Personal Property Secured Transactions

• Published in: The Business Lawyer 2017-09, Vol.72 (4), p.1143-1164
• Main Authors: Weise, Steven O., Sepinuck, Stephen L.
• Format: Article
• Language: English
• Subjects: Agreements; Collateral; Commercial law; Credit unions; Developers; Federal court decisions; Foreclosure; Limited liability companies; Personal property; Secured transactions; State court decisions; Surveys; Survey—Uniform Commercial Code; Torts
• ISSN: 0007-6899; 2164-1838

[...]the court noted that the broker was generally known by his creditors to be engaged in selling the works of others, a fact supported by statements on the debtor's own website. [...]the transaction between the broker and the owner did not qualify as a "consignment" governed by Article 9.9 As a result, the secured lenders of the broker had no interest in the artworks.10 II.ATTACHMENT OF A SECURITY INTEREST A. IN GENERAL In general, there are three requirements for a security interest to attach; that is, for the interest effectively to encumber collateral: (i) the debtor must authenticate a security agreement that describes the collateral; (ii) value must be given; and (iii) the debtor must have rights in the collateral or the power to transfer rights in the collateral.11 There were interesting cases on the first two requirements last year. [...]under the court's approach, a lender with a security interest in a vendor's interest in a land contract could perfect either under real property law (by recording a mortgage) or under Article 9 (by filing a financing statement in the appropriate office). The court ruled for the secured lender. Because the debtors were the ones who orchestrated the sale by, among other things, selecting the auctioneer and choosing the auction date, the court concluded that the secured party had not foreclosed and, thus, was not required to provide notification.98 The decision is consistent with other cases ruling that the secured party's duties to provide notification of a disposition and to conduct a disposition in a commercially reasonable manner do not apply when the debtor sells the collateral.99 B. CONDUCTING A COMMERCIALLY REASONABLE DISPOSITION A secured party may dispose of collateral by a sale, lease, or license.100 The disposition may be public-that is, typically an auction-or private.101 However, every aspect of a disposition must be "commercially reasonable. The sale was preceded by newspaper ads and direct marketing to 150 targeted prospects and fifteen prospective bidders, which all signed confidentiality agreements, allowing them access to a data room.105 The court concluded, on a motion for summary judgment, that the sale was conducted in a commercially reasonable manner even though the secured party was the only bidder, made a credit bid, and acquired a controlling interest.106 The court also discounted the fact that the sale was delayed by three years. Because (i) the debtors did not show that the collateral had d