The case of In re Financial Oversight & Management Board for Puerto Rico involved collateral for bonds used to finance the Puerto Rico Electric Power Authority’s electrical generation and transmission system. The trust agreement for the bonds granted a security interest in Revenues deposited into specified deposit accounts, and it defined Revenues as “all moneys received by the [issuer] in connection with or as a result of its ownership or operation of the System.” The court ruled that this language covered only receipts deposited into the specified accounts, not all receipts and not any receivables. The court also ruled that the preamble of the agreement, which began “Now, Therefore,” indicated the consideration, and stated that the issuer “has pledged and does hereby pledge to the [bond trustee] the revenues of the [system] . . . to the extent provided in this Agreement” was not an independent grant of collateral. As a result, the bonds were massively undersecured.
In June of 2024, the First Circuit reversed. It held that the preamble was an operative provision, and that the preamble’s grant of a security interest in the uncapitalized and undefined term “revenues of the [system]” encompassed all of the Authority’s Net Revenues, which the court concluded were accounts (i.e., receivables, rather than receipts).
B. Other Attachment Issues
For a security interest to attach, the debtor must, in most cases, have signed a security agreement, value must be given, and the debtor must have rights in the collateral or the power to transfer rights in the collateral. These three requirements can be satisfied in any order, and the security interest will attach when the last of the three is met. However, the parties are free by agreement to delay the time when the security interest attaches. There is rarely good reason for such a delay, and when it occurs it is often a result of poor drafting. That was the situation in one case last year.
In Travelers Casualty & Surety Co. v. Vázquez-Colon, a general agreement of indemnity provided that “in the event of a default, Indemnitors assign, convey and transfer” specified property to the surety company. The court ruled that the security interest did not attach until a default occurred. Because that date was not in the record before the court, the court could not determine on summary judgment whether the security interest had priority over a tax lien on the same property.
A security interest automatically attaches to identifiable proceeds of collateral. For this purpose, “proceeds” is defined very broadly, and includes: (i) whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral; (ii) whatever is collected on account of the collateral; and (ii) rights arising out of the collateral. As broad as that definition is, it is not limitless. In In re Las Martas, Inc., a secured creditor had a perfected security interest in the debtor’s milk quota—a license to produce milk for the fresh milk market—and accounts receivable, but not a security interest in the debtor’s cows. In the debtor’s third bankruptcy proceeding, the court followed its own ruling from one of the earlier cases, and ruled that milk was not proceeds of the quota.
III. Perfection of a Security Interest
A. Method of Perfection
In general, perfection of a security interest is a necessary condition for the secured party to have priority over the rights of lien creditors, other secured parties, or later buyers, lessees, and licensees of the collateral. The method by which a secured party may perfect a security interest depends on several things, in particular the type of property involved. Consequently, the first step in determining how to perfect is determining what type or types of the property the collateral is. This issue played a prominent role in two cases last year.
In In re D’Angelo, a secured party with a security interest in membership interests in a limited liability company had possession of the membership certificates, but had not filed a financing statement. The court noted that there appeared to be no dispute that this was ineffective to perfect. The membership interests were not “securities” because the membership interests were not “dealt in or traded on securities exchanges or in securities markets” and there was no express agreement to treat the interests as securities governed by Article 8. Consequently, the membership interests were general intangibles, and the only way to perfect the security interest was by filing of a financing statement.
In In re City of Chester, the court ruled that an indenture trustee’s security interest in revenues “payable to or received by” a city from a casino and racetrack was a security interest in payment intangibles, not money, and was perfected by a filed financing statement.
B. Adequacy of a Financing Statement
When a secured party files a financing statement to perfect a security interest, the financing statement must provide the name of the debtor, provide the name of the secured party or a representative of the secured party, and indicate the collateral. In general, a financing statement is effective for five years. To remain effective beyond that period, a continuation statement must be filed during the last six months of the initial five-year period. During the effective period, a secured party may file other amendments, such as to change to debtor’s name or address, its own name or address, add or remove collateral, or to assign the financing statement. But such amendments do not extend the period of effectiveness. Last year, one creditor learned this rule the hard way.
In Tri-State Electrical Contractors, LLC v. Consolidated Electrical Distributors, Inc., a secured party filed a financing statement in September 2016 to perfect its security interest. In April 2019, the secured party filed an amendment to add a new debtor name following the debtor’s merger. In 2023, the debtor dissolved and filed an interpleader action to determine which of its creditors was entitled to the debtor’s remaining funds.
The secured party claimed that its filed amendment operated as a new financing statement, and thus its security interest remained perfected because the amendment was filed less than five years earlier. An unsecured creditor disagreed, and the court sided with the unsecured creditor. The court reasoned that the amendment was not, by itself, a new financing statement and, as such, the security interest became unperfected when the initial financing statement lapsed in September 2021. Accordingly, the secured party did not have a secured claim in the debtor’s dissolution proceeding.
C. Control of Collateral
A security interest in several types of collateral can be perfected by control, and a security interest in a deposit account, as original collateral, can be perfected only by control. There are several ways a secured party, other than the depositary bank, can obtain control of a deposit account; the most common is by having the debtor, the secured party, and the depositary bank agree in a signed record that the bank will comply, without the debtor’s further consent, with the secured party’s instructions directing disposition of the funds credited to the deposit account. In one case from last year, the court interpreted that rule.
In Wulco, Inc. v. The O’Gara Group, Inc., a judgment creditor sought to garnish funds credited to the debtor’s deposit account at a bank. Monroe Capital Partners, a secured creditor, intervened in the proceeding, claiming priority in the funds credited to the deposit account. There was no real dispute that Monroe Capital, as the second lien agent in a transaction, had a security interest in the deposit account. What the parties disputed was perfection by control.
Monroe Capital had entered into a control agreement with the debtor, the bank, and first lien agent. The Agreement provided that the first lien agent was the “control agent” that could direct disposition of the funds but that, after the first lien agent resigned, Monroe Capital would become the control agent. The debtor had the right to access the funds credited to its deposit account but that would change once the control agent provided a “Shifting Control Notice” to the bank. At that point, and without the debtor’s consent, the control agent could direct what happened to the funds in the accounts.
The court ruled that this arrangement gave Monroe Capital control. It did not matter, the court concluded, that the debtor retained the right to direct the disposition of funds from the deposit account because the test of control is not whether the debtor has retained powers but whether the secured party has obtained the requisite power. Nor did it matter that the control agreement initially made the first lien agent the “control agent” because the agreement provided for the control agent to shift upon notification to the bank and, even though no such notification had been sent, it could have been done unilaterally at anytime. The ruling is correct.
IV. Priority of a Security Interest
A. Competing Security Interests
When there are two security interests in the same collateral, and both are perfected, priority is determined under the first-to-file-or-perfect rule. The first security interest perfected or subject to an effective financing statement has priority, provided there is no period thereafter when there was neither filing nor perfection. One secured creditor tried unsuccessfully to avoid this rule last year.
In Markel Insurance Co. v. Origin Bancorp, Inc., a bank with a perfected security interest in the debtor’s accounts and their proceeds faced a priority challenge from the issuer of surety bonds that later obtained and perfected a security interest in the debtor’s accounts relating to bonded projects. The court applied the first-to-file-or-perfect rule and held that the bank had priority. It did not matter that language in the debtor’s agreement with the surety declared that all monies due or becoming due under any bonded project “are trust funds . . . for the benefit of and for payment of all obligations” owed to the surety. That language, which the court described as “generic,” “ritualistic,” and “talismanic,” was insufficient to create a real trust that would override creditor priority rules by denying the debtor rights in the accounts. Read in context, the agreement created a debtor-creditor relationship, not a fiduciary relationship.
B. Buyers of Goods
A buyer of goods encumbered by a perfected security interest normally takes subject to that security interest. One notable exception to that rule is section 9-320(a), which provides that a buyer in ordinary course of business takes free of a perfected security interest created by the seller. To be a buyer in ordinary course of business, the buyer must, among other things, buy goods: (i) in good faith; (ii) without knowledge that the transaction violates a third person’s rights in the goods; and (iii) in the ordinary course of business from a person engaged in the business of selling goods of that kind. There was one noteworthy case last year about whether an individual qualified as a buyer in ordinary course of business.
In One World Bank v. Miller, Miller bought a used Ferrari for $166,000 from a dealer. When the bank that provided floor plan financing to the dealer withheld the certificate of title to the vehicle, Miller sued the bank for damages. The court ruled for Miller, reasoning that there was no evidence that Miller had not acted in good faith even though Miller: (i) took possession of the vehicle and the certificate of title only briefly, and then returned them to the dealer for safekeeping; (ii) did not insure or register the vehicle; (iii) did not sign the purchase order, and (iv) did not comply with the certificate of title act.
C. Tax Liens
In general, pursuant to the Federal Tax Lien Act of 1966, a security interest perfected before a notice of federal tax lien is filed has priority over the tax lien, and a security interest perfected after the notice is filed is subordinate to the tax lien. Although the federal tax lien statute does not subordinate a tax lien to later purchase-money security interest, a revenue ruling does, and cases have followed the revenue ruling. Nevertheless, the IRS sought to avoid application of the Revenue Ruling in one case last year.
In United States v. Dunn, BMO Harris Bank had leased commercial vehicles to West Plains Transport, Inc. At that time, the bank was listed as the owner on the certificates of title. In several subsequent transactions, after several notices of federal tax lien had been filed against West Plains, West Plains purchased the vehicles from the bank, with the bank retaining a security interest in the vehicles to secure payment of the purchase price. The bank sent West Plains the paperwork necessary for the certificates of title to be reissued, showing West Plains as the owner and the bank as the lienholder. About six weeks after the sales, West Plains submitted the completed paperwork and the state issued new certificates of title.
West Plains defaulted, the bank repossessed and sold the vehicles, and then the IRS then sued the bank for conversion. The IRS argued that the Revenue Ruling did not apply, and the bank was not entitled to priority, because the bank had not perfected within twenty days after the sale, which the bank would have needed to do to have priority over another secured party under U.C.C. section 9‑324(a). The court rejected the IRS’s argument. It ruled that priority was governed by federal law, not by section 9-324(a), and thus it did not matter that the bank had perfected outside the twenty-day period. The case is a good one for secured parties, further cementing the rule that perfected purchase-money security interests have priority over an earlier federal tax lien. But it would be unwise to rely on the court’s conclusion regarding the irrelevance of when perfection occurs. Perfection within twenty days of when the debtor obtains possession of the goods is needed to have priority over an earlier perfected security interest and over the rights of a lien creditor, and a different court might rule that it is also needed to have priority over a federal tax lien.
D. Transferees of Funds from a Deposit Account
To ensure the free flow of funds in commerce and the finality of payments, section 9‑332(b) provides that a transferee of funds from a deposit account takes free of a security interest in the deposit account unless the transferee acts in collusion with the debtor to violate the secured party’s rights. In three cases last year, courts reached differing conclusions about whether a garnishing creditor is a “transferee” under this rule if the funds remain in the custody of the garnishing officer or a court and have not yet made it to the creditor. The 2022 UCC Amendments add language to the official comments to make it clear that transferee takes free “only upon the actual receipt of funds from the deposit account,” and expressly “rejects cases that treat garnishment of a deposit account as an immediate transfer of funds.”
In another case, the court ruled that the secured party stated a claim for conversion against a factor that purchased the debtor’s accounts and received payment of almost $600,000 from the debtor’s deposit. A bank had alleged that the factor knew of the bank’s security interest from the bank’s filed financing statements, deliberately concealed the factoring agreements from the bank, purposefully failed to file any financing statements, and had discussions with the debtors to ensure that debtors would not inform the bank of the factoring agreements. These allegations were sufficient, the court concluded to claim that the factor colluded with the debtor to violate the bank’s rights.
V. Enforcement of a Security Interest
A. Default
Article 9 gives secured parties various rights upon default, including the rights to repossess, collect, and dispose of the collateral. However, Article 9 does not define “default.” Instead, it leaves that to the parties’ agreement and other law. Consequently, unless some other law provides otherwise, parties are free to define default very broadly. Nevertheless, traditional contract-law principles and defenses, such as course of dealing and waiver, can limit a secured party’s ability to enforce a broadly worded definition of default. There were two notable cases last year about default.
In Vivos Acquisitions, LLC v. Health Care Resources Network, LLC, the debtor was current on payments when the secured parties sent notification of default. Nevertheless, the court ruled that the debtor had defaulted. The notes provided any breach of the parties’ related agreements was a default, and the security agreement prohibited the debtor from transferring its pledged LLC membership interest or allowing the LLC to pay the debtor’s expenses. The court concluded that the debtor had breached by: (i) granting an interest in the profits of the company; (ii) using company funds to pay closing costs; and (iii) granting another security interest in the membership interests. It did not matter that, at the time the notification, the secured parties were unaware of these actions.
In Nissan Motor Acceptance Corp. v. Infiniti of Englewood, LLC, a floor plan financier to several related car dealerships declared a default after an audit revealed that the dealerships had sold hundreds of vehicles without remitting the sale proceeds to the financier. The dealerships argued that they were not in default because the financier knew of the sales and, by routinely accepting late payment, had waived the requirement for prompt payment. The court denied summary judgment, concluding that the dealerships had raised a factual issue about default. Although the security agreements provided that no waiver would be effective against the financier unless in writing and signed by an executive officer of the financier, the court concluded that this term too could have been waived.
B. Repossession
Article 9 permits a secured party to repossess collateral without judicial process, provided it can do so without causing a breach of the peace. This duty not to breach the peace is non-waivable. The duty is also non-delegable; a secured party violates the rule even if an independent contractor causes a breach of the peace. The U.C.C. contains no statutory definition of “breach of the peace,” and issues about whether a repossession has violated that standard tend to be highly fact-specific. One frequently recurring issue last year, on which courts were divided, was whether a breach of the peace occurs if the repossession occurs in the debtor’s presence and over the debtor’s objection.
In Labadie v. Nu Era Towing & Services, Inc., the court ruled that a repossession agent did not breach the peace while repossessing the plaintiff’s car even though the agent initially used a vehicle to block plaintiff’s access to her car in a shopping area parking lot and later repossessed the car over the debtor’s objection. According to the court, objecting to repossession does not make the agent’s conduct a breach of the peace in the absence of other actions that result in violence or were likely to cause violence, and even considering her objection in combination with the agent’s act in blocking access to the car was not sufficient to allege that the conduct was likely to produce violence. Similarly, in McCarthy v. First Credit Resources, Inc., the court held that the debtor did not state a claim against a repossession company for violation of the Fair Debt Collection Practices Act or unlawful repossession under the U.C.C. by alleging that during the repossession she verbally objected to the repossession, called the police to try and stop the repossession, and stood in front of the tow-truck to prevent it from driving away. In the court’s view, the allegations centered on the actions of the debtor but what she did is not the point, and taking a vehicle over the oral objection of the owner, however strenuous, is not a breach of the peace unless accompanied by factors indicating that the activities of the repossession agent are of a kind likely to cause violence or public distress.
In contrast, in Byrd v. Hyundai Motor Finance, the court held that the debtor stated claims for violations of the Fair Debt Collection Practices Act and unlawful repossession by alleging that a repossession agent breached the peace by yelling at her while she was in the car trying to make a payment to forestall repossession and by taking the car despite her repeated and unambiguous objections with instructions to stop. And in Fuller v. CIG Finance, LLC, the court ruled that debtor stated a claim against the secured party for breach of the peace, and therefore violation of Article 9 and the Fair Debt Collection Practices Act, by alleging that he objected to the repossession of his truck several times over several hours, and he physically attempted to stop the repossession, but the repossession agent nevertheless continued the repossession process.
C. Conducting a Commercially Reasonable Disposition
A secured party may dispose of collateral by a sale, lease, license, or other disposition. The disposition may be public—that is, typically an auction open to the public—or private. However, every aspect of a disposition must be “commercially reasonable.” If a secured party’s compliance with this standard is challenged, the secured party has the burden of proof. There was one notable case last year dealing with the commercial reasonableness of a secured party’s disposition of collateral.
In Galioto Towing LLC v. The Huntington National Bank, a bank repossessed and sold for $73,000 a truck purchased two years earlier for $120,000. The bank “advertised the sale on multiple online databases, as per its standard practice.” After receiving six offers ranging from $62,500 to $71,500, the bank counter-offered for $75,000 and accepted a counteroffer for $73,000. The court concluded that, based on these facts, the bank had made a prima facie showing that the sale was commercially reasonable and the debtor failed to rebut that with evidence to the contrary. Although the debtor pointed to sales listings for other allegedly similar trucks, with prices ranging from $91,900 to $118,950, the court noted that these listings were not sales, and there was no evidence regarding the prices for which the listed vehicles were sold.
D. Collecting on Collateral
Section 9‑607 provides that, upon default, or when the debtor agrees otherwise, a secured party may instruct account debtors to make payment directly to the secured party. Section 9‑406 provides that, after receipt of such an instruction, along with proof of the secured party’s security interest, if requested and not previously provided, the account debtor may discharge its obligation only by paying the secured party; payment to the debtor will not discharge the obligation. Section 9‑404 adds that the secured party’s right to collect against an account debtor is subject to all terms in the agreement between the debtor and the account debtor and any may be offset by any unrelated claim that accrues before the account debtor receives notification of the secured party’s interest in the receivable. One appellate court misapplied these rules last year.
In AmeriFactors Financial Group, LLC v. Dunham Price Group, LLC, a factor that had purchased a company’s accounts brought a breach of contract claim against an account debtor that refused to pay the factor and instead paid the debtor’s subcontractors. The account debtor had, before paying the subcontractors, received an instruction to pay the factor directly and had signed an agreement for each factored account verifying the validity of the account, disclaiming any disputes or setoff rights, and waiving any defense to payment. Nevertheless, after learning that the subcontractors were not being paid, and fearing that it would be liable to them, the account debtor refused to pay the factor. A jury returned a verdict in favor of the account debtor and the factor appealed.
One of the issues on appeal was whether the trial judge erred in refusing to give the jury an instruction about the validity of a waiver of defenses under section 9-403(b). That provision generally validates an account debtor’s agreement with the debtor not to assert defenses against an assignee, such as a factor. The court of appeals correctly concluded that section 9‑403(b) did not apply to the signed verification agreements because, even if they were contracts, they were between the factor and the account debtor, not between the debtor and the account debtor.
But the inapplicability of section 9-403(b) says nothing about the enforceability of the verification agreements. As comment 6 makes clear, section 9‑403 validates some agreements but does not invalidate other agreements, and it does not displace the law of estoppel or waiver. Nevertheless, after concluding that section 9‑403(b) did not help the factor, the appellate court upheld the jury’s verdict. Even if the verification agreements were valid contracts, the court wrote, there was a reasonable basis for the jury to conclude that the account debtor did not breach them, considering that “it would be an absurd result if the words of the verification forms meant that the money [the account debtor] paid to [the factor] not go toward paying the subcontractors who were doing all of the work.”
It is not clear what this absurdity defense is, and the court did not cite authority for it. More to the point, enforcing the verification agreements would not have been absurd, at least not from the perspective of the factor. The whole purpose of an account debtor’s agreement to waive defenses and claims is to put on the account debtor the risk of any problem relating to the transaction giving rise to the account. In other words, a factor typically relies on such a waiver before paying for an account, and that payment often provides the debtor with the funds the debtor needs to operate and to perform under its agreement with the account debtor. By upholding the jury’s verdict and crediting the argument that enforcement of the verification agreements would have been absurd, the court threw a monkey wrench into the machinery of commercial finance.
E. Explanation of a Deficiency
Pursuant to section 9‑616, a secured party that disposes of collateral in a consumer-goods transaction generally must send to the debtor or obligor an explanation of the resulting surplus or deficiency and how it was calculated. In Fierro v. Capital One, the court ruled that an individual debtor on a car loan stated a claim against the secured party for failing to provide an explanation of a deficiency after her car was totaled and the secured party applied the insurance proceeds to the secured obligation. Although section 9-616 applies only after a secured party conducts a disposition of collateral, and the secured party did not dispose of the car, the court reasoned that the security interest attached to the insurance proceeds, and the secured party arguably “disposed” of the proceeds by instructing the insurer to make payment to the secured party.
VI. Liability Issues
A secured party that fails to comply with its duties under Article 9 may incur liability for all resulting damage. Damages for injuries relating to a secured transaction might also be recoverable against a secured party or someone else in tort, contract, or other statute, depending on the nature of the alleged misconduct. There were several interesting cases last year about liability arising, in various ways, from a secured transaction.
In Grimes v. Auto Venture Acceptance, LLC, a debtor sued a secured party for failing to protect the $9,000 of personal property—including televisions, a laptop computer, cell phones, designer purses, and diamond rings—that he claimed to have lost when his twelve-year-old car was repossessed and allegedly vandalized while in the secured party’s possession. The debtor’s claim would have been dubious in the best of circumstances, but in this case the secured party presented evidence that the car’s dashboard and GPS wires had been removed prior to the repossession, and suggested to the court that the debtor had removed anything of value. The court concluded that it need not weigh the facts and it issued summary judgment for the secured party based on a term in the parties’ agreement providing that the debtor bore “any and all responsibility for any personal property left in the vehicle by me or by other persons, should that property be lost or missing for any reason from the vehicle after it has been taken back by you and stored in a reasonably safe place.” This clause was effective, the court ruled, to waive any negligence by the secured party because the car was stored in a fenced lot with razor wire and a “No Trespassing” sign that suggested there was video surveillance.
In Minn. Bank & Trust v. Principal Securities, Inc., a secured party sued a securities intermediary for breach of contract, negligence, and promissory estoppel for allowing the debtor to transfer assets out of a collateralized securities account without the secured party’s consent, in alleged violation of a control agreement executed by the debtor and the intermediary. Even though the secured party was not a party to the control agreement, the court ruled that the secured party had stated a viable claim. The intermediary’s duty to safeguard the collateral was owed to the secured party, and that was sufficient to suggest that the secured party was a third-party beneficiary of the control agreement.
In its very interesting decision in Cleveland-Cliffs Burns Harbor LLC v. Boomerang Tube, LLC, the Delaware Court of Chancery addressed a variety of claims arising from an orchestrated Article 9 foreclosure. In that case, an unsecured creditor of the debtor brought claims against the entity that owned a majority of the debtor and, through a subsidiary that was the administrative agent for the debtor’s secured creditors, orchestrated an Article 9 disposition of substantially all the debtor’s assets to a buyer that was related to the majority owner. The unsecured creditor also sued the buyer. The creditor alleged that the buyer purchased $100 million in assets for only $16.5 million.
The court ruled that the unsecured creditor had no standing to challenge the commercial reasonableness of the disposition under Article 9. It also ruled that the unsecured creditor had no veil-piercing claim against the majority owner of the debtor. However, the court concluded that the unsecured creditor had stated claims against the buyer to avoid the disposition as both a constructive and intentional fraudulent transfer. With respect to the latter, the court noted multiple facts that made it reasonably conceivable that the debtor had fraudulent intent, including that: (i) the transfer was made to an insider for far less than fair value while the debtor was insolvent; (ii) the transfer was concealed and bids for the sale were accepted over a period from Christmas Eve to January 3, a suspiciously fast turnaround during the winter holidays; and (iii) the transfer was of substantially all of the debtor’s assets. The decision is worth reading.
Equally interesting is the decision of the U.S. Court of Appeals for the Second Circuit in In re TransCare Corp. In that case, the woman who controlled and owned most of the equity in the debtor, and who also controlled the collateral agent for the term loan to the debtor, orchestrated an acceptance of collateral in partial satisfaction of the term loan and then sold the foreclosed assets to newly formed entities she owned and controlled. In the debtor’s ensuing bankruptcy, the trustee brought claims against the woman for fraudulent transfers and breach of fiduciary duties, and won on both claims at the trial court level. The circuit court affirmed.
The circuit court agreed that the woman had violated her fiduciary duties under Delaware law as the controlling shareholder by entering into a self-interested transaction that was not fair to other shareholders. The purpose of the fair dealing standard is to protect minority shareholders but the woman misled the largest minority shareholder throughout the process. Even if, as she claimed, she intended to give the other term loan lenders a proportionate interest in the new entities, that would have little bearing on the procedural fairness of the transaction, because the bargaining process was still devoid of any opportunity for the independent shareholders to advocate for themselves.
The court also agreed that the foreclosure was avoidable as an intentionally fraudulent transfer. In so ruling, the court agreed with the trial court that the foreclosure had virtually all of the classic badges of fraud identified in the case law, including that: the woman failed to demonstrate that the price was objectively fair; she effectively sold the collateral to herself; she maintained control of the collateral at all times; she retained the most valuable parts of the business, free and clear of any liens; she executed all of the transfers after the onset of financial difficulties; she conducted the entire transaction hastily; and she kept key stakeholders in the dark.
The case, along with the Chancery Court decision in Cleveland-Cliffs, is a reminder that Article 9 is not the only law relevant to secured transactions. When enforcing a security interest secured parties should be careful to also comply with applicable corporate law and be cognizant of laws against fraudulent transfers.