Colorado § 4-9-204 - After-acquired property - future advances.

§ 4-9-204. After-acquired property - future advances.

(a) Except as otherwise provided in subsection (b) of this section, a security agreement may create or provide for a security interest in after-acquired collateral.

(b) Subject to subsection (b.1) of this section, a security interest does not attach under a term constituting an after-acquired property clause to:

(1) Consumer goods, other than an accession when given as additional security, unless the debtor acquires rights in them within ten days after the secured party gives value; or

(2) A commercial tort claim.

(b.1) Subsection (b) of this section does not prevent a security interest from attaching:

(1) To consumer goods as proceeds under section 4-9-315 (a) or commingled goods under section 4-9-336 (c);

(2) To a commercial tort claim as proceeds under section 4-9-315 (a); or

(3) Under an after-acquired property clause to property that is proceeds of consumer goods or a commercial tort claim.

(c) A security agreement may provide that collateral secures, or that accounts, chattel paper, payment intangibles, or promissory notes are sold in connection with, future advances or other value, whether or not the advances or value are given pursuant to commitment.

Source: L. 2001: Entire article R&RE, p. 1336, § 1, effective July 1. L. 2023: IP(b) amended and (b.1) added, (SB 23-090), ch. 136, p. 547, § 47, effective August 7.

Editor's note: This section is similar to former § 4-9-204 as it existed prior to 2001.

ANNOTATION

Law reviews. For article, "The Revolution in Consumer Credit Legislation", see 45 Den. L.J. 679 (1968). For article, "Buyer-Secured Party Conflicts Under Section 9-307(1) of the Uniform Commercial Code", see 46 U. Colo. L. Rev. 333 (1974-75). For article, "Commercial and Corporate Law", which discusses a Tenth Circuit decision dealing with a participating bank's risk under a loan participation agreement, see 65 Den. U. L. Rev. 469 (1988).

Annotator's note. The following annotations include cases decided under this section as it existed prior to its 2001 repeal and reenactment.

It is determined when security interest may attach to debtor's accounts receivable. A security interest cannot attach to the accounts receivable of a debtor, if the debtor does not have a "right to payment". Weld Colo. Bank v. E & E Constr., Inc., 653 P.2d 758 (Colo. App. 1982).

Future advance clauses on printed forms are not to secure later purchases unless it is clear the parties contemplated this at the time the agreement was made. The true intent of the parties is the sole controlling factor. In re Grizaffi, 23 B.R. 137 (Bankr. D. Colo. 1982).

"Floating liens" are limited. Even though "floating liens" are sanctioned under subsection (3), the secured party does not obtain a security interest in collateral for contingent contractual liabilities not of the same nature. In re Grizaffi, 23 B.R. 137 (Bankr. D. Colo. 1982).

"Dragnet" clauses construed against drafter. A clause in a printed form attempting to draw in as security all other and future debts and all present and future property, which is called a "dragnet" clause, is to be construed strictly against the party drafting the clause. In re Grizaffi, 23 B.R. 137 (Bankr. D. Colo. 1982).

Bank's security interest is attached at instant title certificates delivered. A bank's security interest in automobiles attached to the automobiles at the same instant that the titles were delivered to the bank. Guy Martin Buick, Inc. v. Colo. Springs Nat'l Bank, 184 Colo. 166, 519 P.2d 354 (1974).

After the purchaser of some automobiles delivered its check to the seller, but before the certificates of title were transferred to a bank as the purchaser's agent, the purchaser executed a security agreement with the bank, intending to create a security interest in the automobiles to secure repayment of the bank's financing loan, until the certificates of title were properly transferred to the purchaser's agent, no right, title, or interest was created in the purchaser which would enable it to legally convey or encumber the automobiles. Therefore, although the bank and purchaser fully intended that the security interest attach to the automobiles at the time the loan funds were deposited in the purchaser's account, the absence of any legal right, title, or interest by the purchaser in the automobiles prevented the bank's security interest from attaching prior to the time that the certificates of title were delivered. Guy Martin Buick, Inc. v. Colo. Springs Nat'l Bank, 184 Colo. 166, 519 P.2d 354 (1974).

Attachment was never effected where bailee at the time it gave a security interest in its inventory to a bank had no rights of its own in the property. Midland Bean Co. v. Farmers State Bank, 37 Colo. App. 452, 552 P.2d 317 (1976).

Applied in Greeley Nat. Bank v. Sloan, 677 P.2d 409 (Colo. App. 1983); Janitell v. State Bank of Wiley, 919 P.2d 921 (Colo. App. 1996); In re 3PL4PL, 619 B.R. 441 (Bankr. D. Colo. 2020).