Opinion ID: 1231525
Heading Depth: 1
Heading Rank: 2

Heading: rights of the seller under article 9 of the uniform commercial code

Text: But Baja maintains that its right to reclamation under Article 2 of the Uniform Commercial Code is a species of security interest governed by the priority provisions of Article 9. This interest, Baja contends, was perfected when it retook possession of the van after learning that Arizona Imports would not complete the cash sale and is superior to any unperfected purchase money security interest First National might have had at the time Baja reclaimed the van. We do not agree. Admittedly, the Uniform Commercial Code provides that Baja, by retaining title, reserved for itself a security interest in the van. This characterization first appears in Article 2 and is affirmed in Article 9. A.R.S. §§ 44-2346 & 44-3113 [U.C.C. §§ 2-401 & 9-113]. Baja's argument that it perfected its security interest by possession alone ignores the provision of the code that before any security interest can be perfected, it must first attach. Under Article 9, attach is a word of art that contemplates the satisfaction of a series of requirements to create an enforceable security interest: A.    a security interest is not enforceable against the debtor or third parties with respect to the collateral and does not attach unless: 1. The collateral is in the possession of the secured party pursuant to agreement, or the debtor has signed a security agreement which contains a description of the collateral and in addition, when the security interest covers crops growing or to be grown or timber to be cut, a description of the land concerned; and 2. Value has been given; and 3. The debtor has rights in the collateral. B. A security interest attaches when it becomes enforceable against the debtor with respect to the collateral. Attachment occurs as soon as all of the events specified in subsection A have taken place unless explicit agreement postpones the time of attaching. A.R.S. § 44-3116(A) & (B) [U.C.C. § 9-203(1) & (2)]. The signed writing requirement of A.R.S. § 44-3116 is similar to a statute of frauds and merely requires that for the security interest to attach, it must be reduced to writing and signed by the debtor. Any written agreement, including a bill of sale, will suffice for the interest to attach as long as it has been signed by the debtor and contains a description of the collateral. See 2 A. Squillante & J. Fonseca, The Law of Modern Commercial Practices §§ 11:22-11:39 (1981). Baja and Arizona Imports never created such a written security agreement, and Baja was never in possession of the van at a time Arizona Imports held rights in the collateral. Lacking these prerequisites, Baja's interest could never attach and therefore could not have been perfected by possessing the van. But Baja contends that even if its security interest has not attached or been perfected, First National does not have an enforceable security interest because its debtor, Arizona Imports, did not have sufficient rights in the collateral to allow First National's interest to attach. A.R.S. § 44-3116(A) [U.C.C. § 9-203(1)(C)]. We do not agree. When Baja delivered the van without a written agreement signed by Arizona Imports, Arizona Imports obtained sufficient rights and power to encumber the van, A.R.S. § 44-3116 [U.C.C. § 9-203], and therefore First National's security interest attached. See J. White and R. Summers, Handbook of the Law Under the Uniform Commercial Code § 23-4 (1972); Galleon Industries, Inc. v. Lewyn Machine Co., 50 Ala.App. 334, 279 So.2d 137 (1973). The priority provisions of A.R.S. § 44-3133(D)(3) [U.C.C. § 9-312(5)(b)] dictate that when neither party perfects his interest, priority goes to the first party to attach. Because First National's security interest attached and Baja's did not, First National is entitled to the proceeds of the van. The trial court was correct in granting the petitioner's motion for summary judgment. This may seem unfair to Baja, but it should be remembered that the bank did everything it was required to do in order to have its security interest attach, while Baja failed to insist upon a written agreement signed by Arizona Imports. Baja failed to take advantage of the code provisions for attachment and perfection which would have given it priority over First National.