Attachment Flashcards
Secured Trans -Attachment - Concept
The creation of SI in property, occurring when the debtor agrees to the security, receives value from the secured party and obtains right in the collateral
Secured Trans - Attachment -Effects (4)
1) Establishes right of creditor against debtor or 3rd party w/knowledge
2) SA by creditor against debtor becomes enforceable
3) SA creditor get priority over unsecured/normal creditor
4) Is required for creditor to have replevin right
Secured Trans -Attachment- Elements (ARV)
- A security agreement (SA)
- Rights in collateral (debtor)
- Value Given
Secured Trans -Attachment- ARV - A SA / reqs (3)
1) SA must be written and authenticated by debtor UNLESS secured party already has possession/control
2) Creditor needs to file Financing Statement
3) Collateral description (see rules for SA/FS)
Secured Trans -Attachment -ARV - Rights in collateral/ by whom?, no possesion situation
- Debtor must have rights on collateral.
- If not received yet, debtor must _at leas_t have legally enforceable right: i.e. warehouse receipt
Secured Trans -Attachment -ARV- Value Given
- Creditor must take loan or deliver collateral to debtor
- Also, binding commitment to extend credit is enough.
Secured Trans -Perfection - Concept
Validation of SI as against other creditors by any of the permitted methods
Secured Trans -Perfection - gral
- Provides protection of SI against 3rd parties, where attachment is not enough (“attachment losses to perfection”)
- Equals to Attachment + at least 1 perfection method PCFMT
Secured Trans -Perfection - 3rd party claims (3) that require perfection (attachment not enough)
1) More than 1 creditor with SI
2) Debtor conveyed collateral to 3rd party for value
3) Bankruptcy trustee asserting ownership in collateral
Secured Trans -Perfection Methods - PCFMT (5)
1) Possession
2) Control
3) Filing of FS*
4) Mere attachment
5) Title certificate notation
Secured Trans -Perfection - Possession - Gral
- Possession of collateral by secured party
- Required for $ money and provides highest perfection to collateral where transferee has greater right than transferor (i.e. negotiable instrument)
Secured Trans -Perfection - Possession - Examples
- physical checks, promissory notes, certificates of deposit, bearer bonds, negotiable warehouse receipt, bills of landing, investment securities certificate instrument
Secured Trans -Perfection - Possession - Effective Date of perfection / date, prevails over…
- As of date of possession
- Prevails over later FS filing against collateral
Secured Trans - Perfection - Control - Gral / how to achieve it, duration
- aka “constructive possession” for intangibles
- Achieved automatically if secured party is depository, if not, it requires agreement between debtor + security party + depository
- Perfection is valid as long as it remains
Secured Trans -Perfection - Control - Application (4) (intangibles)
1) deposit account
2) electronic chattel
3) investment property
3) letter of credit
Secured Trans - Perfection - Control for Depository Account - Reqs (3)
1) by agreement debtor/creditor/depository
2) On authenticated record
3) With instructions from secured party for the bank for the funds in the block deposit account
Secured Trans -Perfection - Control for Electronic Chattel Paper / when, alternative
- When in single unique and identifiable electronic record
- Perfection by either control or filing
- example: car loan agreement sold by car dealer to bank
Secured Trans -Perfection - Control for Investment Property/ i.e., alternative
- Also either by control or filing
- example: commodity contract, stock certificate, items under UCC 8
Secured Trans - Perfection - Control for Letter of Credit / when
Control only method when payee has consented to assignment of proceeds
Secured Trans - Perfection - Filing of FS / for, constructive notice
- Preferred method for intangibles (accounts receivable, commercial tort claim, “general”) and tangibles (inventory, equipment - not for cars, unless sold as inventory from retailer)
- As constructive notice of SI vs everybody and subsequent creditors (who will usually need to do filing search)
Secured Trans - Perfection - FS content (3) + after acquired rule (CNA)
1) Collateral ID - sufficient description (more liberal than SA - accepts general description)
2) Name + address of both debtor/creditor
3) Authorization by debtor (no signature required)
- No need to include “after acquired” provision (only for SA)
Secured Trans - Perfection - FS content - Misleading Change-Mistake rule / when, remedy, i.e., rationale
- When there is error on debtor’s name or seriously (not minor) misleading change on the FS that could affect subsequent creditors
- Original creditor seeking priority must file again within 4 months
- Relates with file search under debtor’s name by other creditors
- i.e.: use of wrong corporate name or newly married name by debtor
Secured Trans - Perfection - FS Filing Place / gral rule, rule for fixtures, mineral, timber, etc
At state central recording office of:
- Debtor’s residence/ppal place of business
- If mx place of business - location of CEO
- Location of related real estate for fixtures/minerals/timber/crop
Secured Trans -Perfection - FS Improper Filing Place Result
- No perfection of SI
- EXCEPT towards those w/actual knowledge of content
Secured Trans - Perfection - FS Filing - Effective Date / gral rule, importace
Gral Rule: date of filing
- Importante regarding priority (“first in time first in right”)
Secured Trans - Perfection - FS Filing - Effective Date Rule for not-yet acquire rights on collateral
Filing does not perfect UNTIL attachment of rights over collateral
Secured Trans - Perfection - FS Filing - Effective Date - Exception
PMSI 20-day grace period to file
- w/effective date relating back to date of attachment
Secured Trans - Perfection - FS Filing - Effective Period / duration, extension
5 years
- extendable by filing continuation statement within 6 months of the end of the period.
Secured Trans - Perfection - Filing - Consignment rules (for inventory) / when, old law vs modern, effect
- When consignee merchant sales inventory goods from other (title directly from consignor to consumer)
- Wholesale consignor wants to avoid that delivered goods in possession of consignee are subject to levy by the consignee’s other creditors
- Old law: post sign
- Modern Law: Consignor must file and send notification to previously perfected inventory creditors
- Creates PMSI which overrides after-acq property clause
Secured Trans - Perfection - Filing - Multistate transactions / applicable law, creditor’s duties and re-filing times
Debtor location defines filing rules for perfection - collateral location not controlling
- If debtor moves to other state - creditor with duty to locate and new filing within 4 months (after that perfection no longer valid)
- If collateral transferred to new debtor in new state - creditor has 1 year for new filing.
Secured Trans - Perfection - Filing - Termination Statement / when, sanction for failure
- To be filed by secured party up to 20 days after receipt of proper request by debtor
- $500 penalty for failure
Secured Trans - Perfection -Mere Attachment - Application (2) and purpose
1) PSMI on consumer goods (of any value)
2) farm machinery equipment <2.5K
Purpose: save of potential invalidation assignments which are not reasonable to require filing
Secured Trans - Perfection -Mere Attachment - Effective date
Date of attachment
Secured Trans - Perfection - Mere Attachment - Effectiveness (in relation to transferee consumer) and limits (3)
1) Not against BF transferee (consumer) of debtor who uses collateral for household/personal purposes (BF = for value + w/out knowledge of SI)
2) Limits creditor possibility for repossession
3) If transferee (consumer) uses for equipment/inventory, then he just takes junior interest in relation to previous perfected SI
Secured Trans - Perfection - Title Certificate Notation / application, method
- Mostly used for vehicles, motorhomes, boats, hawlers, airplanes
- Perfection by notation in title certificate issued by govt agency
Secured Trans - Perfection - Title Certificate Notation - Exception
Vehicle dealers
- retail business where vehicle is inventory: perfection is by filing
Secured Trans -Perfection - Priority rules for judgment creditor and bankruptcy trustee
- Judgment creditor: perfects interest upon registration of judgment with county clerk (and gets lien on real estate and fixtures)
- Bankruptcy trustee: perfects interest once petition for bankruptcy is filed in federal bk court.
