Rowley/Classifying Collateral (Revised) Fall 2008
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Secured Transactions
Professor Keith A. Rowley
Classifying Collateral (Revised)
I. Key: The key consideration is actual or intended use at the time the security agreement
attaches, rather than the intrinsic nature of collateral.
II. Personal vs. Real Property
A. Fixture: An item of personal property that has become so attached to real
property that a right in it arises under real property law. § 9-102(a)(41).
B. In deciding whether personal property collateral that has become attached to real
property is a fixture, courts typically consider three factors:
1. the firmness with which the collateral is affixed to real estate;
2. the parties’ intent as to whether the collateral is a permanent part of the
realty; and
3. the degree to which the collateral is essential to the ability of the realty to
serve its intended function.
C. Article 9 defers to state non-UCC law to determine whether an item of personal
property has become a fixture, except that Article 9 dictates that “ordinary
building materials incorporated into an improvement on land” lose their identity
as personal property. See § 9-334(a) & cmt. 3.
D. Notice that a building erected on a parcel of real property cannot be a fixture for
Article 9 purposes because it was never goods. See § 9-102(a)(44).
III. Tangible Personal Property
A. Goods: All things that are movable when a security interest attaches to them,
including (i) fixtures, (ii) standing timber to be cut and removed under a contract
of sale, (iii) the unborn young of animals, (iv) crops grown, growing, or to be
grown, including the product of trees, vines, and bushes, (v) manufactured homes,
and (vi) embedded software and related information. § 9-102(a)(44).
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Rowley/Classifying Collateral (Revised) Fall 2008
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B. The most common types of goods for Article 9 purposes are:
1. Consumer Goods: Goods used or bought for use primarily for personal,
household, or family purposes. § 9-102(a)(23).
2. Farm Products: Crops, livestock, farming supplies, and unmanufactured
products of crops and livestock. § 9-102(a)(34).
a. Farm products are not inventory. § 9-102(a)(48).
b. The debtor must be “engaged in ... farming operations.” § 9-
102(a)(34).
3. Inventory: Goods held for sale or lease by a person in the business of
selling or leasing such goods. § 9-102(a)(48).
4. Equipment: Goods other than inventory, farm products, or consumer
goods. § 9-102(a)(33).
C. When in doubt dealing with tangible collateral, “equipment” is the default type,
unless the setting permits using the more generic “goods.”
III. Intangible Personal Property (a.k.a. “Non-Goods Personal Property”)
A. Account: A right to payment of a monetary obligation, whether or not earned by
performance, for, inter alia, the sale, lease, or license of property or the rendition
of services, excluding, inter alia, rights to payment evidenced by chattel paper or
an instrument, commercial tort claims, deposit accounts, investment property, and
letters of credit and letter-of-credit rights. § 9-102(a)(2).
B. Chattel Paper: A document evidencing both
1. a monetary obligation and
2. a security interest in or lease of specific goods. § 9-102(a)(11).
♦ Electronic Chattel Paper: Chattel paper evidenced by one or more
electronic record(s). § 9-102(a)(31).
C. Commercial Tort Claim: A tort claim in favor of
1. a corporation or other business organization or
2. an individual, provided that the claim arose in the course of her business
or profession and does not include damages arising out of personal injury
or death. § 9-102(a)(13).
Rowley/Classifying Collateral (Revised) Fall 2008
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D. Deposit Account: A demand, time, or other account in a depository institution,
excluding investment property and accounts evidenced by an instrument. § 9-
102(a)(29).
E. Document: A document of title, as defined in § 1-201(b)(16), or a receipt of the
type described in § 7-201(b). § 9-102(a)(30).
F. Instrument: A device that
1. evidences a right to payment of money;
2. is not itself a security agreement or lease; and
3. is “of the type which is in the ordinary course of business transferred by
delivery with any necessary indorsement or assignment.” § 9-102(a)(47).
G. Investment Property: Securities (§ 8-102(a)(15)), securities accounts (§ 8-
501(a)), securities entitlements (§ 8-102(a)(17)), commodities accounts (§ 9-
102(a)(14)), and commodities contracts (§ 9-102(a)(15)). § 9-102(a)(49).
H. Letter of Credit: An issuer’s undertaking, at the request of an applicant, to pay a
beneficiary upon the beneficiary’s presentation of certain documents evidencing
its entitlement to payment. § 5-102(a)(10).
I. Letter-of-Credit Rights: A right to payment or performance under a letter of
credit other than the beneficiary’s right to demand payment or performance. § 9-
102(a)(51).
J. Money: A domestic, foreign, or intergovernmental medium of exchange. § 1-
201(a)(24).
K. General Intangible: Any intangible personal property, including
a. Things in Action: legal claims (excluding commercial tort claims);
b. Payment Intangibles: A general intangible under which the account
debtor’s primary obligation is to pay money, § 9-102(a)(61); and
c. Software, excluding software that is embedded in goods, § 9-102(a)(75),
but excluding accounts, chattel paper, deposit accounts, documents of title,
electronic chattel paper, instruments, investment property, letter-of-credit rights,
letters of credit, money, and unextracted oil, gas, and other minerals, § 9-
102(a)(42).
♦ When in doubt dealing with intangible collateral, “general intangible” is
the default category.
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