The Court first determined whether the agreement resulted in a total or partial subordination between Peabody and the Bank. Complete subordination is recognized in a minority of legal systems and (a) the interest of the subordinate party is placed under that of the other party and b) the priorities of all eligible parties, including those who are not contracting parties, are reorganized. For example.B. a party in the first priority concludes a subordination agreement with a third priority, the agreement would move the first priority holder in the third, which would place the second priority (i.e. the party part) towards the first priority position. Partial subordination, recognized by the majority of the courts, leads the parties to the subordination agreement to change their respective priority positions. The Court took the majority approach and found that the agreement exchanged Peabody`s priority position with the Bank, placed the bank first and placed Peabody behind Caterpillar. The Court analysed the Bank`s agreement and priority using four separate theories: (i) the agreement created partial or total subordination; (ii) Caterpillar has obtained an equipment security interest in refinancing the debt on the Caterpillar aircraft; (iii) the placement of the device`s title in an ad hoc entity refuted the bank`s claim; and (iv) the ”Composite Document” rule has perfected Peabody`s interest service for equipment and bank debt. UCC3`s UNTERORDNUNG mixes the terms a little. An insured part (for example. B a lender) files a ”UCC-1 financing statement” which, as NWT points out, tells the world that it has a security/link interest in the field. UCC-1 has basic information – the name and address of the debtor and the insured party, as well as a brief description of the guarantees. Here`s one of what a space looks like: www.dos.ny.gov/forms/corporations/UCC1.pdf The next court Caterpillars right to security purchase money.
Caterpillar stated that its loan, which used the device as collateral, was characterized as either security interest for the purchase money or as refinancing of debts owed by S Coal to a leasing company on the aircraft. Under the Single Code of Commerce (UCC) 9-324 (a), if a debt has been incurred to allow a debtor to acquire security, the creditor enjoys a priority security interest, even over previous security interests on the same property.