However, Sports Dimension did not file a UCC-1 financing statement covering its consigned goods until January 25, 2016, approximately one month before the Petition Date, Despite WSFS having succeeded BOA as the term lenders' agent prior to Sports Dimension's UCC-1 filing and WSFS having previously filed a UCC-1 financing statement, Sports Dimension failed to provide notice of its consignment to WSFS, as required by UCC Article 9.
WSFS argued that the consignment was subject to UCC Article 9, As such, and under UCC Article 9, WSFS' and the term lenders' interest in the consigned goods was superior to Sports Dimension's consignment interest because WSFS had filed its UCC-1 financing statement before Sports Dimension filed its financing statement, and Sports Dimension had failed to provide notice of its consignment interest to WSFS as required to obtain a prior interest in the consigned goods.
In such cases, the lender records a UCC-1 on ACRIS to evidence its security interest in the borrower's shares of stock in the cooperative corporation, which acts as collateral for the loan.
UCC-1 Financing Statements are short, standardized forms, that can
In general, a lender must file a UCC-1
Financing Statement describing the collateral with the secretary of state of the state in which the borrower resides in order to perfect a security interest.
PAC had filed a UCC-1
financing statement with respect to its consigned goods on Aug.
form does not include the required information.)
(3) Second, a UCC-1
financing statement identifying the collateral must be filed.
Thereafter, GM filed for Chapter 11 protection and its unsecured creditors' committee challenged the perfection of JPM's security interest in the term loan collateral because of the pre-petition termination of JPM's UCC-1
financing statement covering the term loan collateral.
That includes a proper consignment agreement between the consignor and consignee and filing a UCC-1
financing statement describing the consigned goods in the jurisdiction where the consignee is located.
The courts are divided about whether a consignor must follow these requirements in order to obtain priority over the consignee's existing inventory-secured lender where the consignor has protected its consignment interest without the necessity of filing a UCC-1
. An example would be complying with an applicable state sign law or proving that the consignee's creditors generally knew that the consignee was substantially engaged in the business of selling the goods of others.