Intangible Personal Property

Claims and Rights of Action

A claim or right to something you do not physically possess, such as a claim to money or something of value is personal property. For example, you have a claim to the wages you have earned but have not yet been paid. Physicians, lawyers, dentists, veterinarians and other service providers can include in a list of their personal property any claims they have for unpaid bills.

The claims and rights you own are known in the law as "choses in action" or "things in action." In other words, they are personal property rights that can only be claimed or enforced by a court and not by taking by physical possession. For example, a person injured in a car wreck has a right to sue the other party to recover medical expenses and other damages in the form of a payment of money or property. That right of action is an actual piece of personal property; however, only a court judgment can convert the action into actual money or property.

Does a claim have to belong to an actual person?

No. One of the most common forms of personal property claims are those owned by estates. If your deceased father was owed money, then his claim to that money passes to his estate.

Is a life insurance policy personal property?

Yes. The right to receive insurance proceeds payable at a future but uncertain date is a claim that matures at the death of the insured.

Chattel Mortgages

A chattel mortgage is a mortgage on personal property. Modern chattel mortgages are referred to as "security agreements" and the property covered is called "collateral." In all states, special laws regulate security agreements. Security agreements are typically filed on business equipment, such as a computer network purchased by a company.

A security agreement must be filed in the county clerk's office. The filed agreement acts as notice to the general public that the creditor has legal title to the collateral described in the agreement. If it is not filed, then the creditor's rights in the collateral do not come before another creditor who claims the property.

The filing of a security agreement is necessary because the agreement determines the priority or rank of creditors. For example, if a creditor has filed a security agreement on a company's computers, a different creditor cannot take the computers and sell them to repay what he is owed by the buyer for copy machines. However, if the first creditor did not file the agreement, the computers can be sold and the money applied to what the company owes the copy machine creditor.

Priorities in security agreements are complicated, but filing a security agreement is not. The form is standardized and available in most secretary of state offices.

How do I complete and file a security agreement?

Call or go online to the secretary of state's office in your state. Ask for a UCC-1 Financing Form. The form may also be available for download. The following information must be provided to complete the form:

  • debtor's name and address
  • secured party's name and address
  • numerical identification of the parties (bank transit number and party's federal taxpayer identification number or Social Security number)
  • description of collateral
  • signatures of both parties

I want to give the debtor extra time to pay me. Can I change the security agreement?

Yes. Obtain a UCC-2 Financing Change Form from the secretary of state's office and describe the new terms of the debtor's repayment agreement with you. A UCC-2 is also used when a security agreement is terminated early.

I have financed several pieces of equipment used in my business under a security agreement. The equipment is the collateral. Now that half of my debt has been repaid, do I own any of the equipment outright?

No. As long as there is a security agreement on file describing all of the equipment, then all the equipment is collateral for the debt. You cannot sell or dispose of any of the equipment.

TIP: You need to get a partial release of collateral from your creditor. The creditor simply files a UCC-2 with the county clerk reflecting the change in the collateral.

I never filed a security agreement and now the debtor has sold the collateral to pay other debts. Can I get my collateral back?

No. Since you did not file the security agreement, legal title has passed to the buyer of the collateral. Your only option is to sue the debtor for the money she owes you.

Property Rights in Employment

Typically, an employee does not have a property right in his job. The "employment at will" doctrine allows an employer to discharge an employee for any reason or no reason at any time. The employee does not have any way to get his job back or to recover damages for being discharged. Additionally, unless company policy provides otherwise, the employee is not owed for unused sick days or severance pay.

Some employees, such as public school teachers, are employed under a contract. In those cases, the employee does have a property right in his employment. His job may not be terminated except under the terms set out in the contract. If the employer violates the terms of the contract, the employee can file a lawsuit to recover the salary owed to him under the remainder of the contract.

Sidebar: An employee may have a breach of contract action against his employer when he accepted a job based on false promises and misrepresentations. For example, if you quit your job, sold your house and moved to another state to work as a salesman for a company that promised you a certain amount of customers, sales and commissions that never materialized, you may have a lawsuit.

Although an employee may not "own the job," the employee does own the benefit, retirement and pension plans that are part of his compensation in that job. The employee may become "separated" from the job, but he still has a personal property right in any benefit packages he leaves behind. For example, a plant manager who has been contributing to a company 401(k) plan for many years continues to own the account even after taking a job with another company.

How do I know if I have a property right in my job?

Typically, two types of employees have property rights in their employment:

  • If you have an employment contract, you may have certain property rights in your job. For example, if your contract states that you are hired for a year, you have the right to keep the job for a year (assuming you do not breach the contract or provide a cause for termination).
  • If the law classifies you as a public or civil employee, you probably have a property right in your job. Typically, positions that classify the employee as a civil service employee are listed in state and federal statutes. For example, persons working in law enforcement for a state, city or municipal agency are civil service employees.

Sidebar: A civil service employee can only be terminated for just cause, i.e., a valid reason. Some reasons for termination include incompetence, inefficiency, dishonesty, drunkenness, immoral conduct, insubordination, discourteous treatment of the public and neglect of duty. A civil service employee cannot be terminated until certain procedures are followed.

If I have a property right in my job, can my employer terminate me?

Yes. Employees with a property right in their job can always be terminated for "just cause." In other words, your employer must have a valid reason for letting you go, such as poor job performance, but she can terminate you. You are entitled to notice of the reasons for termination and an opportunity to tell your side of the story to a person or committee that reviews personnel decisions.

Even if I do not have a property right in my job, can I still be fired for any reason at all?

No. You cannot be terminated if the motive was discriminatory under federal or state law.

Sidebar: In cases where the employee was discharged due to discrimination, she can file a lawsuit for wrongful termination.

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