(Code 1981, §11-9-203, enacted by Ga. L. 2001, p. 362, § 1; Ga. L. 2010, p. 481, § 2-20/HB 451.)
The 2010 amendment, effective May 27, 2010, in subparagraph (b)(3)(D), substituted "letter of credit rights, or electronic documents," for "or letter of credit rights," and inserted "11-7-106,". See the Editor's notes for applicability.
Editor's notes.- Ga. L. 2010, p. 481, § 3-1, not codified by the General Assembly, provides that: "This Act applies to a document of title that is issued or a bailment that arises on or after the effective date of this Act. This Act does not apply to a document of title that is issued or a bailment that arises before the effective date of this Act even if the document of title or bailment would be subject to this Act if the document of title had been issued or bailment had arisen on or after the effective date of this Act. This Act does not apply to a right of action that has accrued before the effective date of this Act." This Act became effective May 27, 2010.
Ga. L. 2010, p. 481, § 3-2, not codified by the General Assembly, provides that: "A document of title issued or a bailment that arises before the effective date of this Act and the rights, documents, and interests flowing from that document or bailment are governed by any statute or other rule amended or repealed by this Act as if such amendment or repeal had not occurred and may be terminated, completed, consummated, or enforced under that statute or other rule." This Act became effective May 27, 2010.
Law reviews.- For article on the 1963 amendment to Georgia Uniform Commercial Code, see 14 Mercer L. Rev. 378 (1963). For article discussing the Uniform Commercial Code provisions regarding sufficiency of the description of collateral in security agreements and financing statements, see 28 Mercer L. Rev. 611 (1977). For article discussing the resolution of conflicting claims to goods between an unsecured seller of goods and a creditor of a buyer claiming under an after-acquired property clause, see 28 Mercer L. Rev. 625 (1977).
JUDICIAL DECISIONSANALYSIS
General Consideration
Editor's notes.
- In the light of the similarity of the provisions, decisions under former Article 9 are included in the annotations for this Code section. For a table of comparable provisions, see the table at the beginning of the Article.
Rights in collateral required.
- Fundamental to secured party's acquisition of security interest in property of debtor is that debtor have rights in collateral. A security interest can be created in no other property. Anthony v. Community Loan & Inv. Corp., 559 F.2d 1363 (5th Cir. 1977) (decided prior to 1978 amendment which incorporated parts of § 109A-9-204 into what was § 11-9-203) (decided under former Code Section11-9-203).
One cannot encumber another person's property in the absence of consent, estoppel, or some other special rule. Russell v. Lawrence, 234 Ga. App. 612, 507 S.E.2d 161 (1998).
Purchase money security interests.
- To perfect purchase money security interest and for it to be enforceable against debtor and third parties, there must be a written agreement, signed by debtor under former subsection (1) of this section and filing of a financing statement under former § 11-9-302(1). Food Serv. Equip. Co. v. First Nat'l Bank, 121 Ga. App. 421, 174 S.E.2d 216 (1970) (decided under former Code Section11-9-203).
Financing statements.
- A financing statement merely gives notice of the existence of a security interest but in itself does not create a security interest, for which a security agreement is required. Amoco Oil Co. v. G. Sims & Assocs., 162 Ga. App. 307, 291 S.E.2d 128 (1982) (decided under former Code Section11-9-203).
A financing statement cannot serve as a security agreement because it does not grant the creditor a security interest in the collateral and does not identify the obligation owed to the creditor. Amoco Oil Co. v. G. Sims & Assocs., 162 Ga. App. 307, 291 S.E.2d 128 (1982) (decided under former Code Section11-9-203).
Security agreement was unenforceable.
- Where bank did not introduce written security agreement but instead relied upon its officer's deposition indicating that it possessed car's certificate of title, which car dealer had given to bank pursuant to its financing the dealer's inventory, and where certificate of title, purportedly executed in blank, was not produced, bank's failure to establish compliance with former subsection (1)(a) of this section rendered security interest unenforceable by means of summary judgment. Holloway v. F & M Bank, 151 Ga. App. 424, 260 S.E.2d 380 (1979) (decided under former Code Section11-9-203).
Unless secured party is in possession of collateral, the party's security interest, absent writing which satisfies former subsection (1)(a), is not enforceable even against debtor, and cannot be made so on theory of equitable mortgage or the like. McDonald v. Peoples Auto. Loan & Fin. Corp., 115 Ga. App. 483, 154 S.E.2d 886 (1967) (decided under former Code Section11-9-203).
The purchasers of a horse farm did not have a right in certain horses superior to that of the vendor's former partner based on the horses as collateral for a secured transaction, where the former partner was awarded the horses in a judgment against the vendor and, thus, the collateral did not belong to the vendor/debtor and the security interest did not attach. Russell v. Lawrence, 234 Ga. App. 612, 507 S.E.2d 161 (1998).
Writing not required.- Where collateral is in possession of secured party, evidentiary need for written record is much less than where collateral is in debtor's possession, and under this article, as at common law, writing is not a formal requisite in former situation. Barton v. Chemical Bank, 577 F.2d 1329 (5th Cir. 1978) (decided under former Code Section 11-9-203).
Good faith purchaser.- A bank was a good faith purchaser for value of certain cars under the following circumstances: The proprietor of a used-car business maintained a special checking account with the bank; the proprietor purchased cars from a car auction company with checks drawn upon this account and he then executed a promissory note to the bank, which loaned the proprietor the purchase price and took a security interest in the car; the account became overdrawn and the bank refused to honor the checks made out to the auction company. Georgia Cas. & Sur. Co. v. Tennille Banking Co. (In re Smith), 51 Bankr. 904 (Bankr. M.D. Ga. 1985) (decided under former Code Section 11-9-203).
Insurance benefits considered "proceeds" and subject to lender's security interest.
- Insurance benefits payable from a third-party tortfeasor's insurer upon the destruction of a vehicle became "proceeds," subject to a lender's security interest, before payment to the victims. JCS Enter., Inc. v. Vanliner Ins., 227 Ga. App. 371, 489 S.E.2d 95 (1997).
Bankruptcy court found that under the security deed the credit company held a valid security interest in the destroyed property and the security deed provided sufficient language to grant the credit company a security interest in the proceeds of the collateral, including any insurance proceeds. Altegra Credit Co. v. Ford Motor Credit Co. (In re Brantley), 286 Bankr. 918 (Bankr. S.D. Ga. 2002).
Computer information and programming.
- Computer information and programming recorded on magnetic tape were "general intangibles" which are not included in the types of collateral in which security interests can be perfected by possession under former § 11-9-305, and a security interest therein could therefore only be perfected by filing a financing statement. Dabney v. Information Exch., Inc., 98 Bankr. 603 (Bankr. N.D. Ga. 1989) (decided under former Code Section11-9-203).
Security interest in the proceeds.- After a Chapter 13 debtors' vehicle was destroyed in an accident after confirmation of the plan, the failure of the secured creditor to introduce the insurance policy into evidence, meant that the court could not determine if the creditor had an independent right to the proceeds in addition to its Uniform Commercial Code Article 9 rights; the creditor proved only that it had a security interest in the proceeds and, therefore, Article 9 governed and the insurance payout was proceeds of the collateral. In re Jones, Bankr. (Bankr. S.D. Ga. June 4, 2004).
Language held sufficient to prove security interest.
- Bank that extended credit to a debtor before the debtor declared Chapter 13 bankruptcy, so the debtor could purchase merchandise using a credit card, had an enforceable security interest under O.C.G.A. § 11-9-203 in goods the debtor obtained using the credit card, and a plan the debtor filed for repaying creditors could not be confirmed under 11 U.S.C. § 1325 because the plan treated the bank's claim as an unsecured claim. An application the debtor completed when the debtor applied for the credit card stated that the debtor granted a business a purchase money security interest in goods purchased on the debtor's account. Thomas G. v. HSBC Nev., N.A. (In re Thomas G.), Bankr. (Bankr. N.D. Ga. Dec. 21, 2009)(Unpublished).
Motor Vehicle Certificate of Title Act.
- Failure to comply with the Motor Vehicle Certificate of Title Act (O.C.G.A. § 40-3-1 et seq.) with respect to the perfection of a security interest (former O.C.G.A. § 40-3-50(b)) does not affect the creation of the security interest, which remains a matter of contract between the parties. Spoon v. Herndon, 167 Ga. App. 794, 307 S.E.2d 693 (1983) (decided under former Code Section11-9-203).
Uniform Commercial Code financing statement found not to cover mobile home. See Homac, Inc. v. Fort Wayne Mtg. Co., 577 F. Supp. 1065 (N.D. Ga. 1983) (decided under former Code Section 11-9-203).
Noncompliance with former subsection (1).- Security interest found to comply with former subsection (1). See USI Capital & Leasing v. Medical Oxygen Serv., Inc., 36 Bankr. 341 (Bankr. N.D. Ga. 1984) (decided under former Code Section 11-9-203).
Passage of title.
- When the peanut growers completed the performance of the growers' duties under the growers' contracts with a peanut broker by delivering the growers' peanuts to a peanut company, title passed to the broker. Farm Credit of Northwest Fla., ACA v. Easom Peanut Co., 312 Ga. App. 374, 718 S.E.2d 590 (2011), cert. denied, No. S12C0444, 2012 Ga. LEXIS 315 (Ga. 2012).
Sufficiency of Writing
Requirements, generally.
- For a security interest to be enforceable, there must be a writing signed by debtor, which includes "security agreement" as that term is defined, which describes collateral. In re Carmichael Enters., Inc., 334 F. Supp. 94 (N.D. Ga. 1971), aff'd, 460 F.2d 1405 (5th Cir. 1972) (decided under former Code Section 11-9-203).
Two creditors who loaned money to a debtor to buy a truck and who were named by the debtor as a "lienholder" on the debtor's application for a title won a ruling sustaining their objection to the debtor's proposed Chapter 13 plan in which the creditors' interest was treated as an unsecured interest, because Georgia law did not require the use of "magic words" to create an enforceable security interest and because the three documents signed by the debtor in connection with the transaction satisfied the requirements in O.C.G.A. § 11-9-203(b)(3)(A) for the creation of an enforceable security interest, and were consistent with the debtor's testimony that the debtor knew that the creditors would have a lien on the debtor's truck. In re Flager, Bankr. (Bankr. M.D. Ga. June 8, 2007).
Signatures on face of documents.
- Placing of initials and/or signatures on face of documents does not suffice to authenticate title retention agreement on reverse and as consequence does not entitle creditor to priority over disputed collateral. Food Serv. Equip. Co. v. First Nat'l Bank, 121 Ga. App. 421, 174 S.E.2d 216 (1970) (decided under former Code Section11-9-203).
Party does not receive signed security agreement from debtor with reference to sales orders where only signing appears on face of instruments and neither sale order nor delivery receipt makes any reference to reverse side of documents. Food Serv. Equip. Co. v. First Nat'l Bank, 121 Ga. App. 421, 174 S.E.2d 216 (1970) (decided under former Code Section11-9-203).
Signature on security agreement required for aircraft.
- In a preferential transfer action under 11 U.S.C. § 547(b), while the trustee satisfied the trustee's burden as to many of the elements and was entitled to a partial summary judgment as to those elements, the trustee was not entitled to summary judgment under 11 U.S.C. § 547(b)(5) regarding the debtor's conveyance of an aircraft because there were material fact issues as to the existence of a security agreement, the amount of the debt, the value of the aircraft, and whether the security interest was filed with the Federal Aviation Administration (FAA). In this case, pursuant to O.C.G.A. § 11-9-203(b)(3)(A), in order to have an enforceable security interest, there had to be a signed security agreement. Kelley v. Murphy (In re McConnell), 455 Bankr. 824 (Bankr. M.D. Ga. 2011).
Written assignments of debt.
- Letter written by creditor to debtor stating that the creditor "has assigned" debt to third party, which letter bears "acceptance" by debtor of assignment, and on the basis of which assignee lends money to assignor, is sufficient writing to create security interest in assignee, attaching at time of loan to assignor. Citizens & S. Nat'l Bank v. Capital Constr. Co., 112 Ga. App. 189, 144 S.E.2d 465 (1965) (decided under former Code Section11-9-203).
Language held insufficient to prove security interest.
- Sales invoices, which stated that sales of household goods were subject to a "charge agreement," were not sufficient to prove the existence of a security interest, where such invoices did not constitute a security agreement but merely gave notice of the existence of one. Grier v. Skinner's Furn. Store of Newnan, Inc., 180 Ga. App. 607, 349 S.E.2d 826 (1986) (decided under former Code Section11-9-203).
Written security agreement not established.- Creditor was not entitled to relief from an automatic stay under 11 U.S.C. § 362 when the creditor could not provide evidence of a written security agreement signed by the debtor for the personal property at issue and the debtor testified that the debtor never signed or intended to give a security interest in the personal property. First Nat'l Bank v. Alba (In re Alba), 429 Bankr. 353 (Bankr. N.D. Ga. 2008).
Security agreement in aircraft not established.- When a trustee sought to avoid as a preferential transfer a debtor's conveyance of an aircraft to defendants, summary judgment was inappropriate as to 11 U.S.C. § 547(b)(5) because there were material fact issues as to the existence of a security agreement, the amount of the debt, the value of the aircraft, and whether the security interest in the aircraft was filed with the Federal Aviation Administration. Kelley v. Murphy (In re McConnell), Bankr. (Bankr. M.D. Ga. Aug. 18, 2011).
Description
Purpose of description in unfiled security agreements.
- Purchase money security agreements on consumer goods are not required to be filed, and purpose of description of collateral in such agreements is not to give notice, as on a financing statement, but is to provide identification of collateral so as to avoid disputes over its identity. Personal Thrift Plan of Perry, Inc. v. Georgia Power Co., 242 Ga. 388, 249 S.E.2d 72 (1978) (decided under former Code Section11-9-203).
Sufficiency of description.
- Test of the sufficiency of a description is that the description do job assigned to it, that it make possible identification of thing described. Personal Thrift Plan of Perry, Inc. v. Georgia Power Co., 242 Ga. 388, 249 S.E.2d 72 (1978) (decided under former Code Section11-9-203).
Written security agreement satisfies this provision if it is signed by debtor and contains description of collateral. Additional requirement of description of collateral is necessary to solve the evidentiary problem of identifying collateral when secured party lacks possession of it. Barton v. Chemical Bank, 577 F.2d 1329 (5th Cir. 1978) (decided under former Code Section 11-9-203).
Type of collateral.
- Requirement that identification of collateral indicate type of collateral is applicable to financing statements, not security agreements. Personal Thrift Plan of Perry, Inc. v. Georgia Power Co., 242 Ga. 388, 249 S.E.2d 72 (1978) (decided under former Code Section11-9-203).
Model and serial number.
- Description of collateral in a purchase money security agreement by model and serial number alone meets requirements of former §§ 11-9-203(1)(b) and11-9-110, where secured party named is manufacturer or dealer in specialty appliances sold under trade name. Personal Thrift Plan of Perry, Inc. v. Georgia Power Co., 242 Ga. 388, 249 S.E.2d 72 (1978) (decided under former Code Section11-9-203).
Accounts receivable.- Where the security agreement, like the financing statement, provided that creditor had a security interest in "all those items of personal property" located on debtor's premises, but the security agreement went further than the financing statement by including "all replacements and accessions thereto," the scope of the security agreement was thereby limited to debtor's personal property and any replacements and accessions, and this description did not entail accounts receivable. Thus, like the financing statement, the security agreement failed to place third parties on notice of a possible security interest in accounts receivable. Healthcorp, Inc. v. Southeastern Emergency Healthcare, 85 Bankr. 170 (Bankr. N.D. Ga. 1988) (decided under former Code Section 11-9-203).
Security agreement lacked description of collateral.
- Security agreement lacked description of collateral required for perfection of a security interest, where, although the agreement referred to a "Collateral List and Valuation," there was no record of a "Collateral List and Valuation" document. ITT Fin. Servs. v. Gibson, 188 Ga. App. 188, 372 S.E.2d 468 (1988) (decided under former Code Section11-9-203).
Crops.- Crop need not be described as tobacco crop when all crops on land are collateral for the debt, such description reasonably identifies what is described. United States v. Big Z Whse., 311 F. Supp. 283 (S.D. Ga. 1970) (decided under former Code Section 11-9-203).
Description in security instrument of land or crops must raise warning flag, providing key to identity of property. United States v. Big Z Whse., 311 F. Supp. 283 (S.D. Ga. 1970) (decided under former Code Section 11-9-203).
A debtor may not defeat the rights acquired by the creditor in existing or future crops by turning over the property described in the financing statement to a third party to produce a crop covered by the terms of the statement, where such statement has been executed and recorded according to law. Southwest Ga. Prod. Credit Ass'n v. James, 180 Ga. App. 795, 350 S.E.2d 786 (1986) (decided under former Code Section11-9-203).
A credit association's security interest in a pea crop grown on debtor's land attached at the time the crop was planted. Southwest Ga. Prod. Credit Ass'n v. James, 180 Ga. App. 795, 350 S.E.2d 786 (1986) (decided under former Code Section11-9-203).
Animals.- Where the security agreements signed by a debtor for a loan did not cover after-acquired collateral, nor did it cover the offspring of the pigs purchased with these funds, the bank did not have a valid security interest in the offspring of the pigs. F & M Bank v. Alexander, 70 Bankr. 419 (M.D. Ga. 1987) (decided under former Code Section 11-9-203).
Attachment
Attachment.
- Security interest attaches as soon as parties reach agreement, creditor gives value, and debtor has rights in collateral, unless explicit agreement postpones time of attaching. Barton v. Chemical Bank, 577 F.2d 1329 (5th Cir. 1978) (decided under former Code Section 11-9-203).
Where additional collateral is given to secure antecedent debt, new value is not necessary before a security interest will attach. However, where there is a purchase money security interest in crop to be grown, new value is necessary. United States v. Big Z Whse., 311 F. Supp. 283 (S.D. Ga. 1970) (decided under former Code Section 11-9-203).
It is self-evident that in absence of special circumstances, a security interest can attach only to extent of interest of debtor. First Nat'l Bank & Trust Co. v. Smithloff, 119 Ga. App. 284, 167 S.E.2d 190 (1969) (decided under former Code Section11-9-203).
Three elements for attachment.- For security interests governed by Article 9 of Georgia's Uniform Commercial Code, three conditions must be met before they may be enforceable against anyone, including the debtor: (i) unless the secured party possesses the collateral, there must be a written security agreement signed by the debtor and containing a description of the collateral; (ii) the secured party must have given value; and (iii) the debtor must have rights in the collateral. These three elements were met and the creditor's security interest in the debtor's inventory and its proceeds had been properly attached. In re Shree Meldikrupa Inc., Bankr. (Bankr. S.D. Ga. Jan. 15, 2016).
Date of signing contract determines rights.
- After the debtor executed three contracts prior to filing the debtor's Chapter 11 bankruptcy petition, the date the contracts were signed determined whether the proceeds of the contracts were subject to the security interest of the debtor's pre-petition creditor under 11 U.S.C. § 552(b)(1) and O.C.G.A. § 11-9-203. Diversified Traffic Servs. v. Presidential Fin. Corp. (In re Diversified Traffic Servs.), Bankr. (Bankr. S.D. Ga. May 21, 2010).
RESEARCH REFERENCES
Am. Jur. 2d.
- 68A Am. Jur. 2d, Secured Transactions, §§ 23, 65-67, 109, 155 et seq., 192 et seq., 234, 267 et seq., 482 et seq., 926 et seq.
C.J.S.- 72 C.J.S., Pledges, §§ 10-23, 28, 29, 36.
U.L.A.- Uniform Commercial Code (U.L.A.) § 9-203.
ALR.
- Waiver of usury by renewal or other executory agreement, 13 A.L.R. 1213; 74 A.L.R. 1184.
What amounts to a conditional sale, 17 A.L.R. 1421; 43 A.L.R. 1247; 92 A.L.R. 304; 175 A.L.R. 1366.
Right of conditional seller or mortgagee in respect of proceeds of insurance which conditional purchaser or mortgagor, who had bound himself to carry insurance for former's benefit, had made payable to himself, 92 A.L.R. 559.
Lien which attaches under chattel mortgage of livestock to offspring subsequently born, as surviving period of suitable nurture, 144 A.L.R. 330.
Rights and duties of parties to conditional sales contract as to resale of repossessed property, 49 A.L.R.2d 15.
Priority as between seller or conditional seller of personalty and claimant under after-acquired-property clause of mortgage or other instrument, 86 A.L.R.2d 1152.
Consignment transactions under the Uniform Commercial Code, 40 A.L.R.3d 1078.
Sufficiency of description of crops under UCC §§ 9-203(1)(b) and 9-402(1), 67 A.L.R.3d 308; 100 A.L.R.3d 10; 100 A.L.R.3d 940.
Effectiveness of original financing statement under UCC Article 9 after change in debtor's name, identity, or business structure, 99 A.L.R.3d 1194.
Sufficiency of debtor's signature on security agreement or financing statement under UCC §§ 9-203 and 9-402, 3 A.L.R.4th 502.
What is "commercially reasonable" disposition of collateral required by UCC § 9-504(3), 7 A.L.R.4th 308.
Conveyance of land as including mature but unharvested crops, 51 A.L.R.4th 1263.