SECURED TRANSACTIONS
Fall 2015
PROBLEM SET 17
Maintaining Perfection and Priority: Post-Transaction Changes III
(Multi-State Transactions and Changes in Governing Law)
Carefully read the following:
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Chapter 9 of UNDERSTANDING SECURED TRANSACTIONS
§§ 9-301, 9-303, 9-307, and 9-316
1.
Your day begins with an e-mail from Lisa Shreves, the President of BankGroup Industrial
Credit (BIC). After thanking you for your very fine previous work on the matters involving BIC’s
security interest in aircraft, she says:
BIC has been asked to provide operating capital for two companies related to the Cranky
family. The first company, Cranky Oil, Inc., is an oil exploration company. It is organized
in Oklahoma, but its only active wells anymore are located in Texas. We would take a
security interest in all of its equipment, as well as the crude oil it pumps out of the ground
and the accounts it generates when it sells that oil (it sells all of its oil to ExxonMobil at the
wellhead, as it is extracted).
The second company is Cranky Lumber, and it is a partnership of two of the Cranky
brothers, Stan and Bob. They have an office in Columbia, Missouri, from which they run
their business. They own 35,000 acres of timberland in Oregon and Idaho. They hire crews
to cut the timber off these tracts, load it onto trucks, move it to timber mills elsewhere in the
Northwest, where they sell it. We would take a security interest in the standing timber, the
cut timber, and accounts receivable generated by timber sales.
With all the different states involved, where should BIC file to perfect its security interests
in these transactions?
What’s your response?
2.
Returning from a coffee break, you get the following message from Sara Jones at First Bank:
Two years ago, we made a loan to Green Consulting, LLC, a management consulting
business whose sole member is Dana Green. Dana is moving her office from St. Louis to
Chicago at the request of a couple of her major clients who are located in the Chicago area.
We have a security interest in all the equipment and accounts of the business, which we filed
in Missouri. Do we need to file in Illinois as a result of this move?
What’s your response?
3.
Just before lunch, you hear from Bubba Charles at Putnam County Bank:
A couple of years ago, we made a $200,000 loan to Elaine Gray, who lived in Putnam at the
time. She needed money to pay the legal bills she had built up in a divorce fight with her
husband. We took two items of collateral. One was a Bentley automobile she got in the
divorce. The other was a bicycle that Lance Armstrong rode in the Tour de France and that
he had given her as a gift for hosting several fundraisers for his cancer foundation (before
the whole doping thing). We had our lien noted on the title certificate for the Bentley (the
title certificate was issued by Missouri), and we filed a financing statement covering the bike
in the Missouri Secretary of State’s office.
We just learned that Elaine moved to New York City back in July. Do I need to do anything,
or are we still good?
What’s your response?
4.
A few hours later, Bubba calls you:
Once I started making some calls, I found out some more information. Turns out that once
Elaine went to New York, she borrowed $25,000 from CitiBank and granted them a security
interest in the bike, which CitiBank perfected by filing a financing statement in New York.
Further, the bike has now been seized by the sheriff of Kings County (in Brooklyn, where
she lives); apparently, she didn’t pay one of the caterers at some fundraiser she did, and the
caterer sued her and got a judgment for $20,000. Where would we stand with respect to the
bike as against Citibank and the judgment creditor?
What’s your response? What additional information, if any, do you need to know?
5.
Late in the afternoon, the phone rings. It’s Sara Jones at First Bank again:
Two years ago, we made a $100,000 loan to Tom Trucker, a long-haul trucker, to enable him
to purchase a new tractor/sleeper unit. Our lien was properly noted on the title certificate
for the vehicle, which was issued by the Missouri Department of Revenue.
Last month, Tom Trucker missed his regular payment. I started making inquiries and I’ve
discovered that Tom Trucker moved to Alaska several months ago hoping to land a spot on
the TV show “Ice Road Truckers.” Even worse, it appears that somehow or another, he
convinced the DMV in Alaska to issue a clean title certificate that didn’t show our lien on
it. If that wasn’t bad enough, he then borrowed money from Bank of Fairbanks, and granted
them a security interest in the vehicle; the Alaska DMV has confirmed that Bank of
Fairbanks’s lien is noted on the Alaska title certificate.
Do we still have a security interest in the vehicle, and if so, do we have priority over the
Bank of Fairbanks?
6.
Just as you are leaving, you get an e-mail from Lisa Shreves:
Last year, we extended a $25 million line of credit to ABC, Inc., secured by all of its
equipment (present and after-acquired), perfected by a filed financing statement in Texas
(where ABC is organized). This afternoon, I read in the Wall Street Journal that ABC, Inc.
is in merger talks with XYZ, Inc., one of its primary competitors. If the story is accurate,
it appears that ABC, Inc. is going to be merged into XYZ, Inc., which will be the surviving
corporation. XYZ, Inc. is a Delaware corporation. I have a couple of questions I’d like to
go over with you in the morning:
(a)
What do we need to do, if anything, with regard to our security interest in ABC’s
equipment? Does this merger have any consequences for the validity or perfection
of our security interest in that property?
(b)
Would we have any security interest in new equipment bought by XYZ, Inc. after the
merger? If so, what do we have to do to protect it?
What’s your advice? What additional information do you need?