84-9-110. Security interests arising under Article 2 or 2a. A security interest arising under K.S.A. 84-2-401, 84-2-505, 84-2-711(3) or 84-2a-508(5), and amendments thereto, is subject to this article. However, until the debtor obtains possession of the goods:
(1) The security interest is enforceable, even if K.S.A. 2024 Supp. 84-9-203(b)(3), and amendments thereto, has not been satisfied;
(2) filing is not required to perfect the security interest;
(3) the rights of the secured party after default by the debtor are governed by article 2 or 2a; and
(4) the security interest has priority over a conflicting security interest created by the debtor.
History: L. 2000, ch. 142, § 10; July 1, 2001.
KANSAS COMMENT, 1996
This section, which should be read together with 84-9-203 concerning the description of the collateral in the security agreement, and with 84-9-402 regarding the description of the collateral in the financing statement, varies from the 1995 Official Text in its addition of the "except" clause relating to fixtures. The requirement of description (both in the security agreement under 84-9-203 and in the financing statement under 84-9-402) is to make identification of the personal property or fixtures possible; the test of sufficiency is whether it makes possible the identification of the thing described for the benefit of third parties searching the files. The drafters have rejected a "serial number" test, thus changing pre-UCC Kansas case law. See Trapani v. Universal Credit Co. 151 K. 715, 100 P.2d 735 (1940). Even though the filing lacks details, if it gives clues sufficient that third persons by reasonable care and diligence may ascertain the property covered, the courts should uphold the description. Pre-UCC Kansas law is in substantial accord. See, e.g., Griffiths v. Wheeler & Barber, 31 K. 17, 2 P. 842 (1883); Security State Bank v. Jones, 121 K. 396, 247 P. 862 (1926); Martinek v. Carlson, 125 K. 434, 264 P. 735 (1928); Union Stockyards Bank v. Hamilton, 246 F. 580 (6 th Cir. 1917).
There are two situations where the creditor can get into special trouble. First, the Kansas version of this section requires a full-blown legal description of real estate on which fixtures are located. See 84-9-402(5). Moreover, if crops are involved, both the security agreement (84-9-203(1)(a)) and the financing statement (84-9-402(1)) must contain a description of the land concerned, though not a full-blown legal description. In Chanute Production Credit Association v. Weir Grain and Supply, Inc., 201 K. 181, 499 P.2d 517 (1972), a financing statement which described the realty in a crop loan as "land owned or leased by the debtor in Cherokee County, Kansas" was held insufficient to perfect a security interest in the crops. The real estate description was simply too general. See Kansas Comment to 84-9-402. Second the creditor can get into trouble by using a description of personal property which is so broad as to be meaningless. For example, describing the collateral as "all personal property" of the debtor may not satisfy the "reasonable identification" test of this section unless the security agreement is very clear. See In re Fuqua, 461 F.2d 1186 (10 th Cir. 1972). Compare In re Werth, 443 F. Supp. 738 (D. Kan. 1977), which has been overruled by a unique Kansas amendment to 84-9-402(1), as discussed in Kansas Comment 1983 to that section. Thus, a long shadow is cast over a pre-UCC case like Emick v. Swafford, 107 K. 209, 191 P. 490 (1920), where the court upheld a description of "all personal property" of the debtor in a certain county.
One Kansas supreme court decision which goes far in protecting the creditor under the "reasonable identification" test of this section is John Deere Co. v. Butler County Implement, Inc., 232 K. 273 (1982), 655 P.2d 124. In that case, the creditor described an implement dealer's inventory as "equipment". The court upheld the description in spite of the apparent misclassification, on the ground that the two terms are synonymous in the trade, discussed in the Kansas Comment to 84-9-109.
Revisor's Note:
Former section 84-9-110 was repealed by L. 2000, ch. 142, § 155 and the number reassigned to the current text.
Law Review and Bar Journal References:
Section embodies one of distinctive features of UCC, Charles H. Oldfather, 14 K.L.R. 571, 575 (1966).
Collateral in farm financing discussed, Van Smith, 35 J.B.A.K. 299, 300 (1966).
"Survey of Kansas Law: Secured Transactions," J. Eugene Balloun, 16 K.L.R. 437, 438 (1968).
Requirements of filing, sufficiency of description and notice discussed in "Survey of Kansas Law: Secured Transactions," Gerald D. Hagg, 21 K.L.R. 107, 109 (1972).
"Survey of Kansas Law: Secured Transactions," J. Eugene Balloun, 27 K.L.R. 301, 302, 303 (1979).
"Survey of Kansas Law: Secured Transactions," J. Eugene Balloun, 32 K.L.R. 351, 356 (1984).
"Agricultural Credit and The Uniform Commercial Code: A Need for Change?" Keith G. Meyer, 34 K.L.R. 469, 497 (1986).
"Clear Title: A Buyer's Bonus, A Lender's Loss—Repeal of UCC § 9-307(1) Farm Products Exception by Food Security Act § 1324 [7 U.S.C. § 1631]," Mark V. Bodine, 26 W.L.J. 71, 89 (1986).
"Revised Article 9 in Kansas," Hon. John K. Pearson, 51 K.L.R. 769, 785 (2003).
CASE ANNOTATIONS
1. Description of collateral insufficient to give protection as secured creditor in bankruptcy. In re Fuqua, 330 F. Supp. 1050, 1052.
2. In proceeding to review finding of bankruptcy referee, held that financing statement covering "all personal property" did not meet statutory requirement of description. In re Fuqua, 461 F.2d 1186, 1187, 1188.
3. Financing statement inadequate; did not constitute required notice; insufficient description of real estate. Chanute Production Credit Association v. Weir Grain and Supply, Inc., 210 Kan. 181, 182, 499 P.2d 517.
4. Mentioned in discussion of commercial security interest priority over federal tax liens; circumstances necessary for priority. Donald v. Madison Industries, Inc., 483 F.2d 837, 843.
5. Description of farm equipment in financing statement as "all equipment now owned or hereafter acquired by debtor" held not in compliance with statutes (K.S.A. 84-9-109(2), 84-9-110, 84-9-402). In re Werth, 443 F. Supp. 738.
6. Mentioned in considering assignment by one partner of benefits under contract for sale of partnership assets. Wellsville Bank v. Nicolay, 7 Kan. App. 2d 172, 177, 638 P.2d 975 (1982).
7. Description of collateral contained in security agreement sufficient to include after-acquired inventory. John Deere Co. v. Butler County Implement, Inc., 232 Kan. 273, 279, 282, 655 P.2d 124 (1982).
8. Parol evidence inadmissible to add mobile home to security agreement when contract unambiguous. In Re Swearinger, 27 B.R. 379, 380, 384 (1983).
9. Where financing statement contained no description of real estate, security interest in debtor's growing crops not perfected. In re Roberts, 38 B.R. 128, 129, 130, 131 (1984).
10. Real estate description in financing statement adequate although not exactly correct. In re McMannis, 39 B.R. 98, 99, 101 (1983).
11. Additional digit in vehicle identification number not fatal to security interest. Dick Hatfield Chevrolet, Inc. v. Bob Watson Motors, Inc., 10 Kan. App. 2d 350, 354, 699 P.2d 566 (1985).
12. Cited; no requirement that livestock description include location; covenant to keep at specific location no limitation on security interest. First Nat'l Bank & Tr. Co. v. Atchison County Auction Co., 10 Kan. App. 2d 382, 385, 699 P.2d 1032 (1985).
13. Pre-UCC Kansas cash sale case law changed; later security agreement containing error encompassed by original financing statement. Dick Hatfield Chevrolet, Inc. v. Bob Watson Motors, Inc., 238 Kan. 41, 44, 708 P.2d 494 (1985).
14. Where nature of property changes daily, financing statement accurately describing property sufficient although reference to after-acquired property omitted. United Cooperatives v. Libel Oil Co., 10 Kan. App. 2d 427, 428, 429, 699 P.2d 1040 (1985).
15. Sufficiency of description of land in financial statement covering growing crops examined. In re Lions Farms, Inc., 54 B.R. 241, 243 (1985).
16. References to townships in security agreement and financing statement adequate for crops on land owned by debtor; inadequate as to land leased. In re Law, 54 B.R. 434, 436 (1985).
17. Cited; neither owner's name nor specific tract in section required in land description for financing statement covering growing crops. United States v. Collingwood Grain, Inc., 792 F.2d 972, 973 (1986).
18. Cited; test to determine whether goods are inventory examined; not essential to include term "inventory" in consignment security agreement. Maxl Sales Co. v. Critiques, Inc., 796 F.2d 1293, 1298, 62 B.R.[168] [172] [173] (1986).
19. Cited; secured party's lack of interest in lease to real estate (K.S.A. 84-9-104) holding property subject to security interest examined. Riley State Bank v. Spillman, 242 Kan. 696, 703, 750 P.2d 1024 (1988).
20. Land description in financing statement covering crops sufficient for security interest to maintain conversion action for unauthorized sale. U.S. v. Smoky Valley Bean, Inc., 673 F. Supp. 1551, 1554 (1987).
21. PIK certificates as nonnegotiable, creditor's protection of security interest therein, right to proceeds therefrom determined. In re George, 85 B.R. 133, 145 (1988).
22. Financing statement applicable to government payments pertaining to wheat crop was adequate to describe "Payment in Kind" certificates. In Re George, 119 B.R. 800, 804 (1990).
23. Failure to specify particular piece of land on which crops are growing will not destroy land description in security agreement; included land of adjoining owner. In Re Coones, 954 F.2d 596 (1992).
24. Cited where court finds no authority for merging security interest and financing statement; countywide location not a reasonable identification. Garst Seed Co. v. Wilson, 17 Kan. App. 2d 130, 132, 833 P.2d 138 (1992).
25. Whether financing statement's collateral description reasonably identifies what is described examined. In re Kruckenberg, 160 B.R. 663, 672 (1993).
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