Opinion ID: 1702165
Heading Depth: 1
Heading Rank: 4

Heading: Whether Merchants or St. Paul First Complied with the UCC Requirements

Text: ¶ 14. A security interest attaches when: (1) there is an agreement; (2) value is given; and (3) the debtor has rights in the collateral. Miss.Code Ann. §§ 75-9-203(1)(a)(b)(c) (1972). ¶ 15. The security interests of both Merchants and St. Paul properly attached in compliance with the UCC. In Merchants' case: (1) it executed an agreement with Schwegman Constructors to take an assignment of Schwegman Constructors' right to payment number eight; (2) it gave value of $105,000.00; and (3) pursuant to Schwegman Constructors' work on its project for the School District, Schwegman Constructors had rights in payment number eight. In St. Paul's case, (1) it executed an agreement with Schwegman Constructors to take an assignment of Schwegman Constructors' right to payment number eight; (2) it gave value by waiving its right to seek personal indemnification from Joe Schwegman after Schwegman Constructors' default on its contractual obligations which St. Paul had bonded; and (3) pursuant to Schwegman Constructors' work on its project for the School District, Schwegman Constructors had rights in payment number eight. ¶ 16. If conflicting security interests have attached, priority over the contested collateral goes to the party who filed or perfected first. Miss.Code Ann. § 75-9-312(5)(a) (1972). The Legislature required the filing of a financing statement as a means of implementing a simple procedure which would provide notice. Miss.Code Ann. § 75-9-402 cmt.2 (1972). ¶ 17. On direct appeal, Merchants styles the transaction between it and Schwegman Constructors as an absolute assignment and not a security interest, arguing that the UCC therefore does not apply. The circuit court agreed with this argument, finding that St. Paul's filing statement was wholly ineffective at giving it priority since Schwegman Constructors had already assigned a portion of payment number eight to Merchants. However, the language of Merchants' agreement with Schwegman Constructors is clear: though the agreement did indeed involve an assignment, the assignment of payment number eight merely operated as a means of securing the loan of $105,035.00. This is attested to in the language and terms of the agreement, as well as Merchants' own brief and affidavits. ¶ 18. The comment to the UCC asks whether the transaction was intended to have effect as security. (emphasis added). The intended effect of Merchants' transaction was to secure a loan by way of assignment. The assignment language in the contract and Merchants' current characterization of the transaction do not change the fact that the inherent nature of the loan was that of a secured transaction. ¶ 19. Both Merchants and St. Paul entered into transactions covered by the UCC. Both properly attached their interest in the collateral. However, because St. Paul acted in compliance with Mississippi law by attaching and immediately perfecting its interest by filing, it earned the right to priority over Merchants' interest in the collateral.