Also known as: tracing doctrine · tracing · equitable tracing
Written by attorneys · grounded in primary & secondary sources — see below
A method by which a secured party identifies proceeds of collateral that have been commingled with other property. The method includes application of equitable principles permitted under law other than Article 9 when the proceeds are not goods.
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Dakota Industries held a security interest in inventory sold by its debtor. The debtor deposited sale proceeds into an account containing other funds. Dakota Industries traced the proceeds through the account using lowest-intermediate-balance principles permitted under state law. The court recognized the security interest in the identified amount of the commingled funds.
Demetrius Douglas received funds from the sale of collateral subject to a security interest. He transferred the funds into a new account and then used them to purchase equipment. The secured party applied equitable tracing rules to follow the funds through the transfers and claimed an interest in the equipment.
Destiny Davis paid assessments into a condominium association account that mixed funds from multiple owners. When the association commingled the payments with operating reserves, the secured lender traced its collateral proceeds using permitted equitable methods to recover its share from the account.
Dwight Dorsey used loan proceeds secured by a marina to dredge a channel. After the funds were deposited into a general construction account and spent, the lender traced the identifiable portion through the commingled expenditures under equitable principles.
Denise Donovan received payments from a restrained account that contained both protected and unprotected funds. The enforcing party traced the specific payments through the account using state-law tracing methods to enforce the order against the commingled balance.
Danielle Dixon deposited restitution payments into a personal account holding other income. The victim traced the restitution amounts through the commingled account by applying equitable principles allowed under non-UCC law to recover the identifiable portion.
The doctrine permits a secured party to identify proceeds that are not goods by any method of tracing, including equitable principles, allowed under other law for commingled property of that type.
Supporting sources
The security interest continues in the identifiable proceeds to the extent tracing succeeds under permitted methods.
Supporting sources
No. The doctrine allows identification even after commingling by applying equitable tracing rules to the mixed property.
Supporting sources
…Clause of the Fourteenth Amendment." Cleveland Board of Education v. LaFleur , 414 U. S. 632, 639-640 (1974). A host of cases, tracing their lineage to Meyer v. Nebraska , 262 U. S. 390, 399-401 (1923), and Pierce v. Society of Sisters , 268 U. S. 510, 534-535 (1925), have consistently acknowledged a "private realm of…