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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
The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 1.
WEDNESDAY, OCTOBER 2, 2019
Presenting a live 90-minute webinar with interactive Q&A
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 & Morgan Lewis & Bockius LLP, Knoxville, Tenn.
Steven O. Weise, Partner, Proskauer Rose, Los Angeles
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FOR LIVE EVENT ONLY
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)
8
•Loan agreement
•‘Note’
•Electronic note
•Participation
•Intercompany loan entered on books
•Rights with respect to credit cards
Examples
9
•Differentiate from:
Notes (paper)
Chattel paper
Accounts
Debt securities
Scope – characterization (§§ 8-102 + 9-102)
10
• 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 obligations 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?
11
• In re Commercial Money Center, Inc., 350 B.R. 465 (Bankr. App. 9th Cir. 2006)
• UCC § 9-102, Comment 5.d
• In re Delano Retail Partners, LLC (Bankr. E.D. Calif. 2017) (unpublished)
• 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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•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)
15
•Sales v ‘pledge’
§§ 9-406(e) + 9-408(b)
•Effect of characterization
•Recent amendments to UCC §§ 9-406 and 9-408
Restrictions on transfer
16
•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
19
•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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•Sale
Restrictions on transfer (§ 9-406(e) (revised))
Commercial reasonableness issues
Enforcement - sale
21
•Notice to account debtor (§ 9-406)
•Notice to seller/borrower?
•Duty of commercial reasonableness?
Enforcement – collection
22
•Account debtor defenses (§ 9-404)
•Hell-or-high-water term (§ 9-403)
•Offsets
Enforcement – account debtor defenses
23
Dean T. Kirby
Professor Thomas E. Plank
Steven O. Weise
Thank You
24