Article 9 Flashcards
Goods > Consumer Goods
Goods are anything that is movable when the security interest attaches. Consumer goods are those goods that are used primarily for household or personal purposes. It would seem that Testator owned the Van Gogh painting for display in her home, and thus the painting was consumer goods.
Perfection
A security interest may be perfected by the secured party taking possession or control of collateral, or by filing a financing statement, which is the most common means of perfecting a financing statement. Here, Bank A perfected its security interest by filing a financing statement.
Priority
The rule “first-in-time, first-in-right” applies to priority contests between lien creditors and secured parties, with the exception that a possessory lien on goods has priority over a security interest in the goods. Thus, this answer choice most accurately states the priorities of the interests.
Post-Attachment
Once a security interest has attached, it will continue regardless of a sale, lease, or other disposition of the collateral, unless the secured party agrees that the collateral may be disposed of free of the security interest. Here, both Bank A and Bank B had security interests that had attached, because they had given value for a painting to which Testator had rights, and Testator authenticated security agreements. Thus, their interests will survive any disposition of the painting.
Creation of Security Interest
A security interest must be in writing and must contain a statement that it is creating a security interest (a “granting” clause), a description of the collateral that is sufficient to identify what is described, and the signature or other authentication by the debtor. There is no requirement that the secured party sign the agreement, thus this is the correct answer.
However, the it may be either in writing or oral at the discretion of the debtor or where the secured party has possession of the collateral; such a security agreement is referred to as a pledge.
Financing Statement v. Security Agreement
A financing statement, unlike a security agreement, may give a supergeneric collateral description without rendering the financing statement ineffective. Thus, this is the best answer.
Financing Statement > Post-Filing
Once filed, a financing statement remains effective despite the sale, exchange, lease, or other disposal of the collateral. This is the case even if the secured party consents to the disposition.
Financing Statement > Rejection Thereof
A financing statement must be rejected by a filing office if it fails to meet one of a list of criteria, but these reasons are an exclusive list. There is no requirement that a financing statement be signed by the debtor (the financing statement must only be authorized, and a security agreement constitutes authorization for a financing statement), and because this is not an enumerated requirement, it would be improper for a filing office to reject a financing statement because of the lack of a signature.
Security Interest > Money
A security interest in money may only be perfected by possession, and is only effective while the secured party has possession. Thus, filing a financing statement is not an effective method of perfecting a security interest in money, nor is taking control of the money.
Default
Upon default, a secured party may reduce a claim to judgment, foreclose, or otherwise enforce the claim by any available judicial procedure. These rights are cumulative and may be exercised simultaneously. Thus, a secured party may pursue both courses of action, and at the same time.
Default > Notice Requirement
Although it is generally true that a secured party must notify the debtor before disposing of collateral, this requirement does not apply to collateral that is perishable, may decline quickly in value, or is of a type customarily sold on a recognized market. Thus, this answer makes a correct statement of law.
