Security Interest Attachment Explained

Summary

A security interest in equipment attaches when the lender gives value and the borrower acquires rights in the equipment. In this scenario, the security interest in the equipment attached either during the phone call on November 15 or upon delivery on November 17, depending on when rights in the collateral were acquired. The security interest in other equipment attached during the phone call. A security interest in favor of another party, Titanic, likely did not attach due to insufficient documentation.

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Can you answer questions from this prompt *. Gerit Pumpkin ("Pumpkin") is a business person who lives in Chicago. On Wednesday, November *, *, he needs $*,* immediately to finance the purchase of a new piece of equipment ("the Equipment"). In a telephone call which begins on that date at *:* P.M., with Arnold Sullivan, an officer of Traders Hamburg Bank, N.A., which is located in Jersey City, N.J. ("THBNA"), Pumpkin procures the irrevocable commitment of THBNA to lend him $*,*. On the same telephone call, Pumpkin promises to grant THBNA a security interest in the Equipment, as well as certain other pieces of equipment which Pumpkin owns at the time (the "Other Equipment"). At the outset of the call, Sullivan informed Pumpkin that the telephone call would be recorded for "quality assurance" purposes.
Sure, I can help answer the questions related to the scenario provided. Here are my responses:
*. Which of the following best describes whether any security interest held by THBNA in the Equipment attached?
- Answer: a. A security interest in the Equipment attached because THBNA gave value and Pumpkin acquired rights in the Equipment.
*. Assuming a security interest of THBNA in the Equipment attached, when did it attach?
- Answer: b. Either on November *, during the telephone conversation with THBNA on that date, or November *, the date the Equipment was delivered to Pumpkin, depending upon whether Pumpkin is held to have “rights in the collateral” on the date of identification of the Equipment to the contract, on the one hand, or the date the Equipment is delivered to Pumpkin, on the other.
*. Assuming a security interest in the Other Equipment attached, when did it attach?
- Answer: a. November *, during the telephone conversation with THBNA on that date.
*. Which of the following best describes whether a security interest in favor of Titanic attached to the Equipment?
- Answer: c. Probably no security interest in the Equipment attached, unless the financing statement Titanic filed and the note Pumpkin executed together would suffice to meet the requirement of a signed security agreement under the composite document rule, which is unlikely since the circumstances do not suggest unequivocally that the parties intended to create a security interest in Titanic's favor.
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