and "Promissory Notes" Perfecting Interests In Financial - - PowerPoint PPT Presentation

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UCC Security Interests in Payment Intangibles: Intercompany Loans, Debt Obligations and "Promissory Notes"

Perfecting Interests In Financial Instruments and Contractual Payment Obligations

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific WEDNESDAY, JULY 13, 2016

Dean T . Kirby, Jr., Principal, Kirby & McGuinn, San Diego Professor Thomas E. Plank, Joel A. Katz Distinguished Professor of Law, University of Tennessee College of Law, Knoxville, Tenn. Steven O. Weise, Partner, Proskauer Rose, Los Angeles

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UCC Security Interests in Payment Intangibles: Intercompany Loans, Debt Obligations, and ‘Promissory Notes’

Dean T. Kirby, Jr. Kirby & McGuinn, A P.C. Professor Thomas E. Plank

• U. Of Tennessee College of Law

Steve Weise Proskauer Rose LLP

• Benefits
• Definitions + Examples
• Characterization
• Types of transactions
• Creation
• Perfection
• Priority
• Enforcement

Outline

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• Automatic perfection for sales

No public record

• Can't be primed by possession

Benefits of treatment as ‘payment intangible’

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• Reason for creating
• Core definition
• Expansion of ‘accounts’

Definition (§ 9-102)

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• Loan agreement
• ‘Note’
• Electronic note
• Participation
• Intercompany loan entered on books
• Rights with respect to credit cards

Examples

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• Differentiate from:

Notes (paper) Chattel paper Accounts Debt securities

Scope – characterization (§§ 8- 102 + 9-102)

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• Chattel Paper is a record that evidences . . . (among other things)

 Both a monetary obligation and a security interest

• like a consumer installment purchase contract, or

 A lease of specific goods

• like a commercial equipment lease
• What happens when parties purport to separate the monetary
• bligations of the buyer or lessee from other obligations which are

contained in the record, or from the record itself?  Are the severed payment obligations:

• Accounts?
• Payment intangibles?
• Still chattel paper?

Chattel paper – Splitting the Atom?

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• Control of ‘transferrable records’

under: UETA E-Sign

Electronic notes

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• Security agreement

Sales agreement (for sales)

Creation – by agreement (§ 9- 203)

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• Ancillary rights
• Guaranty
• Letter of credit rights
• Underlying mortgage
• Underlying security agreement

Creation – automatic (§ 9-203)

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• Sales v ‘pledge’

§§ 9-406(e) + 9-408(b)

• Effect of characterization

Restrictions on transfer

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• Automatic for sale

Stripped payment rights?

Perfection – automatic (§ 9- 309(3))

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• Filing

Should filing be dropped?

Perfection – filing (§ 9-310)

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• Not by possession (even if called

a ‘note’) (§ 9-313)

• Not by control (§§ 9-104 – 9-107)
• Automatic for ancillary rights (§ 9-

308(d) + (e))

• Proceeds (§9-315)

Perfection –other methods

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• Filing

Filing help in sales?

• Not by possession (even if called a ‘note’)
• Possibly by control?

Under UETA or E-SIGN

• Transferable records?
• Proceeds

Negotiable proceeds

Priority

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• In re Commercial Money Center, Inc.

350 B.R. 465 (Bankr. App. 9th Cir. 2006)

• Animal, Vegetable or Mineral? In re

Commercial Money Center, 39 U. Tol. L. Rev. 861 (2008)

• Classifying the Right to Rental Payment

Streams Stripped Off a Lease, 86 Tex. L. Rev. 857 (2008)

Stripping to create "payment intangible"

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• Sale

Restrictions on transfer (§ 9- 406(e) (revised)) Commercial reasonableness issues

Enforcement - sale

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• Notice to account debtor (§ 9-

406)

• Notice to seller/borrower?
• Duty of commercial

reasonableness?

Enforcement – collection

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• Account debtor defenses (§ 9-

404)

• Hell-or-high-water term (§ 9-403)
• Offsets

Enforcement – account debtor defenses

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Dean T. Kirby Kirby & McGuinn dkirby@kirbymac.com Professor Thomas E. Plank University of Tennessee College of Law tplank@tennessee.edu Steven O. Weise Proskauer Rose sweise@proskauer.com

Thank You

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