O.C.G.A. § 11-9-204 (2019)

Annotations

Law reviews. For article discussing the classification

of a continuing security interest in changing collateral as an unenforceable preference under Section 60a of the Bankruptcy Act, see 1 Ga. L. Rev. 257 (1967). For note examining the conflict between

the floating lien in after-acquired property under the Uniform Commercial Code and the voidable preferences provisions of the Bankruptcy Act, see 9 Ga. L. Rev. 685 (1975).

For article, “The Good Faith Purchase Idea and the Uniform Commercial Code,” see 15 Ga. L. Rev. 605 (1981).

JUDICIAL DECISIONS ANALYSIS GENERAL CONSIDERATION AFTER-ACQUIRED PROPERTY CONSUMER GOODS FUTURE ADVANCES General Consideration Editor’s notes. - In light of the similarity of the statutory provisions, decisions under former Article 9 are included in the annotations for this Code section. For a table of comparable provisions, see the table at the beginning of the Article. Scope. - This section governs whether, in a security agreement, afteracquired property is subject to a security interest. Williams v. Western Pac. Fin. Corp., 643 F.2d 331, 1981 U.S. App. LEXIS 13963 (5th Cir. 1981) (decided under former Code Section 11-9-204). Construction with federal law. - State law determines whether lender possesses substantive interest in property securing performance of obligation, while Regulation Z § 226.8(b)(5), 15 U.S.C. Appx 12 CFR § 226.8, under the Truth in Lending Act, 15 U.S.C. § 1601 et seq., merely defines whether this state-created substantive right constitutes a security interest for federal disclosure purposes. Williams v. Western Pac. Fin. Corp., 643 F.2d 331, 1981 U.S. App. LEXIS 13963 (5th Cir. 1981) (decided under former Code Section 11-9-204). Guaranty on real estate. - Execution of guaranty, although ineffective to create security interest in debtor’s residence, since real property is excluded from operation of Article 9, was effective to create a security interest in cash proceeds from sale of debtor’s residence. United States v. Wood, 28 B.R. 383, 1983 U.S. Dist. LEXIS 19000 (N.D. Ga. 1983) (de-

cided under former Code Section 11-9204). Additional collateral given to secure antecedent debt. - Where additional collateral is given to secure antecedent debt, new value is not necessary before security interest will attach. However, where there is a purchase money security interest in crop to be grown, new value is necessary. United States v. Big Z Whse., 311 F. Supp. 283, 1970 U.S. Dist. LEXIS 12207 (S.D. Ga. 1970) (decided under former Code 1933, § 109A-9-204). “Magic words” not required. - Although the security agreement must provide that after-acquired collateral is covered under the security agreement, no “magic words” are required in the drafting. The test is whether a reasonable man looking at the entire security agreement and financing statement would recognize that the parties intended to secure afteracquired property. Kubota Tractor Corp. v. Citizens & S. Nat’l Bank, 198 Ga. App. 830, 403 S.E.2d 218, 1991 Ga. App. LEXIS 301 (1991) (decided under former Code Section 11-9-204). Although usually desirable, it is not mandatory that words such as “after-acquired” or “hereafter acquired” appear in the agreement’s description. Kubota Tractor Corp. v. Citizens & S. Nat’l Bank, 198 Ga. App. 830, 403 S.E.2d 218, 1991 Ga. App. LEXIS 301 (1991) (decided under former Code Section 11-9-204). After-Acquired Property Floating liens. - “Floating lien” theory, by which all subsequently ac-

quired property comes under earlier security instrument, has been approved by this section, however, former § 11-9-312 provides seller of noninventory goods under purchase money contract with right to retain priority provided the seller perfects the security interest before delivery or within ten days after delivery. Babson Credit Plan, Inc. v. Cordele Prod. Credit Ass’n, 146 Ga. App. 266, 246 S.E.2d 354, 1978 Ga. App. LEXIS 2317 (1978) (decided prior to 1978 amendment of former Code 1933, § 109A-9-204, which changed time limit for perfecting under prior Code 1933, § 109A-9-312). Unperfected interest of seller of fixtures. - Where seller of personal property which is later affixed to realty retains security interest in the goods, which is not perfected, the seller’s security interest attaches upon delivery and is superior to another creditor’s prior perfected security interest in personalty and “after-acquired” “personal property” and “equipment of every description” of the common debtor when such “after-acquired” personalty is affixed to realty as fixtures. Babson Credit Plan, Inc. v. Cordele Prod. Credit Ass’n, 146 Ga. App. 266, 246 S.E.2d 354, 1978 Ga. App. LEXIS 2317 (1978) (decided under former Code 1933, § 109A-9-204). Security interest in after-acquired fixtures. - Section does not apply to creation of real estate security interest in after-acquired fixtures, even though those fixtures might otherwise be encompassed in code definition of consumer goods on basis of their physical and utilitarian characteristics; a real estate interest in fixtures arises pursuant to real estate law and is contingent upon item of property attaining legal status of fixture, as defined by that law. Williams v. Western Pac. Fin. Corp., 643 F.2d 331, 1981 U.S. App. LEXIS 13963 (5th Cir. 1981) (decided under former Code Section 11-9-204). Property located in different place. - After-acquired property clause may be interpreted to include property located in a different place than the location specified in the agreement where the reference to the location of the secured property is to facilitate identification of that property, not to limit the attachment of the security interest to only after-acquired property

kept at that location. Hudson Properties, Inc. v. Citizens & S. Nat’l Bank, 168 Ga. App. 331, 308 S.E.2d 708, 1983 Ga. App. LEXIS 2765 (1983) (decided under former Code 1933, § 109A-9-204). Mobile homes. - Transaction between a mobile home manufacturer and a retail dealer, involving a mobile home claimed by a floor-plan financer, was a “sale or return,” and the mobile home was subject to the financer’s claim arising from a security interest in the dealer’s after-acquired inventory without regard to whether the manufacturer was compensated for the mobile home. GECC v. Catalina Homes, Inc., 178 Ga. App. 319, 342 S.E.2d 734, 1986 Ga. App. LEXIS 1646 (1986) (decided under former Code Section 11-9-204). Animals. - Where the security agreement signed by debtor for a loan did not cover after-acquired collateral, nor did it cover the offspring of the pigs purchased with these funds, the bank did not have a valid security interest in the offspring of the pigs. F & M Bank v. Alexander, 70 B.R. 419, 1987 U.S. Dist. LEXIS 1332 (M.D. Ga. 1987) (decided under former Code Section 11-9-204). Consumer Goods Truth in Lending Act. - Truth in Lending Act, 15 U.S.C. § 1601 et seq., requires lender to explain ten-day limitation of former subsection (2) of this section so that borrower is informed that any consumer goods which the borrower may acquire within ten days of loan transaction are subject to security interest and that any consumer goods acquired after that date are not. Glenn v. Trust Co., 152 Ga. App. 314, 262 S.E.2d 590, 1979 Ga. App. LEXIS 2910 (1979) (decided under former Code 1933, § 109A-9-204). After-acquired property was included under the part in a security agreement providing that a loan was secured by “all equipment, accessories and parts added or attached thereto,” and the failure of a lender to disclose in the agreement the ten-day limitation of former subsection (2) of this section on after-acquired property subject to the lender’s security interest violated a regulation of the Truth in Lending Act. Brown v. Termplan, Inc., 693 F.2d

Consumer Goods (Cont’d) 1047, 1982 U.S. App. LEXIS 23385 (11th Cir. 1982) (decided under former Code Section 11-9-204). Failure to disclose ten-day limitation provided in former subsection (2) violates Truth in Lending Act. Lender violates Regulation Z § 226.8(b)(5), 15 U.S.C. Appx 12 CFR § 226.8, under the Truth in Lending Act, 15 U.S.C. § 1601 et seq., by failing to disclose nature of its security interest retained in after-acquired consumer goods when it omits from its disclosure statement the ten-day limitation provided in former subsection (2) of this section. Williams v. Western Pac. Fin. Corp., 643 F.2d 331, 1981 U.S. App. LEXIS 13963 (5th Cir. 1981) (decided under former Code Section 11-9-204). A disclosure statement accompanying a promissory note violated the federal Truth in Lending Act, 15 U.S.C. § 1601 et seq., for failing to disclose the ten-day limit imposed under former subsection (2) of this section. Varner v. Century Fin. Co., 738 F.2d 1143, 1984 U.S. App. LEXIS 19711 (11th Cir. 1984) (decided under former Code Section 11-9-204). Consumer goods. - To determine whether after-acquired consumer goods within meaning of section are contemplated within scope of any particular security deed, one must look to language of deed and interpret it in light of Uniform Commercial Code as adopted by Georgia Legislature. Williams v. Western Pac. Fin. Corp., 643 F.2d 331, 1981 U.S. App. LEXIS 13963 (5th Cir. 1981) (decided under former Code Section 11-9-204). Section permits security interest in after-acquired consumer goods acquired within ten-day limitation period. Williams v. Western Pac. Fin. Corp., 643 F.2d 331, 1981 U.S. App. LEXIS 13963 (5th Cir.

1981) (decided under former Code Section 11-9-204). Equipment. - By definition equipment is not consumer goods, and as such, security interest in after-acquired equipment is unaffected by ten-day limitation imposed in former subsection (2) of this section. Williams v. Western Pac. Fin. Corp., 643 F.2d 331, 1981 U.S. App. LEXIS 13963 (5th Cir. 1981) (decided under former Code Section 11-9-204). Future Advances Future advances. - Georgia courts have long recognized and enforced “future advance” schemes in security instruments to effectuate a cross collateralization of previously granted security interests to indebtedness thereafter arising. Safeway Fin. Co. v. Ward, 14 B.R. 549, 1981 U.S. Dist. LEXIS 14787 (S.D. Ga. 1981) (decided under former Code Section 11-9204). Former subsection (3) of this section allows use of future advances clause in retaining security interests in personal property and requires only that obligation of future advances be covered by security agreement. Barksdale v. Peoples Fin. Corp., 393 F. Supp. 112, 1975 U.S. Dist. LEXIS 13701 (N.D. Ga. 1975), rev’d, 543 F.2d 568, 1976 U.S. App. LEXIS 5962 (5th Cir. 1976) (decided under former Code 1933, § 109A-9-204). Indebtedness arising in future. - Clause setting up open ended security interest which expressly provides that it shall extend to other indebtedness arising in future, makes clear intent of parties and will be given full effect to bind subsequently arising debts. Barksdale v. Peoples Fin. Corp., 393 F. Supp. 112, 1975 U.S. Dist. LEXIS 13701 (N.D. Ga. 1975), rev’d, 543 F.2d 568, 1976 U.S. App. LEXIS 5962 (5th Cir. 1976) (decided under former Code 1933, § 109A-9-204).

RESEARCH REFERENCES Am. Jur. 2d. 68A Am. Jur. 2d, Secured Transactions, §§ 85 et seq., 174 et seq., 234 et seq.

C.J.S. 72 C.J.S., Pledges, § 22.

U.L.A. Uniform Commercial Code (U.L.A.) § 9204. ALR. What are “minerals” within deed, lease, or license, 17 A.L.R. 156; 86 A.L.R. 983.

Construction and effect of “future advances” clauses under UCC Article 9, 90 A.L.R.4th 859.