Also known as: cash proceed
Written by attorneys · grounded in primary & secondary sources — see below
A category of proceeds consisting of money, checks, deposit accounts, or the like. This classification determines automatic continuation of perfection when a security interest in the original collateral was perfected.
Cascade Manufacturing sold its inventory of parts to a buyer and received a check at delivery. The secured party with a purchase-money interest in the inventory claimed priority in the check as identifiable cash proceeds received on or before delivery. The court applied the priority rule to the check, awarding the purchase-money secured party superior rights over a conflicting inventory lender.
La Sher Oil received cash from selling collateral subject to Metropolitan National Bank's security interest and deposited the funds into its operating account. The bank traced the deposit as identifiable cash proceeds under the lowest intermediate balance rule. The court held the bank retained a perfected interest in the traced amount despite commingling.
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Cash proceeds include money, checks, deposit accounts, and similar items received upon disposition of collateral. Noncash proceeds fall into a separate category and receive different treatment for perfection and priority.
Supporting sources
Yes. A perfected security interest in original collateral remains perfected in identifiable cash proceeds without further action by the secured party. This rule applies even after the proceeds are deposited into an account.
Supporting sources
Perfection continues indefinitely in identifiable cash proceeds. The twenty-one-day limit on continuation of perfection does not apply when the proceeds qualify as cash proceeds.
Supporting sources
Courts apply the lowest intermediate balance rule to identify the amount of cash proceeds remaining in a commingled deposit account. The secured party bears the burden of tracing the funds.