Legal Question in Business Law in California

Cross Collateral Agreements

in April i purchased a piece of equipment, the seller said that it was owned free and clear. a few weeks after a person called claiming he has a lien on that equipment. his claim is based on a cross collateral agreement which has a schedule attached with a UCC filing. The piece of equipment is not identified in the schedual attached. I did a UCC search and i do not find any mention of said equipment. He claims that the language in the cross collateral agreement is suffecient for his purpose. the agreement states that in addition to the schedual A, all assets and all assets to be aquired become a part of the collateral agreement. My position is that the equipment would need to be listed in the schedual A and by no means can he attach all assets to the agreement with out identifing such equipment. am i correct? i have been warned that a law suit will be filed, but that has not happened yet. How much time does he have to file a law suit?


Asked on 8/06/00, 12:59 pm

4 Answers from Attorneys
Edward Hoffman Law Offices of Edward A. Hoffman

Re: Cross Collateral Agreements

The situation you describe is fairly intricate and I would need to see the pertinent documents and talk to you a bit before I could offer any guidance. Do feel free to contact me if you like.

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Answered on 9/13/00, 8:00 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Cross Collateral Agreements

My reading of your question suggests that you are facing an "after-acquired property" clause type of security interest. This somewhat resembles cross-collateralization and that term is sometimes used but is not completely accurate.

If you want to do a little legal research on your own, look up California Commercial Code section 9204 at your local law library or public library and see if it seems to cover your situation.

If so, the security interest is probably valid, and your recourse would be against the seller of the equipment, not the claimant, for misrepresentation. The presence of the lien should have been disclosed and you have a case even without the active misrepresentation.

If you cannot obtain satisfaction from the seller by making an informal demand, you can bring legal action and I would be pleased to assist.

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Answered on 9/13/00, 8:23 pm
Jed Somit Jed Somit, Attorney at Law

Re: Cross Collateral Agreements

It is impossible to determine the rights of the claimed

secured party from the facts in your statement. However, a description

of property can be acceptable even if the property is not exactly described

in an inventory, if it reasonably identifies what is described. See California

Commercial Code Sections 9108, 9504. Section 9504 specifically allows (although

9108 does not) a description such as "all the debtor's assets" in a financing statement.

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Answered on 9/13/00, 8:24 pm
John Hayes The John Hayes Law Offices

Re: Cross Collateral Agreements

The Statute of Limitations varies depending on the cause of action he chooses to sue under ie. breach of contract, negligence, fraud etc. You may have a valid argument. Regardless of your defense if you are served with a summons and lawsuit you must file a legal answer with the proper court withing thirty days of service. Failure to do so will result in a default judgment filed against you. This can be put aside by the court but it will cost you a lot more in attorney's fees than if you just filed an answer to the complaint in the first place. I wouldn't worry about it until you are served. If you are served and need help filing an answer please feel free to contact my office toll free at 877-546-9918. Good luck.

Sincerely,

John Hayes, Esq.

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Answered on 9/13/00, 9:57 pm


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