Question

(law question). Fred Maxson owned Canadian Equipment Company. To operate the business, Maxson borrowed funds from Cross Town Bank & Trust. For each loan, Cross Town filed a financing statement that included Maxson’s signature and address, the bank’s name and address, and a description of the collateral. The first loan covered all of Maxson’s equipment, including “any after-acquired property.” The second loan covered a truck crane “whether owned now or acquired later.” The third loan covered a “Bobcat mini-excavator.” Did these financing statements perfect Cross Town’s security interests? Explain.

Answer 1

The Cross Town Bank & Trust fullfilled all the conditions relating to filing a financing statement for perfection of a security interest.

However, a Security Interest can only be perfected if it has been "attached". ( need to attach first and then perfect.).

In order to attach, ALL the three conditions must be met. The interest is considered to have been attached when the last of the three occurs. The three conditions are:

• Property owned by borrower/debtor
• Interest is created
• Creditor /lender gives value to borrower / debtor

Since all the conditions have been met, the financing statements perfect Cross Town’s security interests. However, for the after acquired property, attachment is possible only after the same is being owned by the borrower/lender and same applies in case of perfection.

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