Also known as: security interest · security interest's
Written by attorneys — see sources below.
A consensual lien in property granted to secure payment of a debt or performance of an obligation. The holder may foreclose or repossess upon default to satisfy the underlying debt.
Stella Shapiro borrowed funds from Synergy Systems to purchase a residence. She executed a mortgage pledging the property as collateral. When Stella defaulted on the payments, Synergy Systems initiated foreclosure proceedings to recover the outstanding balance from the sale of the home.
After Sebastian Santos died, his surviving spouse Sylvia Santos selected household furnishings and an automobile from the estate. A creditor held a security interest in the automobile. The probate court valued the items in excess of that security interest to determine the allowable exempt property amount under the statutory cap.
Santiago Sanchez, a resident of State X, granted a security interest in his automobile located in State Y to Sapphire Holdings. Both states applied identical rules on a debtor's right of redemption. The court treated the contacts as if they occurred in a single state when resolving the redemption issue.
Spencer Silver purchased appliances on credit from Southland Foods and granted a security interest in the goods. Southland Foods sought to repossess the appliances through a prejudgment writ without providing Spencer an opportunity to be heard. The court held that the procedure violated due process even though it protected the creditor's security interest.
Margarita Fuentes, a Florida resident, purchased a gas stove and a stereophonic phonograph from the Firestone Tire and Rubber Company under conditional sales contracts calling for monthly payments over time, with Firestone retaining title until full payment. After making payments for more than a year, about two hundred dollars remained due. A dispute developed between Fuentes and Firestone over servicing of the stove. Firestone then instituted an action in small claims court for repossession. It obtained a writ of replevin from the court clerk by submitting form documents and posting a bond in double the value of the property. A deputy sheriff and Firestone agent seized the stove and stereo from Fuentes's home the same day. Fuentes subsequently brought an action in federal district court challenging the constitutionality of the Florida prejudgment replevin procedures. A three-judge district court was convened and upheld the statute. In the consolidated Pennsylvania case, several residents purchased household goods such as beds, tables, and other items under similar installment contracts. After claimed defaults, sellers obtained writs of replevin from a prothonotary upon ex parte applications and posting of bonds. County sheriffs seized the goods from the buyers' homes without prior notice. This included one instance where a former deputy sheriff obtained a writ for his son's clothes, furniture, and toys. The Pennsylvania appellants filed suit in federal district court, where a three-judge court upheld the statute. The Supreme Court noted probable jurisdiction of the appeals from both district court decisions.
View caseSarah Sullivan purchased multiple items of furniture from Solstice Ventures under successive installment contracts. Each contract stated that payments would be applied pro rata across all outstanding balances and that title to every item remained with the seller until all debts were paid. When Sarah defaulted on one account, Solstice Ventures attempted to repossess all items under the cross-collateral clause.
Appellee Walker-Thomas Furniture Company operates a retail furniture store in the District of Columbia. During the period from 1957 to 1962, each appellant purchased several household items from the company, with payment to be made in installments. The terms of each purchase appeared in a printed form contract that set forth the value of the item and purported to lease it to the purchaser for a stipulated monthly rent payment. Title remained in the company until the total of all monthly payments equaled the stated value, after which the purchaser could take title. In the event of default on any monthly installment, the company could repossess the item. The contract further provided that the amount of each periodical installment payment would be inclusive of and not in addition to payments under prior leases, and that all payments made would be credited pro rata on all outstanding leases, bills, and accounts due the company. This provision kept a balance due on every item purchased until the balance due on all items was liquidated. As a result, the debt from each purchase was secured by the right to repossess all items previously purchased by the same buyer, and each new item became subject to a security interest from previous dealings. On May 12, 1962, appellant Thorne purchased a Daveno, three tables, and two lamps with a total stated value of $391.10. Shortly after this purchase, Thorne defaulted on the monthly payments, leading the company to seek replevin of all items purchased since the first transaction in 1958. On April 17, 1962, appellant Williams bought a stereo set of stated value $514.95. At that time her account showed a balance of $164 from prior purchases. The total of all purchases over the years came to $1,800 with total payments of $1,400. Williams also defaulted shortly thereafter, prompting the company to seek replevin of all items purchased since December 1957. The Court of General Sessions granted judgment for the company in these cases. The District of Columbia Court of Appeals affirmed the judgments. This court granted the appellants' motion for leave to appeal. Prior to the last purchase by Williams, she had reduced her account balance to $164. The reverse side of the stereo contract listed the name of her social worker and her $218 monthly stipend from the government. At the time of the purchases, the company was aware of Williams's financial position and her need to support herself and seven children on that amount.
View caseSylvia Santos advanced funds to her employer Synergy Systems secured by a lien on equipment the company held. After termination, Sylvia sought to enforce the security interest against the equipment. The court examined whether the employment relationship altered the enforceability of the independent security arrangement.
Interactive Data Corporation hired John Foley in June 1976 as an assistant product manager at a starting salary of $18,500. As a condition of employment Foley signed a confidential and proprietary information agreement. The company's president told Foley that if he performed his job well he would have a long and rewarding employment with the firm. Over the next six years and nine months Foley received steady salary increases, promotions, bonuses, awards, and superior performance evaluations, rising to branch manager of the Los Angeles office with an annual salary of $56,164 plus a merit bonus. In January 1983 Foley learned that his new supervisor, Robert Kuhne, was under investigation by the FBI for embezzlement from his former employer, Bank of America. Foley reported the information to Vice President Richard Earnest because he was worried about working for Kuhne in a supervisory position. Earnest told Foley not to discuss rumors and to forget what he had heard. In early March 1983 Kuhne informed Foley that the company had decided to replace him for performance reasons and offered a transfer to another division. Foley was later told he could continue as branch manager if he agreed to a performance plan, but when Kuhne met with him the next day Kuhne instead gave Foley the choice of resigning or being fired. Foley was discharged on March 13, 1983. Foley filed suit against Interactive Data Corporation alleging three causes of action: tortious discharge in violation of public policy, breach of an implied-in-fact contract to terminate only for good cause, and tortious breach of the implied covenant of good faith and fair dealing. The superior court sustained the company's demurrer without leave to amend and dismissed the action. The Court of Appeal affirmed the judgment. The Supreme Court granted review.
View caseA mortgage pledges real property to secure a debt while a security interest under Article 9 typically encumbers personal property or fixtures. Both allow the secured party to foreclose or repossess upon default.
A security interest may continue in goods that become fixtures attached to real property unless the goods qualify as ordinary building materials incorporated into an improvement. Priority then turns on proper perfection and recording rules.
A license or access right coupled with a security interest in chattels generally cannot be assigned without conveying the security interest itself. Separation of the two violates the coupling requirement.
When two states have the same local law on an issue such as redemption rights, the court treats the multistate contacts as if they occurred in a single state for choice-of-law purposes.
…( Koehrer v. Superior Court, supra, 181 Cal. App.3d at p. 1171.) And that expectation constitutes a far greater and graver security interest than any which inheres in the insurance context. Most of us can live without insurance. Few of us could live without a job. Peace of mind? One's work obviously involves more than just…