Secured Transactions
Assignment 22
Maintaining Perfection Through
Lapse and Bankruptcy
1
The Big Picture
Part Two: The Creditor Third Party Relationship
Chapter 6: Perfection
Chapter 7: Maintaining Perfection
Assignment 22: Through lapse and
bankruptcy
Assignment 23: Through changes in name,
identity and use of collateral
Assignment 24: Through interstate
movements of debtors and collateral
Chapter 8-9: Priority
2
The Big Picture
Part Two: The Creditor Third Party Relationship
Chapter 6: Perfection
Chapter 7: Maintaining Perfection
Assignment 22: Through lapse and
bankruptcy
Assignment 23: Through changes in name,
identity and use of collateral
Assignment 24: Through interstate
movements of debtors and collateral
Chapter 8-9: Priority
3
The Big Picture
Part Two: The Creditor Third Party Relationship
Chapter 6: Perfection
Chapter 7: Maintaining Perfection
Assignment 22: Through lapse and
bankruptcy
Assignment 23: Through changes in name,
identity and use of collateral
Assignment 24: Through interstate
movements of debtors and collateral
Chapter 8-9: Priority
4
The Big Picture
Part Two: The Creditor Third Party Relationship
Chapter 6: Perfection
Chapter 7: Maintaining Perfection
Assignment 22: Through lapse and
bankruptcy
Assignment 23: Through changes in name,
identity and use of collateral
Assignment 24: Through interstate
movements of debtors and collateral
Chapter 8-9: Priority
5
The Lapse Problem
RE recording system
UCC filing system
6
The Lapse Problem
RE recording system
UCC filing system
Adds documents, never
removes documents
7
The Lapse Problem
RE recording system
UCC filing system
Adds documents, never
removes documents
1. Mortgage
8
The Lapse Problem
RE recording system
UCC filing system
Adds documents, never
removes documents
1. Mortgage
2. Satisfaction of mortgage
9
The Lapse Problem
RE recording system
UCC filing system
Adds documents, never
removes documents
May physically destroy
documents after six years
1. Mortgage
2. Satisfaction of mortgage
10
The Lapse Problem
RE recording system
UCC filing system
Adds documents, never
removes documents
May physically destroy
documents after six years
1. Mortgage
1. Financing statement
2. Satisfaction of mortgage
11
The Lapse Problem
RE recording system
UCC filing system
Adds documents, never
removes documents
May physically destroy
documents after six years
1. Mortgage
1. Financing statement
2. Satisfaction of mortgage
2. Termination statement
12
The Lapse Problem
RE recording system
UCC filing system
Adds documents, never
removes documents
May physically destroy
documents after six years
1. Mortgage
1. Financing statement
2. Satisfaction of mortgage
2. Termination statement
Automatic termination at
five years
13
The Lapse Problem
RE recording system
UCC filing system
Adds documents, never
removes documents
May physically destroy
documents after six years
1. Mortgage
1. Financing statement
2. Satisfaction of mortgage
2. Termination statement
Automatic termination at
five years, so:
3. Continuation statement
(at approximately five
year intervals)
14
Basic Concepts
Temporary (automatic) perfection:
15
Basic Concepts
Temporary (automatic) perfection:
General rule: Perfection by possession “continues only while
the secured party retains possession.” §9-313(d)
16
Basic Concepts
Temporary (automatic) perfection:
General rule: Perfection by possession “continues only while
the secured party retains possession.” §9-313(d)
Exception: Secured party who “makes goods available” for
“ultimate sale” remains perfected for 20 days. §9-312(f).
17
Basic Concepts
Temporary (automatic) perfection:
General rule: Perfection by possession “continues only while
the secured party retains possession.” §9-313(d)
Exception: Secured party who “makes goods available” for
“ultimate sale” remains perfected for 20 days. §9-312(f).
Searcher on goods has three tasks:
18
Basic Concepts
Temporary (automatic) perfection:
General rule: Perfection by possession “continues only while
the secured party retains possession.” §9-313(d)
Exception: Secured party who “makes goods available” for
“ultimate sale” remains perfected for 20 days. §9-312(f).
Searcher on goods has three tasks:
1. Search filings
2. Examine goods for possession
19
Basic Concepts
Temporary (automatic) perfection:
General rule: Perfection by possession “continues only while
the secured party retains possession.” §9-313(d)
Exception: Secured party who “makes goods available” for
“ultimate sale” remains perfected for 20 days. §9-312(f).
Searcher on goods has three tasks:
1. Search filings
2. Examine goods for possession
3. Determine if goods were possessed in previous 20 days
20
Basic Concepts
Temporary perfection/bankruptcy: Schwinn Cycling case
21
Basic Concepts
Temporary perfection/bankruptcy: Schwinn Cycling case
Bailee
perfected by
possession
22
Basic Concepts
Temporary perfection/bankruptcy: Schwinn Cycling case
Bailee
perfected by
possession
Bailee
surrenders
possession
23
Basic Concepts
Temporary perfection/bankruptcy: Schwinn Cycling case
Bailee
perfected by
possession
Bailee
surrenders
possession
Deadline
to perfect
20 days
§9-312(f) A perfected security interest in a negotiable
document or goods in the possession of a bailee . . . remains
perfected for 20 days without filing if the secured party
makes available to the debtor the goods or documents
representing the goods for the purpose of
(1) ultimate sale or exchange; or
(2) . . . otherwise dealing with them . . . preliminary to their
sale or exchange.
24
Basic Concepts
Temporary perfection/bankruptcy: Schwinn Cycling case
Bailee
perfected by
possession
Bailee
surrenders
possession
Deadline
to perfect
20 days
Bankruptcy
§9-312(f) A perfected security interest in a negotiable
document or goods in the possession of a bailee . . . remains
perfected for 20 days without filing if the secured party
makes available to the debtor the goods or documents
representing the goods for the purpose of
(1) ultimate sale or exchange; or
(2) . . . otherwise dealing with them . . . preliminary to their
sale or exchange.
25
Basic Concepts
Temporary perfection/bankruptcy: Schwinn Cycling case
Bailee
perfected by
possession
Bailee
surrenders
possession
Deadline
to perfect
Now
20 days
Bankruptcy
§9-312(f) A perfected security interest in a negotiable
document or goods in the possession of a bailee . . . remains
perfected for 20 days without filing if the secured party
makes available to the debtor the goods or documents
representing the goods for the purpose of
(1) ultimate sale or exchange; or
(2) . . . otherwise dealing with them . . . preliminary to their
sale or exchange.
26
Basic Concepts
Temporary perfection/bankruptcy: Schwinn Cycling case
Bailee
perfected by
possession
Bailee
surrenders
possession
Deadline
to perfect
Now
20 days
Bankruptcy
§9-312(f) A perfected security interest in a negotiable
document or goods in the possession of a bailee . . . remains
perfected for 20 days without filing if the secured party
makes available to the debtor the goods or documents
representing the goods for the purpose of
(1) ultimate sale or exchange; or
(2) . . . otherwise dealing with them . . . preliminary to their
sale or exchange.
27
Bailee should have filed!
Basic Concepts
9-210(b). [A] secured party . . . shall comply with a request
within 14 days after receipt:
28
Basic Concepts
9-210(b). [A] secured party . . . shall comply with a request
within 14 days after receipt:
(2) in the case of a request regarding a list of collateral or a
request regarding a statement of account, by authenticating
and sending to the debtor an approval or correction.
29
Basic Concepts
Authenticated
request with
collateral list
Authenticated
approval or correction
14 days
9-210(b). [A] secured party . . . shall comply with a request
within 14 days after receipt:
(2) in the case of a request regarding a list of collateral or a
request regarding a statement of account, by authenticating
and sending to the debtor an approval or correction.
30
Basic Concepts
Authenticated
request with
collateral list
Authenticated
approval or correction
14 days
9-210(b). [A] secured party . . . shall comply with a request
within 14 days after receipt:
(2) in the case of a request regarding a list of collateral or a
request regarding a statement of account, by authenticating
and sending to the debtor an approval or correction.
This is the only (non-contract) obligation for secured to furnish
information
31
Basic Concepts
Authenticated
request with
collateral list
Authenticated
approval or correction
14 days
9-210(b). [A] secured party . . . shall comply with a request
within 14 days after receipt:
(2) in the case of a request regarding a list of collateral or a
request regarding a statement of account, by authenticating
and sending to the debtor an approval or correction.
This is the only (non-contract) obligation for secured to furnish
information
Only the debtor may make a request.
32
Basic Concepts
Authenticated
request with
collateral list
Authenticated
approval or correction
14 days
9-210(b). [A] secured party . . . shall comply with a request
within 14 days after receipt:
(2) in the case of a request regarding a list of collateral or a
request regarding a statement of account, by authenticating
and sending to the debtor an approval or correction.
This is the only (non-contract) obligation for secured to furnish
information
Only the debtor may make a request. The debtor can request
33
on behalf of the searcher.
Problem 22.1, page 392
12/30/01
7/7/06
CS
FS
a.
Bank filed financing statement 12/30/01, continuation
statement 7/7/06.
34
Problem 22.1, page 392
12/30/01
7/7/06
CS
FS
a.
Bank filed financing statement 12/30/01, continuation
statement 7/7/06. Was it timely?
35
Problem 22.1, page 392
12/30/01
12/30/06
7/7/06
5 years
FS
a.
CS
6 mo.
Bank filed financing statement 12/30/01, continuation
statement 7/7/06. Was it timely? Yes, in last six months,
§9-515(d).
36
Problem 22.1, page 392
12/30/01
12/30/06
7/7/06
5 years
FS
a.
CS
3/22/10
Today
6 mo.
Bank filed financing statement 12/30/01, continuation
statement 7/7/06. Was it timely? Yes, in last six months,
§9-515(d).
37
Problem 22.1, page 392
12/30/01
12/30/06
7/7/06
5 years
FS
CS
3/22/10
Today
6 mo.
a.
Bank filed financing statement 12/30/01, continuation
statement 7/7/06. Was it timely? Yes, in last six months,
§9-515(d).
b.
When is the next continuation statement due?
38
Problem 22.1, page 392
12/30/01
12/30/06
7/7/06
5 years
FS
CS
6 mo.
12/30/11
3/22/10 6/30/11
5 years
CS
6 mo.
a.
Bank filed financing statement 12/30/01, continuation
statement 7/7/06. Was it timely? Yes, in last six months,
§9-515(d).
b.
When is the next continuation statement due? 6/30/11 to
12/30/11, §9-515(d)
39
Problem 22.1, page 392
12/30/01
12/30/06
7/7/06
5 years
FS
CS
12/30/11
3/22/10 6/30/11
Bky
5 years
6 mo.
CS
6 mo.
a.
Bank filed financing statement 12/30/01, continuation
statement 7/7/06. Was it timely? Yes, in last six months,
§9-515(d).
b.
When is the next continuation statement due? 6/30/11 to
12/30/11, §9-515(d)
c.
Does a 3/29/10 bankruptcy change your advice? 
40
Problem 22.1, page 392
c. Does bankruptcy change your advice (to file a continuation
statement between 6/30/11 and 12/30/11)?
41
Problem 22.1, page 392
c. Does bankruptcy change your advice (to file a continuation
statement between 6/30/11 and 12/30/11)?
§362(a)(4). [A] petition . . operates as a stay . . of . . any act to
create, perfect or enforce any lien against property of the
estate.
42
Problem 22.1, page 392
c. Does bankruptcy change your advice (to file a continuation
statement between 6/30/11 and 12/30/11)?
§362(a)(4). [A] petition . . operates as a stay . . of . . any act to
create, perfect or enforce any lien against property of the
estate.
§362(b)(3). The filing of a petition . . . does not operate as a stay .
. . of any act to perfect, or to maintain or continue the
perfection . . . to the extent that the trustee’s rights . . . are
subject to such perfection under section 546(b) . . .
43
Problem 22.1, page 392
c. Does bankruptcy change your advice (to file a continuation
statement between 6/30/11 and 12/30/11)?
§362(a)(4). [A] petition . . operates as a stay . . of . . any act to
create, perfect or enforce any lien against property of the
estate.
§362(b)(3). The filing of a petition . . . does not operate as a stay .
. . of any act to perfect, or to maintain or continue the
perfection . . . to the extent that the trustee’s rights . . . are
subject to such perfection under section 546(b) . . .
§546(b)(1)(B). The rights . . . of a trustee . . . are subject to any
generally applicable law that . . . provides for the . . .
continuation of perfection of an interest in property to be
effective against an entity that acquires rights . . . before the
44
date on which action is taken to effect such . . . continuation.
Problem 22.1, page 392
c. Does bankruptcy change your advice (to file a continuation
statement between 6/30/11 and 12/30/11)? No
§362(a)(4). [A] petition . . operates as a stay . . of . . any act to
create, perfect or enforce any lien against property of the
estate.
§362(b)(3). The filing of a petition . . . does not operate as a stay .
. . of any act to perfect, or to maintain or continue the
perfection . . . to the extent that the trustee’s rights . . . are
subject to such perfection under section 546(b) . . .
§546(b)(1)(B). The rights . . . of a trustee . . . are subject to any
generally applicable law that . . . provides for the . . .
continuation of perfection of an interest in property to be
effective against an entity that acquires rights . . . before the
45
date on which action is taken to effect such . . . continuation.
Problem 22.2, page 392
Now
5 years
FS
Note
due
No continuation statement was filed.
46
Problem 22.2, page 392
Now
5 years
FS
Note
due
Was continuation
our job or the
client’s job?
No continuation statement was filed.
47
Problem 22.2, page 392
Now
5 years
FS
Note
due
Was continuation
our job or the
client’s job?
No continuation statement was filed.
Barnes v. Turner, 606 S.E. 2d 849 (Ga. 2004).
48
Problem 22.2, page 392
Now
5 years
FS
Note
due
Was continuation
our job or the
client’s job?
No continuation statement was filed.
Barnes v. Turner, 606 S.E. 2d 849 (Ga. 2004). We do not, as
the dissent contends, demand that the lawyer “ascertain
the full extent of the client's 'objectives;’ only that the
lawyer take reasonable, legal steps to fulfill the client's
main, known objective -- to be paid for the business he
sold. . . .”
49
Problem 22.2, page 392
Now
5 years
FS
Note
due
No continuation statement was filed.
1.
Should we file a continuation statement now?
50
Problem 22.2, page 392
Now
5 years
FS
Note
due
No continuation statement was filed.
1.
Should we file a continuation statement now? No. §9510(c).
51
Problem 22.2, page 392
Now
5 years
FS
Note
due
No continuation statement was filed.
1.
Should we file a continuation statement now? No. §9510(c).
2.
File a financing statement now?
52
Problem 22.2, page 392
Now
5 years
FS
Note
due
No continuation statement was filed.
1.
Should we file a continuation statement now? No. §9510(c).
2.
File a financing statement now? Ask debtor’s permission?
53
Problem 22.2, page 392
Now
5 years
FS
Note
due
No continuation statement was filed.
1.
Should we file a continuation statement now? No. §9510(c).
2.
File a financing statement now? Ask debtor’s permission?
9-509(b). By authenticating . . . a security agreement, a debtor
. . . authorizes the filing of an initial financing statement . . .
covering the collateral described . . . .”
54
Problem 22.2, page 392
§1-106(1). [U]nless
the context
Note otherwise requires . .
5 years
due . words in the
FS
singular number
include the plural. . .
No continuation statement was filed.
Now
1.
Should we file a continuation statement now? No. §9510(c).
2.
File a financing statement now? Ask debtor’s permission?
9-509(b). By authenticating . . . a security agreement, a debtor
. . . authorizes the filing of an initial financing statement . . .
covering the collateral described . . . .”
55
Problem 22.3, page 392
Associates
files
Ryerson
files
Now
9 years
Bky
Ryerson filed first and is supposed to have the first.
56
Problem 22.3, page 392
Associates
possesses
Associates
files
Ryerson
files
Now
9 years
Bky
Ryerson filed first and is supposed to have the first. §9-322(a)
57
Problem 22.3, page 392
Associates
possesses
Associates
files
Ryerson
files
Now
9 years
Bky
Ryerson filed first and is supposed to have the first. §9-322(a)
How could Associates possess a traveling circus?
58
Problem 22.3, page 392
Associates
possesses
Associates
files
Ryerson
files
Now
9 years
Bky
Ryerson filed first and is supposed to have the first. §9-322(a)
How could Associates possess a traveling circus? Example:
Allied Van Lines had the circus in trucks and authenticated
record saying they held for Associates?
59
Problem 22.3, page 392
Associates
possesses
Associates
files
Ryerson
files
Now
9 years
Bky
Ryerson filed first and is supposed to have the first. §9-322(a)
a. How could Associates possess a traveling circus? Example:
Allied Van Lines had the circus in trucks and authenticated
record saying they held for Associates?
b. Parker right?
60
Problem 22.3, page 392
Associates
possesses
Associates
files
Ryerson
files
Now
9 years
Bky
Ryerson filed first and is supposed to have the first. §9-322(a)
a. How could Associates possess a traveling circus? Example:
Allied Van Lines had the circus in trucks and authenticated
record saying they held for Associates?
b. Parker right? §9-308(c). “A security interest . . . is perfected
continuously if it is originally perfected by one method under this
article and is later perfected by another method under this
article, without an intermediate period when it was unperfected.”
61
Problem 22.3, page 392
Associates
possesses
Associates
files
Ryerson
files
Now
9 years
Bky
Ryerson filed first and is supposed to have the first. §9-322(a)
a. How could Associates possess a traveling circus? Example:
Allied Van Lines had the circus in trucks and authenticated
record saying they held for Associates?
b. Parker right? §9-308(c). “A security interest . . . is perfected
continuously if it is originally perfected by one method under this
article and is later perfected by another method under this
article, without an intermediate period when it was unperfected.”
c. How will you do the closing next time? Evidence?
62
Problem 22.3, page 392
Associates
possesses
Associates
files
Ryerson
files
Now
9 years
Bky
Ryerson filed first and is supposed to have the first. §9-322(a)
a. How could Associates possess a traveling circus? Example:
Allied Van Lines had the circus in trucks and authenticated
record saying they held for Associates?
b. Parker right? §9-308(c). “A security interest . . . is perfected
continuously if it is originally perfected by one method under this
article and is later perfected by another method under this
article, without an intermediate period when it was unperfected.”
63
c. How will you do the closing next time? Evidence? §9-339?
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts”
Authorized financing statement: “Equipment”
Fork
lifts
Equipment
Drill
presses
64
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts”
Authorized financing statement: “Equipment”
Does Firstbank have a security interest in the drill presses?
Fork
lifts
Equipment
Drill
presses
65
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts”
Authorized financing statement: “Equipment”
Does Firstbank have a security interest in the drill presses? No.
Fork
lifts
Equipment
Drill
presses
66
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts”
Authorized financing statement: “Equipment”
Does Firstbank have a security interest in the drill presses? No.
a. Does Firstbank have to give a release?
Fork
lifts
Equipment
Drill
presses
67
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts”
Authorized financing statement: “Equipment”
Does Firstbank have a security interest in the drill presses? No.
a. Does Firstbank have to give a release? No. Authorized FS.
Fork
lifts
Equipment
Drill
presses
68
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts”
Authorized financing statement: “Equipment”
Does Firstbank have a security interest in the drill presses? No.
a. Does Firstbank have to give a release? No. Authorized FS.
b. Can Beaver borrow on the drill presses?
Fork
lifts
Equipment
Drill
presses
69
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts”
Authorized financing statement: “Equipment”
Does Firstbank have a security interest in the drill presses? No.
a. Does Firstbank have to give a release? No. Authorized FS.
b. Can Beaver borrow on the drill presses?
Firstbank files
“equipment”
2nd bank files
“drill presses,”
SA, lends”
70
Problem 22.5, page 393
Firstbank: Security agreement: “12 fork lifts”
Authorized financing statement: “Equipment”
Does Firstbank have a security interest in the drill presses? No.
a. Does Firstbank have to give a release? No. Authorized FS.
b. Can Beaver borrow on the drill presses?
Firstbank files
“equipment”
Firstbank gets SA in
drill presses and lends
2nd bank files
“drill presses,”
SA, lends”
71
Problem 22.5, page 393
§9-322(a)(1). Conflicting perfected security interests . . . rank
according to priority in time of filing or perfection. Priority
dates from the earlier of the time a filing covering the
collateral is first made or the security interest . . . is first
perfected . . . .
Firstbank files
“equipment”
Firstbank gets SA in
drill presses and lends
2nd bank files
“drill presses,”
SA, lends”
Who’s first? §9-322(a)(1)
72
Problem 22.5, page 393
§9-322(a)(1). Conflicting perfected security interests . . . rank
according to priority in time of filing or perfection. Priority
dates from the earlier of the time a filing covering the
collateral is first made or the security interest . . . is first
perfected . . . .
Firstbank files
“equipment”
Firstbank gets SA in
drill presses and lends
2nd bank files
“drill presses,”
SA, lends”
Who’s first? §9-322(a)(1)
Will §9-210 help?
73
Problem 22.5, page 393
§9-322(a)(1). Conflicting perfected security interests . . . rank
according to priority in time of filing or perfection. Priority
dates from the earlier of the time a filing covering the
collateral is first made or the security interest . . . is first
perfected . . . .
Firstbank files
“equipment”
Firstbank
“No SI”
2nd bank files
“drill presses,”
SA, lends”
Firstbank gets SA in
drill presses and lends
Who’s first? §9-322(a)(1)
Will §9-210 help?
74
Problem 22.7, page 394
New
Lender
Termination $407K
Bill of sale $550K Termination
Suarez Termination Buyer
Global
$600K
Would the Suarezs be better off under the UCC rule?
75
Problem 22.7, page 394
New
Lender
Termination $407K
Bill of sale $550K Termination
Suarez Termination Buyer
Global
$600K
Would the Suarezs be better off under the UCC rule?
UCC §9-513(c). [W]ithin 20 days after a secured party receives
an authenticated demand . . . the secured party shall . . . send
to the debtor a termination statement . . . if (1) . . . there is no
obligation secured by the collateral . . . and no commitment to
make an advance . . . .
76
Problem 22.7, page 394
New
Lender
Termination $407K
Bill of sale $550K Termination
Suarez Termination Buyer
Global
$600K
Would the Suarezs be better off under the UCC rule?
UCC §9-513(c). [W]ithin 20 days after a secured party receives
an authenticated demand . . . the secured party shall . . . send
to the debtor a termination statement . . . if (1) . . . there is no
obligation secured by the collateral . . . and no commitment to
make an advance . . . .
Payment
and demand
Termination
20 days
77
Problem 22.7, page 394
New
Lender
Termination $407K
Bill of sale $550K Termination
Suarez Termination Buyer
Global
$600K
Would the Suarezs be better off under the UCC rule?
UCC §9-513(c). [W]ithin 20 days after a secured party receives
an authenticated demand . . . the secured party shall . . . send
to the debtor a termination statement . . . if (1) . . . there is no
obligation secured by the collateral . . . and no commitment to
make an advance . . . .
Payment and
Demand
termination
20 days
78
Problem 22.7, page 394
New
Lender
Termination $407K
Bill of sale $550K Termination
Suarez Termination Buyer
Global
$600K
9-509(d). A person may file an amendment . . . only if . . . (2)
the amendment is a termination statement . . . the secured
party . . . failed to file or send . . . as required by Section 9513(c), the debtor authorizes the filing, and the termination
statement indicates that the debtor authorized it to be filed.
79
Problem 22.7, page 394
New
Lender
Termination $407K
Bill of sale $550K Termination
Suarez Termination Buyer
Global
$600K
9-509(d). A person may file an amendment . . . only if . . . (2)
the amendment is a termination statement . . . the secured
party . . . failed to file or send . . . as required by Section 9513(c), the debtor authorizes the filing, and the termination
statement indicates that the debtor authorized it to be filed.
[Otherwise, it is ineffective. 9-510(a).]
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Problem 22.7, page 394
New
Lender
Termination $407K
Bill of sale $550K Termination
Suarez Termination Buyer
Global
$600K
9-509(d). A person may file an amendment . . . only if . . . (2)
the amendment is a termination statement . . . the secured
party . . . failed to file or send . . . as required by Section 9513(c), the debtor authorizes the filing, and the termination
statement indicates that the debtor authorized it to be filed.
[Otherwise, it is ineffective. 9-510(a).]
If you are New Lender, is this termination statement
acceptable?
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