
3. UCC category
4. Quantity
5. Computational formula
6. Any other if “objectively
determinable”
7. Not “all assets”
8. Not “commercial tort claims
9. Not “consumer goods”
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
Validity (of descriptions)
9-203(b)(3)(A) requires a
description
2. The security agreement
speaks as of its
execution
9-108 permits
1. Specific
2. Category
3. UCC category
4. Quantity
5. Computational formula
6. Any other if “objectively
determinable”
7. Not “all assets”
8. Not “commercial tort claims
9. Not “consumer goods”
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
Validity (of descriptions)
9-203(b)(3)(A) requires a
description
2. The security agreement
speaks as of its
execution
9-108 permits
1. Specific
2. Category
3. UCC category
4. Quantity
5. Computational formula
6. Any other if “objectively
determinable”
7. Not “all assets”
8. Not “commercial tort claims”
9. Not “consumer goods”
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
Contract interpretation and validity
Interpretation
1. Generally: The rules of
contract govern
Validity (of descriptions)
9-203(b)(3)(A) requires a
description
2. The security agreement
speaks as of its
execution
9-108 permits
1. Specific
2. Category
3. UCC category
4. Quantity
5. Computational formula
6. Any other if “objectively
determinable”
7. Not “all assets”
8. Not “commercial tort claims”
9. Not “consumer goods”
3. “All equipment” means
“all equipment presently
owned”
4. Exception for inventory,
accounts, other rapid
turnover assets
5. But see §9-108
comment 3
After-Acquired Property
Definition: Collateral acquired after security agreement is signed
Issue: Must the description say “after-acquired” to include it?
§9-204(a) A security agreement may provide for after acquired
§9-108. Cmt 3. “Much litigation has arisen over whether a
description in a security agreement is sufficient to include afteracquired collateral if the agreement does not explicitly so
provide. This question is one of contract interpretation and is
not susceptible to a statutory rule. . . . Accordingly, this section
contains no reference to descriptions of after-acquired
collateral.
Case law: Cases turn on the facts. Most likely outcomes:
“All inventory” is held to include after-acquired inventory
“All equipment” is held not to include after-acquired
25
Rules for interpretation and validity
§9-108(a)(6) “Objectively determinable” by whom? Using
what additional information?
26
Rules for interpretation and validity
§9-108(a)(6) “Objectively determinable” by whom? Using
what additional information?
1. Example: “inventory” is goods held for sale – depends
on debtor’s intention – OK
27
Rules for interpretation and validity
§9-108(a)(6) “Objectively determinable” by whom? Using
what additional information?
1. Example: “inventory” is goods held for sale – depends
on debtor’s intention – OK
2. Example: “Crops growing on real estate described by
ASCS Farm Serial Number J-528” – OK
28
Rules for interpretation and validity
§9-108(a)(6) “Objectively determinable” by whom? Using
what additional information?
1. Example: “inventory” is goods held for sale – depends
on debtor’s intention – OK
2. Example: “Crops growing on real estate described by
ASCS Farm Serial Number J-528” – OK
3. Example: “The equipment in the restaurant at 123
Main Street.” (Consider the possibility it will be
moved.) – OK
29
Rules for interpretation and validity
§9-108(a)(6) “Objectively determinable” by whom? Using
what additional information?
1. Example: “inventory” is goods held for sale – depends
on debtor’s intention – OK
2. Example: “Crops growing on real estate described by
ASCS Farm Serial Number J-528” – OK
3. Example: “The equipment in the restaurant at 123
Main Street.” (Consider the possibility it will be
moved.) – OK
4. Example: “Creditor shall have a security interest in all
items purchased on this account” – Not OK, Shirel
30
Rules for interpretation and validity
§9-108(a)(6) “Objectively determinable” by whom? Using
what additional information?
1. Example: “inventory” is goods held for sale – depends
on debtor’s intention – OK
2. Example: “Crops growing on real estate described by
ASCS Farm Serial Number J-528” – OK
3. Example: “The equipment in the restaurant at 123
Main Street.” (Consider the possibility it will be
moved.) – OK
4. Example: “Creditor shall have a security interest in all
items purchased on this account” – Not OK, Shirel
Shirel is an exception. Most courts allow extrinsic
evidence. Otherwise, most descriptions would fail
31
In re Shirel
“It is understandable for a creditor to desire one
catchall phrase which creates a security agreement
in every possible situation. However, in doing so, it
may not ignore one of the primary reasons for
creating a security agreement, which is to give notice
to a third party. [If that is the case why is it a private
agreement nobody can read?] This can only be
achieved by describing what property is subject to the
security interest.”
Judge Bohanon does not seem to understand the
difference between a security agreement and a
financing statement.
33
34
Problem 9.1, page 160
a. “All equipment and inventory”
§9-108(b)(3), “a type of collateral defined in the Uniform
Commercial Code”
b. “All items purchased with the card”
c. “Restaurant equipment located at 123 Main Street.” Debtor
has a restaurant there.
d. “All of the debtor’s consumer goods”
§9-108(e)
e. “All goods other than consumer goods.” §9-108(b)(3) UCC
category. §9-108(c), supergeneric?
35
Problem 9.2, page 161
36
Problem 9.2, page 161
Description of collateral in Shirel (page 152):
“Respondent will have a security interest in all ‘merchandise’
purchased with the credit card.”
37
Problem 9.2, page 161
Description of collateral in Shirel (page 152):
“Respondent will have a security interest in all ‘merchandise’
purchased with the credit card.”
Holding: Description insufficient because it does not reasonably
describe the collateral. Respondent is unsecured.
38
Problem 9.2, page 161
Description of collateral in Shirel (page 152):
“Respondent will have a security interest in all ‘merchandise’
purchased with the credit card.”
Holding: Description insufficient because it does not reasonably
describe the collateral. Respondent is unsecured.
Our client’s (Walter’s Department Store) description of
collateral (page 161):
“Cardholder grants Walter’s a security interest in all items
purchased on the account.”
39
Problem 9.2, page 161
Description of collateral in Shirel (page 152):
“Respondent will have a security interest in all ‘merchandise’
purchased with the credit card.”
Holding: Description insufficient because it does not reasonably
describe the collateral. Respondent is unsecured.
Our client’s (Walter’s Department Store) description of
collateral (page 161):
“Cardholder grants Walter’s a security interest in all items
purchased on the account.”
Insufficient, but why . . . .
40
Problem 9.2, page 161
Some statements from Shirel:
The form says “respondent will have a security interest in all
‘merchandise’ purchased with the credit card.” page 152.
41
Problem 9.2, page 161
Some statements from Shirel:
The form says “respondent will have a security interest in all
‘merchandise’ purchased with the credit card.” page 152.
[T]he phrase “all merchandise” is . . . too liberal, too
imprecise, and is not a description. . . . [I]t does not set forth a
graphic or detailed account of the purported collateral.” A
“sufficient description might have been a refrigerator” p 153-4
42
Problem 9.2, page 161
Some statements from Shirel:
The form says “respondent will have a security interest in all
‘merchandise’ purchased with the credit card.” page 152.
[T]he phrase “all merchandise” is . . . too liberal, too
imprecise, and is not a description. . . . [I]t does not set forth a
graphic or detailed account of the purported collateral.” A
“sufficient description might have been a refrigerator” p 153-4
“One of the primary reasons for creating a security agreement . .
. is to give notice to a third party. This can only be achieved
by describing what property is subject to the security interest.”
43
Problem 9.2, page 161
Some statements from Shirel:
The form says “respondent will have a security interest in all
‘merchandise’ purchased with the credit card.” page 152.
[T]he phrase “all merchandise” is . . . too liberal, too
imprecise, and is not a description. . . . [I]t does not set forth a
graphic or detailed account of the purported collateral.” A
“sufficient description might have been a refrigerator” p 153-4
“One of the primary reasons for creating a security agreement . .
. is to give notice to a third party. This can only be achieved
by describing what property is subject to the security interest.”
What can we do to satisfy Judge Bohanon?
44
Problem 9.2, page 161
Some statements from Shirel:
The form says “respondent will have a security interest in all
‘merchandise’ purchased with the credit card.” page 152.
[T]he phrase “all merchandise” is . . . too liberal, too
imprecise, and is not a description. . . . [I]t does not set forth a
graphic or detailed account of the purported collateral.” A
“sufficient description might have been a refrigerator” p 153-4
“One of the primary reasons for creating a security agreement . .
. is to give notice to a third party. This can only be achieved
by describing what property is subject to the security interest.”
What can we do to satisfy Judge Bohanon?
16 CFR 444.1 prohibits taking . . . a nonpossessory security
interest in household goods other than a purchase
money
45
security interest.
Problem 9.4, page 161
SA
signed
Planting
Now
Harvest
Crop in ground
Description: “crops growing on the debtor’s farm in Osprey
County, about 14 miles from Tilanook”
46
Problem 9.4, page 161
SA
signed
Planting
Now
Harvest
Crop in ground
Description: “crops growing on the debtor’s farm in Osprey
County, about 14 miles from Tilanook”
a. Does First National have a SI in these crops?
47
Problem 9.4, page 161
SA
signed
Crop in ground
Planting
Now
Harvest
Crop in ground
Description: “crops growing on the debtor’s farm in Osprey
County, about 14 miles from Tilanook”
a. Does First National have a SI in these crops? Make any
difference if there were crops in the ground when the
security agreement was signed?
48
Problem 9.4, page 161
SA
signed
Crop in ground
Planting
Now
Harvest
Crop in ground
Description: “crops growing on the debtor’s farm in Osprey
County, about 14 miles from Tilanook”
a. Does First National have a SI in these crops? Make any
difference if there were crops in the ground when the
security agreement was signed?
49
Problem 9.4, page 161
SA
signed
Crop in ground
Planting
Now
Harvest
Crop in ground
Description: “crops growing on the debtor’s farm in Osprey
County, about 14 miles from Tilanook”
a. Does First National have a SI in these crops? Make any
difference if there were crops in the ground when the
security agreement was signed? Future crops or none!
50
Problem 9.4, page 161
SA
signed
Crop in ground
Planting
Now
Harvest
Crop in ground
Description: “crops growing on the debtor’s farm in Osprey
County, about 14 miles from Tilanook”
a. Does First National have a SI in these crops? Make any
difference if there were crops in the ground when the
security agreement was signed? Future crops or none!
Charles v. Fidelity State Bank (D. Kan. 1987) (“Crops
growing” is present tense; for future crops the security
interest should say “crops to be grown.”)
51
Problem 9.4, page 161
SA
signed
Planting
Crop in ground
Now
Harvest
Crop in ground
Description: “crops growing on the debtor’s farm in Osprey
County, about 14 miles from Tilanook”
a. Does First National have a SI in these crops? Make any
difference if there were crops in the ground when the
security agreement was signed? Future crops or none!
Charles v. Fidelity State Bank (D. Kan. 1987) (“Crops
growing” is present tense; for future crops the security
interest should say “crops to be grown.”)
b. What advice for the Gillams?
52
Problem 9.4, page 161
SA
signed
Crop in ground
Planting
Now
Harvest
Crop in ground
Description: “crops growing on the debtor’s farm in Osprey
County, about 14 miles from Tilanook”
a. Does First National have a SI in these crops? Make any
difference if there were crops in the ground when the
security agreement was signed? Future crops or none!
Charles v. Fidelity State Bank (D. Kan. 1987) (“Crops
growing” is present tense; for future crops the security
interest should say “crops to be grown.”)
b. What advice for the Gillams? Who is right is not
determinative. Title to the crops is “clouded.”
53
Problem 9.6, page 162
We are advising a secured creditor on the coverage of its
security interest.
61
Problem 9.6, page 162
We are advising a secured creditor on the coverage of its
security interest.
The description: “All of Debtor’s equipment, including
replacement parts, additions, repairs, and accessories
incorporated therein or affixed thereto. Without limitation the
term ‘equipment’ includes all items used in recording ,
processing, playing back, or broadcasting moving or still
pictures, by whatever process.”
62
Problem 9.6, page 162
We are advising a secured creditor on the coverage of its
security interest.
The description: “All of Debtor’s equipment, including
replacement parts, additions, repairs, and accessories
incorporated therein or affixed thereto. Without limitation the
term ‘equipment’ includes all items used in recording ,
processing, playing back, or broadcasting moving or still
pictures, by whatever process.”
The disputed collateral: Video equipment similar to that
owned at time of security agreement signing, but acquired
later.
63
Problem 9.6, page 162
We are advising a secured creditor on the coverage of its
security interest.
The description: “All of Debtor’s equipment, including
replacement parts, additions, repairs, and accessories
incorporated therein or affixed thereto. Without limitation the
term ‘equipment’ includes all items used in recording ,
processing, playing back, or broadcasting moving or still
pictures, by whatever process.”
The disputed collateral: Video equipment similar to that
owned at time of security agreement signing, but acquired
later.
The issue: Does the description cover the disputed collateral?
64
Problem 9.6, page 162
We are advising a secured creditor on the coverage of its
security interest.
The description: “All of Debtor’s equipment, including
replacement parts, additions, repairs, and accessories
incorporated therein or affixed thereto. Without limitation the
term ‘equipment’ includes all items used in recording ,
processing, playing back, or broadcasting moving or still
pictures, by whatever process.”
The disputed collateral: Video equipment similar to that
owned at time of security agreement signing, but acquired
later.
The issue: Does the description cover the disputed collateral?
The law: Ҥ9-201(a). [A] security agreement is effective
65
according to its terms . . . .”
Problem 9.6, page 162
We are advising a secured creditor on the coverage of its
security interest.
The description: “All of Debtor’s equipment, including
replacement parts, additions, repairs, and accessories
incorporated therein or affixed thereto. Without limitation the
term ‘equipment’ includes all items used in recording ,
processing, playing back, or broadcasting moving or still
pictures, by whatever process.”
The disputed collateral: Video equipment similar to that
owned at time of security agreement signing, but acquired
later.
The issue: Does the description cover the disputed collateral?
The law: Ҥ9-201(a). [A] security agreement is effective
66
according to its terms . . . .”
Problem 9.6, page 162
The court: "Addition" is defined in Black's Law dictionary as
an "[e]xtension; increase; augmentation." This definition in no
way contemplates that "additions" is sufficient to reasonably
identify the after-acquired collateral.“
67
Problem 9.6, page 162
The court: "Addition" is defined in Black's Law dictionary as
an "[e]xtension; increase; augmentation." This definition in no
way contemplates that "additions" is sufficient to reasonably
identify the after-acquired collateral.“
Additions" . . . is listed among the words "replacement
parts . . . repairs, and accessories,"
68
Problem 9.6, page 162
The court: "Addition" is defined in Black's Law dictionary as
an "[e]xtension; increase; augmentation." This definition in no
way contemplates that "additions" is sufficient to reasonably
identify the after-acquired collateral.“
Additions" . . . is listed among the words "replacement
parts . . . repairs, and accessories," and . . . clearly and
unambiguously refers to items like replacement parts, repairs,
and accessories, which can be incorporated in or affixed to
the existing equipment . . .
69
Problem 9.6, page 162
The court: "Addition" is defined in Black's Law dictionary as
an "[e]xtension; increase; augmentation." This definition in no
way contemplates that "additions" is sufficient to reasonably
identify the after-acquired collateral.“
Additions" . . . is listed among the words "replacement
parts . . . repairs, and accessories," and . . . clearly and
unambiguously refers to items like replacement parts, repairs,
and accessories, which can be incorporated in or affixed to
the existing equipment . . .
Had the parties chosen to do so, they could have easily
included language clearly stating that after-acquired
equipment would be included . . . .
70
Default assignment changes
In Assignment 10, add problem 10.7 to the default set.
Problem 9.7, page 162
A riddle (real case):
72
Problem 9.7, page 162
A riddle (real case):
1. Wisconsin Bank makes loan against the “fixtures and
equipment” of a lessee bar (no after acquired property
clause)
73
Problem 9.7, page 162
A riddle (real case):
1. Wisconsin Bank makes loan against the “fixtures and
equipment” of a lessee bar (no after acquired property
clause)
2. Six years later, the debtor absconds to Minnesota.
74
Problem 9.7, page 162
A riddle (real case):
1. Wisconsin Bank makes loan against the “fixtures and
equipment” of a lessee bar (no after acquired property
clause)
2. Six years later, the debtor absconds to Minnesota. The
Bank retakes possession and finds no collateral.
75
Problem 9.7, page 162
A riddle (real case):
1. Wisconsin Bank makes loan against the “fixtures and
equipment” of a lessee bar (no after acquired property
clause)
2. Six years later, the debtor absconds to Minnesota. The
Bank retakes possession and finds no collateral.
3. Bank prosecutes debtor for the crime of removing collateral
from the state in violation of a security agreement
76
Problem 9.7, page 162
A riddle (real case):
1. Wisconsin Bank makes loan against the “fixtures and
equipment” of a lessee bar (no after acquired property
clause)
2. Six years later, the debtor absconds to Minnesota. The
Bank retakes possession and finds no collateral.
3. Bank prosecutes debtor for the crime of removing collateral
from the state in violation of a security agreement
Debtor admitted taking the fixtures and the equipment from
the bar to Minnesota, but said he had taken no collateral to
Minnesota.
77
Problem 9.7, page 162
A riddle (real case):
1. Wisconsin Bank makes loan against the “fixtures and
equipment” of a lessee bar (no after acquired property
clause)
2. Six years later, the debtor absconds to Minnesota. The
Bank retakes possession and finds no collateral.
3. Bank prosecutes debtor for the crime of removing collateral
from the state in violation of a security agreement
Debtor admitted taking the fixtures and the equipment from
the bar to Minnesota, but said he had taken no collateral to
Minnesota. How can that be?
78

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