Topic: Article 9 – Uniform Commercial Code
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We have a blanket financing statement on all equipment “now owned and after acquired” by the debtor, who recently died. Another lender later filed a financing statement listing a specific piece of equipment, but we are unsure whether this lender has a purchase money security interest (PMSI) in the piece of equipment and would have priority over our lien. Must a financing statement indicate if the lender has a PMSI? Also, this lender has not amended its financing statement to reflect the debtor’s name as it appears on his driver’s license. Could this affect the lender’s position? An auction sale has been scheduled, and we are trying to determine our position.
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We are not aware of any statutory requirement for a financing statement to indicate that a lender has a PMSI in the collateral identified in the statement. You may wish to contact the other lender to inquire as to the nature of their interest in the piece of equipment. You are correct that a lender…
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Is there a restriction on the maximum lien amount that may be listed in a mortgage — for example, “twice the loan amount?” Have there been any cases where listing more than twice the loan amount has been challenged?
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We are not aware of any restrictions on the maximum lien amount that may be listed in a mortgage, nor of any restrictions that would limit the maximum lien amount to twice the loan amount. Illinois courts generally have upheld “cross-collateralization” clauses in security agreements to secure future debts, provided the clauses are “clear and…
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When we take a security interest in the grain of one of our customers, we send a notice of security interest to the grain elevator where the grain is stored. Are there any Illinois laws that indicate how frequently we need to send these notices?
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We recommend sending notices of your security interest to the grain elevator at least annually. Under both federal and Illinois law, notice of a security interest in farm products must be provided within one year of a sale in order to protect your bank’s security interest, and we are aware of at least one Illinois…
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Illinois appears to have a non-uniform UCC provision, providing that Article 9 is not applicable to a transfer by a government or governmental subdivision or agency. It is being argued that a UCC filing against a municipality would be ineffective under this provision. Can you explain the history of this provision and how it should be interpreted?
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We believe that Article 9 of Illinois’ Uniform Commercial Code does exclude from its scope any transfers in which a governmental unit (including a municipality) is the borrower. Section 9-109 excludes from coverage “a transfer by a government or governmental subdivision or agency.” While the term “governmental subdivision or agency” is not defined, the definition…
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When we file a mortgage or UCC financing statement to perfect a lien for an LLC that has established a series, what name should we use for the borrower? For a mortgage, we use the grantor’s name, which typically is the name of the series of the LLC (e.g., “ABC Properties, LLC; #2 Any Road” or “1234 North Street, Series of ABC Properties, LLC”). Should we enter the name of the LLC itself, or is it appropriate to use the name of the series?
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Subject to the discussion below, we believe that your bank may be able to perfect its security interests in property held by a series of an Illinois LLC by following your current practice, using the name of the series provided on the property title. Illinois law permits series LLCs to establish any number of “series,”…
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We financed an LLC’s bulk sale purchase of farm equipment inventory owned by a corporation and filed a blanket financing statement covering the LLC’s existing and later-acquired equipment. Within one month of the sale, a creditor of the corporation filed an amendment to its blanket lien, identifying the LLC as the debtor. After a bulk sale occurs, can the seller’s creditor maintain its lien position in the sold assets, and for how long can its priority be maintained as to future creditors who also file blanket financing statements on the same equipment?
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Farm Equipment Sold by the Corporation to Your Borrower (the LLC) We believe that the original creditor can maintain its lien position in the sold farm equipment indefinitely, as long as it files continuation statements for its original financing statement (and provided that no intervening events cause its security interest to lapse — for example,…
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We filed a UCC-1 financing statement in July 2018, covering the assets of an LLC that changed its name on August 1, 2018. Do we need to file a UCC-3 financing statement amendment as to the debtor’s name to maintain our perfection date?
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Your bank’s July 2018 financing statement remains effective to perfect a security interest in the assets acquired by the LLC before its name change and within fourth months thereafter. The UCC provides that your “financing statement is not rendered ineffective if, after the financing statement is filed, the information provided in the financing statement becomes…
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We have a customer requesting financing on a personal use airplane. What steps do we need to take to perfect a lien on the airplane?
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To perfect a lien on a civilian aircraft, your bank will need to record its security agreement with the Federal Aviation Administration (FAA). The rules for recording and enforcing a security interest in civil aircraft are governed by the Federal Aviation Administration Act, which governs the perfection of security interests in this type of collateral.…
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We would like to perfect a lien on a contract between a grain grower and a broker that will be marketing the grower’s grain for purchase by grain elevators. We want to protect our interest in the grain, but we won’t know which grain elevator ultimately will purchase the grain until the broker has completed its work. We are considering an arrangement in which we require each separate contract between the grain grower and the broker to indicate that sale proceeds would be deposited into an account at our bank, to ensure that we receive the proceeds. Do we need to obtain a lien on each contract, or can we have a blanket lien covered by a UCC-1 filing?
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We recommend consulting with local counsel to ensure that your security agreement, financing statement and requirements for the broker contracts fully protect your bank and comport with applicable local rules and practices. Your bank may perfect its lien on the grain by filing a UCC-1 form, but you may have to take additional steps to…