Covered Under Article 9 or not

Question 1

The FAA commands the administrator to establish a system that records any conveyance of an airplane which effects the title to, or any interest in, any civil aircraft in the united states” it us undisputed that the security interest is covered by this regulation. is is also governed by article 9

Answer 1

No! the federal law will pre-empt state law

Question 2

the is a mechanics lien on a piece of jewelry that you had repaired. Does the jeweler have an Article 9 Security interest in your jewelry.

Answer 2

No! Mechanic’s liens are either of common law or statutory in nature. This was a consensual arrangement only and article 9 does not cover that (not sure what this means, just noting it for later.

Question 3

if a federal rule dictates how security interest in intellectual Property will be dealt with, will article 9 still apply at the state level,.

Answer 3

No! article 9 is preempted by the federal regulation.

Question 4

How to tell from a lease and secured interest disguised and a lease?

Answer 4

There are 2 tests for a lease:
1. is the BRIGHT LINE TEST
2. does the lessor retain an “economically meaningful reversionary interest” in the good involved.
In Re Sankey alaska 2004

Question 5

what is the bright line lease test

Answer 5

1. you need to meet the first element:** does the lessee have the opportunity to shorten the lease at their pleasure**? if NO, you need only 1 on the next 4.
2. a) is the leased product devoid of any economic life at the end of the lease?
   2.b) is the lessee bound the renew the lease for the remaining economic life of the product.
   2.c) The lessee has an **option **to renew for the remaining economic life with no additional consideration or nominal additional consideration upon compliance with the lease agreement
   2.d) is there an **option **to keep the chattel at the end of the lease for free or just nominal consideration (Some states say that “fair market value” is not nominal)

Question 6

what is the non-brite line test in Sankey

Answer 6

(economic realities test),does the lessor retain an “economically meaningful reversionary interest” in the good involved.

Question 7

lease

what is nominal consideration
I must look at the HAL case B&B49#6

Answer 7

it is nominal if it is less than the lessee’;s predictable cost of perfroming under the lease agreement if the option is not exerised. (this seems to mean if the cost is built into the K and leaves you not choice to take the option) E&E 41
example: at end of 4 year lease the option to buy value is $500 when it. In this case it is not a lease but a sale that was enterted into the agreement.
Substance over form

this deal did not retain an “economically meaningful reversionary inter

Question 8

Lease cases

Answer 8

1. lease of pigs for breeding, the breeding outlasted their economic life, BUT they still had value in slaughter.
2. duke v. pillowtex e&e46 (look for things with poor resale value (here it was lighting fixtures)

Question 9

Lease Odds and Ends

Answer 9

1. just becasue the lease required the lessee to carry insurance an do the maintenace, does not necessarily give rise to a secured interest.
2. a full payout lease does not mean per se a secured interest, you need to look at all the facts.

Question 10

Argicultural lien (pay attention)

Answer 10

Agricultural liens ARE NOT a secured interest. HOWEVER, they fall w/in the reach of article 9 under section 1-102(a)(5)

Question 11

agriculture farm liens

Answer 11

Farm products are crops grown, growing or to be grown. Livestock (live or unborn (future piglet case)). or supplies.

a gardners in not a farmer but a dog breeder is.

livestock at the food processing plant is no longer a farm product.

Question 12

agricultural liens (perfection and attachment)

Answer 12

Perfection is required: agricultural lien is perfected if it has become effective and all applicable requirements of 9-310 are met.

attachment : article 9 attachment rules do nto appy to agricultureal liens.

Question 13

Consignment as a security interest

Answer 13

is a transaction in which the owner of goods (consignor), delivers the goods to the merchant (consignee) for the purpose of selling goods to another.

typically consignee returns all unsold goods

the consignor has a **security interest **in the goods and there is perfection MST at 11.

Question 14

consigment factors list 9-102(a)(20)

Answer 14

1. consignor delivers goods to merchant for sale to others.
2. merchant deals with similar goods under a different name. is not an auctioneer, in not generally known by its creditors** to be substantially engaged in selling goods of others**.
3. each delivery of good is over $1K
4. goods are not conumser good immediately before delivery. (this means the good was used, the used car example)
5. transaction does not create a security interest that secures and obligation.

Question 15

What happens if you consign goods to a consignor and they have creditors coming after them. do you need to perfect your interest

Answer 15

the consignor must comply with attachement and perfection MST 12. The rules created the secured interest and the consignee is the debtor. (Dr.)

Some courts have held that if you notify the creditor of your goods on consignment, you do not have to perfect.

Creditors have argued that they are entitled to the consigned goods.

Question 16

Consignment (more rules)

Answer 16

1. Secured Party must give value to the consignee.
2. consignee must have rights in the collateral
3. both parties must authenticate the agreement MST 12.
   areeging to give commission to Cee satisfies #1. Cee rights will be in the agreement between Cor and Cee. finally the agreement is authenticated with a consignment agreeement.

NOTE: the rights of the Cor and Cee are the same, so the Cee and actually use Cor’s good to secure a loan.

if Cee defaults, Cor must perfect prior to other Cr.s or file a financial statement under 9-103(d) Purchase-Money Security Interest (PMSI) this will give Cor priority rights of all.

Question 17

Consignment perfection

Answer 17

Cor files a financial statement. Article 9 makes the consignor’s security interest a “Purchase money security interest” PMSI, which has greater protection if the rules are followed.

Question 18

security interest include: intangibles

Answer 18

buyer of accounts, chattel paper, payment intangibles, promisory notes in a transaction.

E&E at 18#7a: 9-109(a)(2) PERSONAL PROPERTY

Question 19

in a security interest/ intangibles sale, whos is the secured partry

Answer 19

it is actually the BUYER, the seller is the debtor, the property sold is the collateral. MST at 15. we have seen this before in E&E at

Question 20

Agricultureal liens in general

Answer 20

attachment lien:
1. serve as payment or performance of good or services in connection to farming operation.
2. rent on real property leased
3. created by statute
4. in the ordinary course of business or in connection with farming operation AND
5. effectiveness does not depend on a person’s possession of the property.

Question 21

What parts of Article 9 apply to Agricultural liens

Answer 21

not many: we know that security interest section DOES NOT

Question 22

What creates a securtiy interest

Answer 22

a security interest is created by a consensual lien by contract between a creditor and debtor

Question 23

you need to look towards the individual states Agricultural lien statute

Answer 23

the statute will likley provide the scope of the lien and the priority

Question 24

when you see a consumer good transaction, a warning light needs to go off:

Answer 24

look to the statue to see if it covers a consumer transaction of the more narrow consumer goods transaction.

Question 25

PMSI

Answer 25

a SI in collateral is a PMSI if: 1. a seller sold the Dr the collateral in which it took a security interest or 2. a lender loaned money to the DR that the DE used to buy the collateral

Question 26

PMSI with comingled funds

Question 27

is the sale of accounts or chattel paper covered by article 9

Answer 27

Yes, this is confusing, but it is a sale, that is covered by article 9 glan at 57
- this could create priority. issues purchase the accounts and do not file a financial statment

Question 28

i need to look at the 2 debtor struction of the use of chattel paper for collateral glan at 56

Question 29

Dr has a car, taking with bank loan, car is wrecked, ins company. Article 9 makes payment under the police as “proceeds of collateral.”

Is this transaction excluded from article 9

Answer 29

no. this is not one of the exceptions.

Question 30

Dr how was in the car accident is injured and goes to the hospital. ** is her right of payment to her monetary obligation to the doctor covered by article 9**

Answer 30

this is covered by article 9 an not excluded.

Question 31

under the insurance exception, can an life insurance company sell it “right to payment” to receive insurance premiums

Answer 31

Yes: this is not a transfer of interest under the policy nor is it a an assignment of claim under the policy.

Question 32

i am hurt in a camper accident, can i assign my negligence claim ot the bank as collateral for a new camper.

Answer 32

this transaction is NOT covered by article 9.