old_soul wrote:Can some generous soul please explain the "same office" rule (Secured Transactions) to me in uncomplicated language?
The nature of proceeds of collateral can be different than the prior collateral. For example, if a bottling company has a large piece of machinery that it financed worth $30,000, and it decides to trade that for something else, the creditor may or may not need to re-perfect.
Option A: Trade the machinery (equipment) for $30k worth of bottles (inventory) in the same state. Both Equipment and Inventory are perfected by filing in the state Secretary of State's office or other similar state office with a form UCC-1, therefore there is no need to re-perfect, even though the UCC-1 on file might say "All Equipment" or "Zebo Bottling Machine Serial Number 1234567." The creditor's security interest in the bottles (which are the proceeds of the equipment) is automatically perfected going forward due to that previously filed UCC-1, even if it does not mention the bottles specifically or inventory generally.
Option B: Trade the machinery (equipment) for a $30k company car for the CEO to use for business. Cars are perfected through the state title system, not through the Secretary of State's office. Therefore the creditor must re-perfect within the allotted time (20 days). The creditor remains perfected for those 20 days but now must follow the procedures for getting onto the car title in order to remain perfected beyond day 20. The creditor can still perfect after day 20, but he would then be junior to any other creditors who took and timely perfected a security interest in the car in the meantime.
[Sorry for all the edits... there were a couple extra details, plus some annoying grammar errors]