| | | This section reaches the same result but takes a different | | approach. It recognizes that the treatment of proceeds acquired | | with cash proceeds under former Section 9-306(3)(a) essentially | | was superfluous. In the example, had the filing covered | | "equipment" as well as "inventory," the security interest in the | | proceeds would have been perfected under the usual rules | | governing after-acquired equipment (see former Sections 9-302, 9- | | 303); paragraph (3)(a) added only an exception to the general | | rule. Subsection (d)(1)(C) [Maine cite subsection (4), paragraph | | (a), subparagraph (iii)] of this section takes a more direct | | approach. It makes the general rule of continued perfection | | inapplicable to proceeds acquired with cash proceeds, leaving | | perfection of a security interest in those proceeds to the | | generally applicable perfection rules under subsection (d)(3) | | [Maine cite subsection (4), paragraph (c)]. |
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| | | Example 1: Lender perfects a security interest in Debtor's | | inventory by filing a financing statement covering "inventory." | | Debtor sells the inventory and deposits the buyer's check into a | | deposit account. Debtor draws a check on the deposit account and | | uses it to pay for equipment. Under the "lowest intermediate | | balance rule," which is a permitted method of tracing in the | | relevant jurisdiction, see Comment 3, the funds used to pay for | | the equipment were identifiable proceeds of the inventory. | | Because the proceeds (equipment) were acquired with cash proceeds | | (deposit account), subsection (d)(1) [Maine cite subsection (4), | | paragraph (a)] does not extend perfection beyond the 20-day | | automatic period. |
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| | | Example 2: Lender perfects a security interest in Debtor's | | inventory by filing a financing statement covering "all debtor's | | property." As in Example 1, Debtor sells the inventory, deposits | | the buyer's check into a deposit account, draws a check on the | | deposit account, and uses the check to pay for equipment. Under | | the "lowest intermediate balance rule," which is a permitted | | method of tracing in the relevant jurisdiction, see Comment 3, | | the funds used to pay for the equipment were identifiable | | proceeds of the inventory. Because the proceeds (equipment) were | | acquired with cash proceeds (deposit account), subsection (d)(1) | | [Maine cite subsection (4), paragraph (a)] does not extend | | perfection beyond the 20-day automatic period. However, because | | the financing statement is sufficient to perfect a security | | interest in debtor's equipment, under subsection (d)(3) [Maine | | cite subsection (4), paragraph (c)] the security interest in the | | equipment proceeds remains perfected beyond the 20-day period. |
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| 6. Automatic Perfection in Proceeds: Lapse or Termination of | | Financing Statement During 20-Day Period; Perfection Under Other | | Statute or Treaty. Subsection (e) [Maine cite subsection (5)] | | provides that a security interest in proceeds perfected |
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