Artice 9 - Secured Transactions (UCC)

Question 1

Secured Party

Answer 1

The creditor who has a security interest in the debtor’s collateral. Can be a seller or a lender or a buyer of accounts or chattels

Question 2

Debtor

Answer 2

The person who owes payment or other performance of the secured obligation

Question 3

Security Interest

Answer 3

The interest in collateral that secures payment, or performance of an obligation

Question 4

Financing Statement

Answer 4

Referred to as UCC-1 form, is the instrument usually filed to give public notice to third parties of the secured parties security interest

Question 5

Chattel paper

Answer 5

A writing or writings that evidences both a security interest in goods and/or software use in goods and a monetary obligation to pay – such as a security agreement or a security agreement and a promissory note

Question 6

Instrument

Answer 6

A negotiable instrument or other writing that evidences a right to the payment of money and is not a security agreement or lease but a type that can ordinarily be transferred

Question 7

Commercial tort claim

Answer 7

A claim arising out of a tort in which the claimant is an orgnaization or arose in the course of a claimants business or profession and does not include damages for death or personal injury

Question 8

Transactions EXCLUDED from secured transactions law

Answer 8

• Lanlord, Mechanic, and Artisan’s LIENS
• Assignment of wage
• Tort claims
• Insurance
• Judgements
• Leases
• Real Estate Mortgages

Question 9

REQUIREMENTS for a security interest to attach

Answer 9

1. A writing, signed, decription
2. Secured party must give something of value
3. The debtor must have “rights” in the collateral
   * When these three are met, the interest attaches

Question 10

Rights of the creditor UPON attachment

Answer 10

• Right to repossess, sell the repossessed, has priority over unsecured creditors, priority in bankruptcy

Question 11

Perfection of Security Interest (Methods)

Answer 11

1. Filing
2. Possession
3. Automatic
4. Temporary

Question 12

Filing Requirements

Answer 12

• Names of debtor and secured party

- Description of the collateral

Question 13

Perfection

Answer 13

A means by which a secured party gains priority to a debtor’s collateral over other 3rd parties who also claim to have an interest in the same collateral

Question 14

Timing issues with filing

Answer 14

• A financing statement can be filied before a security agreement is made or interest attaches, before debtor authorization is required, or before the authentication of a security agreement
• **ALL requirements for attachment must be met before a financing statement can be effective

Question 15

Filed financing statement

Answer 15

• good for 5 years from the date filed, can be extended 5 years if continuation statement filed in last 6 months

Question 16

Perfection by Possession

Answer 16

• Creditor has physical possession of the goods
• Pawn of goods is possession
• Transfer of instruments or chattel paper from debtor to creditor is possession
• Field warehousing; creditor has agent at debtor’s place of business
  RULES:
  Letter of credit rights, deposit accounts - by CONTROL
  Money - by POSSESSION
  Electronic chattel paper - FILING OR CONTROL
  investment property -by FILING

Question 17

Automatic Perfection

Answer 17

Two most important:

1. PMSI - purchase money security interest - e.g. financing a TV from Best Buy
2. A sale of payment intangibles or promissory notes
   e. g. assignment of health-care insurance receivables to the health care provider

Question 18

Temporary Perfection

Answer 18

W/O filing or possession for certified secrities, negotiable documents, and instruments if new value is given:

• For 20 days from creation of interest
• only appplicable to above

Question 19

Perfected by possession

Answer 19

Only remaims perfected for 20 days w/o filing IF:

• Goods in possession of a bailee or negotiable document where secured party makes goods/docs available to debtor for sale
• for certified security or instrument where secured party delivers the instrument to the debtor for sale
• NEED to take action for post-20 day period in order to retain perfection

Question 20

Debtor moves out of state

Answer 20

State A has priority - state the interest was originally perfected for 4 months from the date the debtor changes location
* where there is a transfer of the collateral to another debtor, the priority period is one year

Question 21

Priorities in Secured Interests (over creditors)

Answer 21

• Perfected secured party vs. unsecured, unperfected = the perfect has priority
• perfected vs. lien, judgment creditors = first to attach has priority

Question 22

Priorities in Secured Interests (over buyers)

Answer 22

• buyers in ordinary course of business: buyer wins
• buyers NOT in the ordinary “: perfected secured party wins
• buyers NOT vs secured creditor = buyer wins unless aware of interest
• buyer NOT in “ of consumer goods = wins over previously perfected interest by attachment if they can prove value, no knowledge of interest, buying for personal use, and before perfection by filing
• buyers who are HDCs, holdlers of negotiable docs or BFPs WIN over previously perfected security interests

Question 23

Priorities between 2 perfected interests

Answer 23

Generally, first in time of perfection = first in priority right
- PMSIs usually have priority