Types of Goods;

Intangibles & Quasi-Intangibles

CLASS #3
SECURED TRANSACTIONS – SPRING 2018
 Review Problem #1

Kip borrows $8,000 from the Bank and signs a

promissory note. His uncle, Rico, also signs the note
and grants the Bank a security interest in his van.
Which statement is correct?
A. Kip is a debtor and an obligor, and Rico is an obligor
B. Kip is a debtor and Rico is a debtor and an obligor
C. Kip and Rico are each debtors and obligors
D. Kip is an obligor and Rico is a debtor and an obligor
 Problem 1.1(c)

John (Debtor)
Note
SI: Watch

Ed Alexandra
(Obligor) (Secured Party)

$20,000
 Problem 1.1(c)

John (_____)

Note SI: Watch

Ed Alexandra
(______) (________)

$20,000
Security interest created? If so, who is the debtor and who is the obligor?
 Problem 1.2

Bucks: “…you can

Bucks lends Winger fails have [the plane] back
$300 to to repay the as soon as you pay me
Winger loan that $300 you owe me”

Does Bucks have a

security interest in the plane?
 Problem 1.3

E-Z Pay Monthly Payment Plan Agreement:

“…title to any merchandise made the subject of this
agreement will remain in the Seller until Buyer has made
full and final payment of all amounts due hereunder.”

Has a security interest

been created?
 Problem 1.3: Retention of Title

1-201(b)(35):
“…The retention or reservation of title by a seller of
goods…is limited in effect to a reservation of a
security interest.”
 Diagram -- Problem 1.3

Note;
SI: TV
(Agreement)

Ben Sarah
(Debtor/Obligor) (Secured Party)

TV
 Brown v. Indiana National Bank

Brown signs a Racers borrow INB sells most

5-year pro Racers default Racers assets to
$ from INB on the loan, so
hockey contract and grant a SI HW, but not
with Racers; it INB takes Brown’s
in all Racers possession of
requires that assets contract. Brown
Brown consent Brown’s doesn’t get paid
(including contract
to any trade contracts) for last 2 years
Brown v. Indiana Nat’l Bank: Fill in the Blanks

Note;
SI: _____
(Agreement)

_________ _______
(Debtor/Obligor) (Secured Party)

____
 Brown v. Indiana Nat’l Bank

Note;
SI: all assets
(Agreement)

Racers, Ltd. INB

(Debtor/Obligor) (Secured Party)

Loan $
Note: Brown does not
appear in the diagram
 Problem 1.4

Provision in security document:

“The parties hereto agree that their contract is to be
governed solely by the terms of this agreement as
interpreted under the common law of the State of
New York. No other document, statute, treaty, or
convention shall affect the rights or duties of the
parties hereto.”

Does Article 9 still apply?

 What are “Goods”?

UCC 9-102(a)(44):
“Goods” means all things that are movable when a
security interest attaches…
 Problem 2.1(a)

Are the finished furniture pieces “goods”?

If so, what type?
 Inventory

9-102(a)(48):
Inventory means goods…which…
 (B) “…are held by a person for sale or lease…”;
 (D) “…consist of raw materials, work
in process, or materials used [up] or
consumed in a business…”
 Problem 2.1(b)-(c)

What type of goods if held by a wholesaler?

By a furniture boutique store?
 Problem 2.1(d)

What type of goods upon delivery

to Tanya (a customer)?
 Problem 2.1(e)

What if Tanya puts the furniture

in her professional dental office?
 In re Estate of Joseph M. Silver

Paintings: Equipment or Consumer Goods?

Wilson: Silver Trust:

Perfected Subsequent
Security Interest Perfected Security
in equipment Interest in Paintings
In- Class Hypothetical: Pizzeria Bianco

“…Borrower grants to Lender a security interest in all

of Borrower’s equipment located on the Premises...”
 Problem 2.2

How should Fresno’s lender classify Fresno’s assets?

 Problem 2.3 – Joshua Tillers

How to classify:
(a) Seed/fertilizer/pesticides?
(b) Tractor?
(c) Tractor fuel?
(d) Raspberries growing in the field?
(e) Harvested raspberries?
 Problem 2.4

What classification should be

given to the jars of jam?
 Review: Types of Goods

Types of goods:
 Consumer Goods – used “primarily for personal,
family or household purposes…”
 Farm Products –crops, livestock, supplies, etc.
relating to a debtor’s farming operation
 Inventory –“held…for sale or lease”; “raw materials,
work in process, or materials used or consumed…”
 Equipment – [all other goods]
 In-Class Problem #1

Rio Salado Apartments offers to pledge the monthly

rents it collects from its tenants as collateral for a
swimming pool renovation loan. Would Article 9
cover such a transaction?

Hint: See 9-109(d)

 In-Class Problem #2

Ben wants to buy a set of Ping golf clubs from his local golf
pro shop. He signs a purchase agreement with the pro shop
to pay for the clubs through three monthly installments of
$200 each and takes the clubs home.

Does the pro shop have a

security interest in the clubs?
 In-Class Problem #3

What if the purchase agreement between Ben and

the golf pro shop contained the following provision:

“It is agreed by Buyer and Seller that title to the golf

clubs shall remain in Seller until Buyer has made full
payment of all amounts due hereunder.”

Does the pro shop have a

security interest in the
clubs?
 In-Class Problem #4

Oregano’s Pizza Bistro grants a security interest in its

“inventory” to Bank for a loan to pay for store
renovations. In which of the following items
does the Bank hold a security interest?

 Cardboard pizza boxes

 Frozen pizzas
 Beverage dispensing machine
 Dishwashing soap
 Rights in Oregano’s logo
 Employee Uniforms
 Accounts

9-102(a)(2): An account is a “right to payment…for

property that has been...sold,…for services rendered…”
 An “account receivable” is a term commonly used to
describe many accounts. Accounts arise when:
 Safeway buys 1000 boxes of Trix, with payment due in 30 days
 A dentist fills a cavity, with payment due in 60 days

 Account does NOT include:

 Deposit accounts (e.g., checking or savings)
 Promissory notes
 Etc.
 Other Forms of Collateral

 Commercial Tort Claims – 9-102(a)(13)

 Deposit Accounts – 9-102(a)(29)
 Documents (of title) – 9-102(a)(30); 1-201(b)(16)
 Includes bills of lading (for transit) and warehouse receipts

 Instruments – 9-102(a)(47) (a check or note)

 See also 3-104

 Chattel Paper – 9-102(a)(11)

 Example: car dealer’s security agreement/title rights from
consumer car loan