Business Law

Business Law News 2018, ISSUE 3

2017-2018 Commercial Law Developments, Part I.A (Personal Property Secured Transactions)1

Steven O. Weise, Teresa Wilton Harmon, John F. Hilson, Stephen L. Sepinuck, Edwin E. Smith, and Lynn A. Soukup

A. Scope of Article 9 and Existence of a Secured Transaction

1. General

  • South Lafourche Bank & Trust Co. v. M/VNOONIE G, 2017 WL 2634204 (E.D. La. 2017) – Federal law requires that a preferred ship mortgage state "the amount of the direct or contingent obligations." It is sufficient if the mortgage states the maximum amount that may be secured. Because the mortgage indicated that it secured a line of credit up to a maximum principal amount of $900,000, the mortgage was effective.
  • In re Climate Control Mechanical Services, Inc., 570 B.R. 673 (Bankr. M.D. Fla. 2017) – A secured party with a perfected security interest in the accounts of the debtor, a general contractor, encumbered the debtor’s right to the amounts withheld but now due to the debtor under a construction contract. The amounts had not been earmarked for payment of a subcontractor.
  • In re Johnson, 2017 WL 2399453 (6th Cir. BAP 2017) – A security agreement describing the collateral as "the payment, proceeds, and rights under and related to" the debtor’s contract to play hockey failed to comply with California Labor Code § 300(b), governing assignments of wages. The security agreement failed to state that there was no other assignment in connection with the transaction. Accordingly, no security interest attached.
  • Bank of the Pacific v. F/V ZOEA, 2017 WL 823298 (W.D. Wash. 2017) – The federal Ship Mortgage Act preempts a Washington state law that prohibits the creation of a security interest in commercial shellfish and food fish permits. A preferred ship mortgage granted by the limited liability company covered a Dungeness crab permit appurtenant to a vessel attached to the permit. It did not matter that the owner of the company had the permit titled in his own name and later sold the permit. The owner held title in trust for the limited liability company and the preferred ship mortgage attached and had priority over the rights of the buyer.

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