Secured Transactions Commons^™

Representing The Low Income Consumer In Repossessions, Resales And Deficiency Judgment Cases, James J. White

Articles

The goal of this article is to lend a helping hand to the debtor's lawyer in his job of defending deficiency judgment suits brought following the repossession and resale of a debtor's encumbered personal property. Although some of the following discussion is relevant to the defense of any creditor's suit, and some applies to representation of the debtor prior to repossession or resale, the focal point of the discussion is the low-income consumer who has lost his automobile, television or some other "hard good" and has become a defendant in a suit brought by his secured creditor for a deficiency …

Ucc--Secured Transactions--Judicial Sales--Purchaser At Judicial Sale Takes Property Subject To Unperfected Security Interest Of Which He Has Knowledge, Michigan Law Review

Michigan Law Review

p>The first question for consideration is the applicability of the "shelter provision" of section 2-403(1) to these cases. This section may be relied upon by different parties depending upon the nature of the sale. When a bankruptcy sale is involved, the buyer may claim, as Armstrong did in Mitchell, that the section allows him to succeed to the trustee's priority over unperfected security interests. When an ordinary judicial sale is involved, however, there is no intermediate transferee with both title to the property and a clear claim to priority, and the secured party may rely on this section …

Preferential Transfers On The Eve Of The Bankruptcy Amendments, Richard M. Kohn

University of Michigan Journal of Law Reform

While secured lenders may have been content to ride the crest of judicial legislation, the only permanent solution to the problem lie in amending either the Bankruptcy Act, the Uniform Commercial Code, or both. This at least is the view taken by the National Bankruptcy Conference's Committee on Coordination of the Uniform Commercial Code and Bankruptcy Act. Since its first meeting in June 1966, the Committee has focused its attention primarily upon the validity, in bankruptcy proceedings, of Article 9 security interests in after-acquired property. In September 1967, the Committee submitted to the Bankruptcy Conference its first draft of a …

Conflicting Perfected Security Interests In Proceeds Under Article 9 Of The Uniform Commercial Code, Michigan Law Review

Michigan Law Review

Section 9-306 gives the inventory financer a "continuously perfected" security interest in the proceeds of the inventory if the security interest in the original collateral was perfected. "Proceeds" is defined as including "whatever is received when collateral or proceeds is sold, exchanged, collected or otherwise disposed of." Thus, the inventory financer may have a security interest in the proceeds of the original collateral or the proceeds of the proceeds. The security interest in the proceeds may be perfected in either of two ways: (1) under section 9-306(3)(a) the security interest is perfected by filing a financing statement that expressly covers …

Secured Transactions-Insurance-A Security Interest In The "Proceeds" Of Secured Collateral Does Not Include Insurance Proceeds-Universal C.I.T. Corp. V. Prudential Investment Corp., Michigan Law Review

Michigan Law Review

In return for a loan, a debtor executed a promissory note to codefendant, Prudential Investment Corporation, and entered into a written agreement to secure this note, designating as collateral a semi-tractor and the proceeds therefrom. Under this type of arrangement, Prudential's security interest would attach automatically to any property received from a sale, exchange, or other disposition of the tractor. Petitioner, Universal C.I.T. Corp., held the conditional sales contract which was executed in financing the purchase of the tractor and was named as loss payee in the insurance contract covering the tractor. When the tractor was totally destroyed, petitioner collected …

Bankruptcy Preferences-Secured Transactions-Security Interest In After-Acquired Property Is Voidable Preference If Received Within Four Months Of Bankruptcy-In Re Portland Newspaper Publishing Co., Michigan Law Review

Michigan Law Review

In an effort to provide employment for several hundred workers who had lost their jobs in an unsuccessful strike against Portland's two largest newspapers, the local printers' unions and several civic leaders organized the Portland Reporter Publishing Co. (Reporter) to publish a rival newspaper. The unions also formed the Rose City Development Co. (Rose City), which leased facilities and equipment to Reporter and subsequently made several emergency operating loans to it. These loans were secured by an agreement designating as collateral all of Reporter's previously unsecured accounts receivable, both present and after-accruing. This type of agreement -securing after-acquired property of …

Bootstraps And Capital Gain--A Participant's View Of Commissioner V. Clay Brown, William H. Kinsey

Michigan Law Review

A closely held corporation may be sold in a variety of ways. At one end of the spectrum is an all-cash sale. In such a transaction, the seller receives the purchase price and has no further concern with the economic well-being of the business. The difficulty with this method, of course, is finding a purchaser with sufficient cash who is willing to pay a fair price.

At the other end of the spectrum is a full-fledged bootstrap sale, where there is no down payment other than from the underlying assets of the sold corporation, and the purchaser's obligation to pay …

Uniform Commercial Code Article 9 Filing Procedures For Railroad, Utility, And Other Corporate Debtors: Some Suggestions, Daniel R. Elliott Jr.

Michigan Law Review

After a brief discussion of the provisions of Article 9 peculiarly applicable to the long-term mortgage, a portion of this comment will review the relevant statutes and case authority in force prior to the effective date of the Code in various states and still applicable in others. More specifically, it will examine the special treatment accorded certain types of corporate indentures, particularly those securing the debt of railroads and other public utilities. Second, an attempt will be made to explain the probable solutions to the problems raised by the filing requirements of Article 9 as promulgated in each jurisdiction and …

Security-Chattel Mortgages-Mortgage Recorded Under Federal Aviation Act Of 1958s As Affected By State Laws, William C. Brashares

Michigan Law Review

Defendant, a Michigan corporation, ordered a new airplane from Air-O-Fleet, a retailer. Air-O-Fleet financed its purchase from the manufacturer through a loan from plaintiff, a Texas corporation, who took a chattel mortgage on the airplane. One day after Air-O-Fleet had made delivery to defendant and received full payment, plaintiff recorded the chattel mortgage with the Federal Aviation Authority in accordance with the Federal Aviation Act of 1958, section 1403, which provides that "no conveyance or instrument ... shall be valid ... against any person other than the person by whom the conveyance or other instrument is made or given, ... …

Mechanics' Liens-Improvements Outside Building--Lien Allowed For The Clearing Of Land Unconnected With The Construction Of A Building, Byron Bronston S.Ed

Michigan Law Review

Plaintiff filed a bill of complaint seeking to enforce a mechanic's lien for the clearing of eighty acres of land pursuant to an agreement with the owners. The bill alleged that plaintiff's lien was superior to a mortgage which, though prior in time of execution, had been recorded subsequent to the inception of the clearing contract. Defendant mortgagee demurred on the ground that land clearance did not qualify for a lien under the pertinent mechanic's lien statute which provided that "every ... person ... who shall do or perform any work or labor upon ... any building or improvement on …

The Lazy Lawyer's Guide To Secured Transactions Under The Code, Peter F. Coogan

Michigan Law Review

It is expected that few, if any, who can really qualify as "lazy lawyers" will read this paper. There is, however, an obvious need for a reasonably simple statement which a young Iawyer, for example, may find helpful in explaining article 9 of the Uniform Commercial Code to the partners in his firm, or a lender's lawyer may use in explaining the essentials of article 9 to a borrower's counsel who has only occasional contact with secured transactions-- or, in either case, vice versa.

If we could assume that our learner had absolutely no knowledge of article 9, we could …

Mortgages - Priorities -Mechanics' Lien Attaching To Optionee's Interest In Land Superior To Purchase Money Mortgage, Roger W. Kapp

Michigan Law Review

The holder of an option to purchase land ordered building materials from plaintiff. The materials were delivered the same day. The option was subsequently exercised by the vendee, and a warranty deed received from the vendor. At the same time a deed of trust was executed and delivered by the vendee to the defendant to secure a loan for the purchase money. The trust deed was properly recorded. Upon a failure of payment, plaintiff filed its mechanic's lien. Defendant subsequently foreclosed its trust deed. Plaintiff commenced this action to foreclose its lien. The trial court held the mechanic's lien superior …

Stockholder Votes Motivated By Adverse Interest: The Attack And The Defense, Earl Sneed

Michigan Law Review

It is the purpose of this article to study stockholder votes motivated by adverse interest from the standpoint of the attack and the defense. First, the remedies available to the complaining minority are examined. Then follows a study of the indicia of adverse interest in specific shareholder actions. Knowledge of the nature and import of these indicia should enable the careful lawyer to avoid or defeat the charge that unconscionable adverse interest vitiated the result of a stockholder vote.

Bankruptcy - Uniform Trust Receipts Act - Rights Of Entruster To A Lien Interest In The General Assets Of Bankrupt Trustee, Barry I. Fredericks

Michigan Law Review

Plaintiff, a credit corporation, used a trust receipt arrangement to finance a car dealer, who thereafter sold a number of the entrusted cars (out of trust sales) without remitting the proceeds to plaintiff. In order to restore some of these proceeds, which had been dissipated in the course of running his business, the car dealer gave plaintiff a trust receipt on ten unencumbered trucks in its possession, in release of part of plaintiff's security interest under the first trust receipts. Plaintiff later sold these ten trucks. Subsequently, in the course of bankruptcy proceedings filed against the car dealer, plaintiff sought …

Bills And Notes - Acceptance - Payment By Drawee Of Raised Check Precludes Recovery Under Section 62 Of The Uniform Negotiable Instruments Law, Louis A. Kwiker

Michigan Law Review

Defendant, collection bank and presenter, paid the face amount of a raised check, executed its unqualified indorsement thereon, transmitted the check through regular banking channels, and received payment from drawee bank. Upon discovery of the overpayment plaintiff, surety, reimbursed the drawee and sought recovery from the defendant. The trial court sustained defendant's demurrer. On appeal, held, affirmed. Under section 621 of the Uniform Negotiable Instruments Law, a drawee bank which pays a raised but otherwise genuine check to a non-negligent holder in due course cannot recover the amount by which the instrument was raised because payment constitutes an acceptance …

Bills And Notes - Indorsements - Effect Of Contemporaneous Agreement On The Indorsement Contract, W. Stanley Walch

Michigan Law Review

Plaintiff, payee of a promissory note, indorsed and negotiated the note to the defendant bank. Attached to the note was a separate agreement of assignment and warranty in which the plaintiff assigned the note and a conditional sales contract to defendant, and further agreed to repurchase the note if any of the warranties in the contemporaneous agreement were breached. The maker of the note defaulted and defendant, after due presentment and notice, debited plaintiff's account for the face amount of the note. Plaintiff brought suit to recover the money from defendant on the theory that the contemporaneous agreement had qualified …

Fiduciary Administration - Nominee Statutes - Transfer Of Securities Held For The Benefit Of Another, Joseph T. De Nicola

Michigan Law Review

Michigan is the forty-second jurisdiction to enact a nominee statute. Nominee statutes authorize a fiduciary to nominate a third person to hold stock or securities in the third person's name without giving notice on the stock certificate or on the transfer books of the corporation of his qualified ownership. For the most part it has been assumed that these statutes would facilitate a more rapid transfer of securities. It is the purpose of this comment to compare and analyze these statutes and to determine whether they are the most effective means of accomplishing the end they are intended to serve.

Creditor's Rights - Fraudulent Conveyances - Security Assignment Of Contract Payments Void If Assignor Retains Control, John A. Beach S.Ed.

Michigan Law Review

An insolvent debtor, who owed some $3,500 on plaintiff's partially-collected judgment, executed an instrument assigning to another creditor, a bank, all moneys due and to become due to the debtor under an existing contract, expressly as security for payment of the debtor's present and future indebtedness to the bank. The contract obligor was notified of the assignment, and thereafter the bank collected the amounts periodically accruing under the contract. The bank applied part of these collected amounts to the balance that the debtor owed the bank. The rest was either handed over to the debtor or credited to his general …

Principal And Surety - Construction Of Guaranty, Charles R. Linton

Michigan Law Review

Defendant's testator guaranteed the payment in full of a mortgage note for $8,000 "until such time as the sum of sixteen hundred (1600) dollars has been paid on the principal of said note." Upon default before the sum of $1,600 had been paid, the balance came due and the plaintiff foreclosed the mortgage, crediting the proceeds, which exceeded the sum of $1,600, on the note. Held, crediting the proceeds of foreclosure on the note did not, as the defendant contended, discharge the obligation of the guarantor, but merely amounted to a payment pro tanto for the benefit of both …

Contracts - Specific Enforcement Of An Executory Accord, Benjamin H. Dewey

Michigan Law Review

Sometime previous to the suit in question, defendant had executed a mortgage to the plaintiff, the loan secured by such mortgage to be repaid in installments. After having paid some but not all of the installments, defendant defaulted. As a result of negotiations between the parties and the Federal Land Bank of Omaha, it was agreed that the defendant should pay a lump sum in full satisfaction of the balance of the installments due under the mortgage. Performance was later tendered under this agreement, but the plaintiff refused to accept same, and subsequently brought suit in equity to foreclose the …

Constitutional Law--Mortgages--Frazier-Lemke Act

Michigan Law Review

In 1922 and 1924 appellee mortgaged property worth $18,000 to secure a loan of $9,000 from appellant which was to be repaid in installments over a period of thirty-four years. Default being made on the covenants in the mortgage, the mortgagee declared the full amount due and brought a suit to foreclose. Proceedings were stayed when the appellee sought relief under Section 75 of the Bankruptcy Act, but he was unable to obtain the requisite majority in number and amount to the composition proposed. The state court entered a foreclosure judgment and ordered a sale. The mortgagor then sought relief …

Banks And Banking - Power To Pledge Assets To Secure Private Depositors

Michigan Law Review

Plaintiff railway company deposited funds in the national bank of the defendant receiver. Dissatisfied with the guaranty of his deposits by surety bonds, the plaintiff demanded and received from the bank Liberty Loan Bonds, which were deposited with the trust officer of the bank to be held as security for the repayment, on demand, of the deposits. On the insolvency of the bank, the receiver refused to turn over the bonds, whereupon the plaintiff brought an action on the contract of pledge. Held, that the contract of pledge of the bank's assets to secure the private deposit was invalid …

Trust Receipts

Michigan Law Review

That the conflict between the convenience of business and the rigidity of the law continually brings about modifications and expansions of legal doctrine is nowhere better illustrated than in the field of commercial financing. A merchant wishes to purchase goods; he has no funds or available unencumbered property for security; his general credit is too poor to warrant either the manufacturer or a bank in making advances without security. How can the manufacturer give the merchant possession and power of sale of the goods and yet retain a legal hold on them or their proceeds as security for the payment …

Pledge - Liability Of Pledgee For Depreciation Of Corporate Stock

Michigan Law Review

The plaintiff brought suit to recover the value of a promissory note for which the defendant had pledged corporate stock as collateral security. Defendant filed a counterclaim for the depreciation in value of the stock between the time he had requested the plaintiff to sell and the time of bringing the suit. Held, that plaintiff was not liable for the depreciation of the stock since the pledgor had made no offer to pay pledgee such sum as would together with the price for which the stock could have been sold satisfy the note. People's Nat. Bank & Trust Co. …

The Principal's Warranty And Offset Claims Against The Creditor As Defenses To The Surety, Victor Levine

Michigan Law Review

When a buyer seeks to purchase goods on credit, the seller often refuses to make the sale unless the buyer procures some third person to become liable for the price; and the seller also exacts the privilege of suing either the buyer or the third person or both in the event that payment is not made on the date the price falls due. In a three-party transaction of this sort, the buyer, after the goods are delivered, is commonly called the principal, the seller the creditor, and the third person the surety.

Suretyship--Fraud Of Principal On Surety--Principal As Agent Of Creditor

Michigan Law Review

The plaintiff manufactured medicines, selling to peddlers who operated as independent contractors. Menning, a peddler, signed a new contract with plaintiff for operations for the ensuing year, the contract also covering payment of existing debts ($1,794) to plaintiff. The defendant, induced by Menning and relying on his statement that there was no existing debt, signed the contract as surety, the guaranty reciting a consideration of $1 received by defendant and an extension of time on any debts. This contract was terminated after seven weeks, and plaintiff sued for $1670, the balance due. The defendant claimed that Menning was plaintiff's agent …

Suretyship-Discharge Of Guaranty By Payment Of Amount To Which Liability Is Limited

Michigan Law Review

Defendant wrote a letter to plaintiff, "Kindly extend credit to A for materials to the amount of $250, and I hereby become security for the same." Relying on this letter, plaintiff for several years sold goods to A. By reason of A's defaults, defendant paid plaintiff $71.80 on one occasion and $197.10 on another. Later, A became indebted to plaintiff to the amount of $464.22 and this action was brought to recover on the guaranty the sum of $250. The court construed the guaranty as a continuing one, but held that that fact did not impose a continuing liability on …

Suretyship-Application Of Payments From Principal To Creditor-Equity Of Surety In Building Contract Funds

Michigan Law Review

A building contractor's bond, with professional surety, promises to see that all laborers and materialmen assisting upon a certain construction job are fully paid. With moneys received from work upon this building, the contractor pays a certain sum to a materialman without applying it to any particular debt. The contractor owes the materialman upon two separate debts: one for materials furnished upon this very job, and covered by this surety bond; and a pre-existing debt, in no way connected with the present contract. Is the surety able to insist that the materialman use this payment to discharge the debt on …

Rights Of Holder Of Bill Of Exchange Against The Drawee, Ralph W. Aigler

Articles

“If the question were put to the average layman whether the holder of a check...had any effective rights against the drawee bank, it is believed that the almost universal response would be to the effect that of course the holder may insist upon payment by the bank, if there are funds on deposit to cover the amount. And if the same question were propounded to the average lawyer, the reply generally would be--at least if the lawyer had in mind the provisions of the Uniform Negotiable Instruments Law--that the holder had no rights against the bank. It is the purpose …

Recognition Of New Types Of Negotiable Instruments, Ralph W. Aigler

Articles

“The expression ‘negotiable instrument’ is one of variable meaning, and what is meant thereby often can be determined only by the context… Primarily ‘negotiable’ indicates transferability with a certain facility…..

“It may be not without interest to consider how instruments gain the negotiable quality and to trace, sketchily perhaps, the process of recognition.”