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The Uniform Commercial Code does not require, for a security interest to be perfected, that the security agreement precede the filing of the financing statement, U.C.C. § 9-402, let alone that it be attached to the statement. The Uniform Commercial Code merely states that the secured party who has filed may have a security interest in the collateral described. U.C.C. § 9-402 official comment 2.
Defendant, Bank One, had a security agreement with bankrupt Vic Supply Company, covering all of Vic's assets. Plaintiff, Falconbridge U.S., Inc., sold Vic nickel for resale, acquiring a purchase money security interest covering the proceeds of the resale. The bankruptcy court, seconded by the district court, ruled that Bank One's security interest was prior to Falconbridge's under Article 9 of the Uniform Commercial Code. On appeal, Falconbridge argued that its interest was prior because the bank never signed its security agreement with debtor and therefore never accepted the security agreement.
Would a bank’s failure to sign the security agreement allow a subsequent secured lender to take priority over the earlier one?
The court of appeals affirmed the district court's judgment. The court found that plaintiff could not challenge the validity of the security agreement between defendant and debtor. The court reasoned that the security agreement was valid noting that acceptance can be effectuated by performance as well as by a signature and that, despite the fact that defendant bank never signed the agreement, it nonetheless lent money to debtor against its inventory and that neither party to the agreement challenged the agreement's validity.