27.1 Financing Statement C&H Trucking, Inc. (C&H), borrowed $19,747.56 from S&D Petroleum Company, Inc. (S&D). S&D hired Clifton M. Tamsett to prepare a security agreement naming C&H as the debtor and giving S&D a security interest in a new Mack truck. The security agreement prepared by Tamsett declared that the collateral also secured:
any other indebtedness or liability of the debtor to the secured party direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including all future advances or loans which may be made at the option of the secured party.
Tamsett failed to file a financing statement or the executed agreement with the appropriate government office. C&H subsequently paid off the original debt, and S&D continued to extend new credit to C&H. Two years later, when C&H owed S&D more than $17,000, S&D learned that (1) C&H was insolvent, (2) the Mack truck had been sold, and (3) Tamsett had failed to file the security agreement. Does S&D have a security interest in the Mack truck? Is Tamsett liable to S&D? S&D Petroleum Company, Inc. v. Tamsett, 144 A.D.2d 849, 534 N.Y.S.2d 800, Web 1988 N.Y.App. Div. Lexis 11258 (Supreme Court of New York)
27.2 Priority of Security Agreements World Wide Tracers, Inc. (World Wide), sold certain of its assets and properties, including equipment, furniture, uniforms, accounts receivable, and contract rights, to Metropolitan Protection, Inc. (Metropolitan). To secure payment of the purchase price, Metropolitan executed a security agreement and financing statement in favor of World Wide. The agreement, which was filed with the Minnesota secretary of state, stated that “all of the property listed on Exhibit A (equipment, furniture, and fixtures) together with any property of the debtor acquired after” the agreement was executed was collateral.
One and one-half years later, State Bank (Bank) loaned money to Metropolitan, which executed a security agreement and financing statement in favor of Bank. Bank filed the financing statement with the Minnesota secretary of state’s office one month later. The financing statement contained the following language describing the collateral: “All accounts receivable and contract rights owned or hereafter acquired. All equipment now owned and hereafter acquired, including but not limited to, office furniture and uniforms.”
When Metropolitan defaulted on its agreement with World Wide six months later, World Wide brought suit, asserting its alleged security agreement in Metropolitan’s accounts receivable. Bank filed a counterclaim, asserting its perfected security interest in Metropolitan’s accounts receivable. Who wins? World Wide Tracers, Inc. v. Metropolitan Protection, Inc., 384 N.W.2d 442, Web 1986 Minn. Lexis 753 (Supreme Court of Minnesota)
27.3 Floating Lien Joseph H. Jones and others (debtors) borrowed money from Columbus Junction State Bank (Bank) and executed a security agreement in favor of Bank. Bank perfected its security interest by filing financing statements covering “equipment, farm products, crops, livestock, supplies, contract rights, and all accounts and proceeds thereof” with the Iowa secretary of state. Four years and 10 months later, Bank filed a continuation statement with the Iowa secretary of state. Four years and 10 months after that, Bank filed a second continuation statement with the Iowa secretary of state. Two years later, the debtors filed for Chapter 7 liquidation bankruptcy. The bankruptcy trustee collected $10,073 from the sale of the debtors’ crops and an undetermined amount of soybeans harvested on farmland owned by the debtors. The bankruptcy trustee claimed the funds and soybeans on behalf of the bankruptcy estate. Bank claimed the funds and soybeans as a perfected secured creditor. Who wins? In re Jones, 79 B.R. 839, Web 1987 Bankr. Lexis 1825 (United States Bankruptcy Court for the Northern District of Iowa)