deck_8023005 Flashcards
Scope of Article 9What is covered by Article 9?1) Collateralized Txns2) Sales of receivables3) Consignments4) Agricultural liens5) Lease-purchase Agreements
Scope of UCC 91) Collateralized transactions.It is any transaction that is intended to create a security interest in personal property or fixtures.The property used as collateral may be:–Already owned by the owner.–Acquired with loan.For Example, with purchase money security interest.And after-acquired.2) Sales of receivables, including the outright sale of:–Accounts,–Chattel paper,–Payment intangibles,–And promissory notes.3) Consignments.A consignment is a bailment by the owner, bailor, or consignor under which the bailee or consignee has authority to sell.A consignor MUST also COMPLY with UCC9 to protect its interest in consigned goods against creditors of the consignee IF:a) Consigned goods are worth a total of $1,000 or more,b) The consignor did not use the goods for personal, family or household purposes,c) And there is a potentially deceptive consignee.A potentially deceptive consigner:Deals with goods of that kind under a name other than the consignor’s name,And is not an auctioneer or generally known by the consignee’s creditors to be substantially engaged in consigned goods.4) Agricultural liens created by statute are also within the scope of UCC9.They are non-possessory liens on farm products such as crops and livestock created by state law in favor of a person who provides goods or services to a farmer.5) Lease-purchase agreements are within the scope.In a lease-purchase, the transaction is a credit sale, rather than a true lease, if the lessee cannot terminate the lease plus one of the following:a) The lease transfers the economic life of the goods,b) The lessee is bound by mandatory renewals or buyouts,c) The lessee has option to renew the lease for remaining economic life for no or nominal additional consideration,d) Or the lessee has option to become the owner of the goods for noor nominal additional consideration.
Six things not covered by UCC 9?
Not Covered by UCC 91) Rights governed by federal law, such as ships, planes, and patents.2) Real property.Remember, fixtures are not a part of a real property.3) Tort claims including commercial tort claims such as unfair competition.4) Deposit accounts in consumer transactions.5) Statutory lines.For Example, the landlord and mechanics liens. 6) Wage assignments.
Classifying Collateral1) Definition of GOODS?2) Specific Inclusions (3)? 3) Specific exclusions (3)?4) Four classifications of GOODS?
Goods1) First, Goods are movable items and fixtures at the time security interest attaches.2) Specific inclusions to goods include:–Standing timber.–Growing crops.–And unborn young of animals.3) Whereas specific exclusions include:–Money.–Minerals before extraction are considered real property.–And collateral that fits other categories.4) Also, there are four classifications of goods:a) Consumer goods, which are goods used or bought primarily for personal, family, or household purposes.b) Inventory, which are goods held for sale or lease. c) Equipment, which are goods other than inventory or consumer goods. They must be moveable.d) Farm products, which must be in possession of a farmer and un-manufactured.
Classifying CollateralSemi-tangible & Intangible Property (7)?
Semi-Tangible & Intangible Property1) Instruments, including promissory notes and checks.2) Documents including:–Warehouse receipt, which are goods in storage.–And bill of lading, which are goods in transit.3) Chattel paper, which are writing showing both a monetary obligation and a security interest in goods or lease of goods.4) Account receivables, which is the right to payment for goods sold or leased or services rendered not shown on chattel paper.5) Deposit account and bank accounts.6) Investment property, which are stocks and bonds.7) Commercial tort claims, which are business torts not involving personal injury.
Classifying Collateral1) What are PROCEEDS?2) How to get s/i in PROCEEDS?3) Rights to PROCEEDS when?4) PROCEEDS commingled?
Proceeds1) Proceeds are whatever is received upon a sale, exchange, or other disposition of collateral.2) A security interest in collateral automatically gives a secured party a security interest in the identifiable proceeds.3) There is also right to proceeds after disposition, such as a sale and exchange.–If collateral is sold or otherwise disposed of and the secured party AGREED to the disposition, then the secured party has a security interest ONLY IN the proceeds BUT NOT the collateral.–Now, if collateral is sold or otherwise disposed of, but the secured party DID NOT AGREE to the disposition, then the secured party has a security interest in BOTH the collateral AND proceeds. However, the secured party can only get one satisfaction.4) Nevertheless, when the proceeds are commingled with other property, the secured party only has rights to the proceeds if they are identifiable.
ATTACHMENTDefinition?
Attachment1) DefinitionAttachment is a process by which a security interest is created and becomes enforceable against the debtor so the creditor can repossess the collateral if the debtor does not pay.
ATTACHMENT3 Elements of Valid Attachment?————————————-RE: First Element: requirements w/respect to s/a (4 things (last thing has 4 also))?
3 Elements of Valid Attachment1) Parties AGREE that s/i ATTACHES. (Debtor signs s/a or secured party has possession of collateral or takes control);2) SECURED PARTY give VALUE; AND3) DEBTOR has RIGHTS and ownership inthe collateral.——————————————-1) Either the debtor SIGNS a security agreement OR the secured party has POSSESSION OR TAKES CONTROL of the collateral.Here, the security agreement must provide a REASONABLE DESCRIPTION of the collateral.The description CAN be BROAD by category.For Example, statement such as all my equipment or all my law books is a valid description.Commercial tort claims and consumer goods MUST be SPECIFIC.A SUPERGENERIC description, such as statements all of my assets or all of my personal property, is NOT valid.Moreover, security agreement CAN be SATISFIED by CONTROL IF the collateral is:a) Nonconsumer deposit account,b) Electronic chattel paper,c) Or investment property.d) And the seller can get a security interest through an agreement that is much vaguer than a regular security agreement.For Example, statements like “the seller keeps title” or “sale is with reservation” are valid agreement that allows the seller to get a security interest.2) that the secured party gives value. Here, the creditor lends money or gives goodson credit.3) debtor has rights and ownership inthe collateral.
ATTACHMENT1) When does s/i attach for After-Acquired Property?2) Type of language that creates s/i in A.A. property (2)?3) Restriction? S/p can’t create interest in (2)? Unless?
After-Acquired Property1) Security interest attaches when debtor gets RIGHTS in the new property.2) The language that can create a security interest in afteracquired property are statements such as:a) All inventoryb) Or equipment now owned or hereafter acquired.3) Restrictiona) However, a secured party CANNOT create an after-acquired interest in CONSUMER GOODS UNLESS the debtor gets consumer goods WITHIN 10 DAYS after the secured party GIVES VALUE.b) The secured party also CANNOT create an after-acquired interest in COMMERCIAL TORT CLAIMS.
ATTACHMENTCan s/a cover Future Advances?
Future AdvancesA security agreement can expressly provide that collateral secures future advances regardless of whether the secured partyhas made a commitment to make future advances.Collateral secures not only the immediate loan, but other future advances, such as future loans.
PERFECTION1) What is Perfection of a s/i? Definition?2)How to Perfect?–What kind of acts can perfect (6)?3) What does order of perfection mean/matter?
Perfection1) Perfection of Security InterestPerfection is a process by which the creditor protects the security interest from most other claimants to the same collateral.2) To perfect a security interest, a creditor needs to finish ATTACHMENT and one of the following acts:a) The creditor takes POSSESSION of collateral.b) The creditor files FINANCING STATEMENT.c) There is an AUTOMATIC perfection, such as a PMSI in CONSUMER GOODS.d) There is an AUTOMATIC TEMPORARY perfection, such as PROCEEDS.e) The creditor has the CONTROL over the collateral.f) There is a notation of security interest on certificate of title.3) There is an order of perfection. This means that if a creditor files or takes possession BEFORE attachment, security interest is still NOT perfected UNTIL the attachment occurs because perfection cannot occur before attachment.There are different ways to achieve perfection.
PERFECTIONKINDS OF PERFECTIONPerfection by Possession. 1) What type of collateral does Perfection by Possession NOT Apply (4)?2) How can a creditor lose perfection if collateral is already perfected by possession?
Perfection by Possession1) Perfection by Possession applies any kind of collateral except:a) Accounts receivables.b) Deposit accounts.c) Nonnegotiable instruments.d) And electronic chattel paper.2) If collateral is already perfected by possession, a creditor can lose perfection once he LOSES POSSESSION of collateral UNLESS the collateral falls within the 20 day temporary automatic perfection.
PERFECTIONKINDS OF PERFECTIONPerfection by Filing a Financing Statement1) What kind of collateral CANT be perfected by filing (1)?2) Five things that must be on F/S?
Perfection by Filing a Financing Statement1) On the other hand, anything can be perfected by filing except for DEPOSIT ACCOUNTS.2) A financing statement must contain five things.a) Names of the debtor and creditor.b) Address of the debtor, secured party, or their representatives. c) Description of collateral.d) Description of land if it has timber, minerals, fixtures or crops.e) The debtor’s authorization to file. A debtor can authorize the financing statement after filing.
PERFECTIONKINDS OF PERFECTIONPerfection by Filing a Financing Statementa) Names of the debtor and creditor.1) What if debtor there’s an error spelling debtor’s name on the f/s?2) What if debtor changes name AFTER filing of the f/s?—-Consequences?
a) Names of the debtor and creditor.1) An error in the debtor’s name is acceptable UNLESS it is SERIOUSLY MISLEADING, which means it is so misleading that a search of records of filing office under debtor’s correct name would not disclose financing statement.2) If the debtor makes a SERIOUSLY MISLEADING name change AFTER a financing statement is FILED, perfection CONTINUES for the collateral acquired by the debtor BEFORE the name change and WITHIN 4 MONTHS AFTER the name change.—-Any collateral acquired AFTER 4 MONTHS is NOT perfected UNLESS secured party files under the debtor’s new name WITHIN the 4 months
PERFECTIONKINDS OF PERFECTIONPerfection by Filing a Financing Statementb) Address of the debtor, secured party, or their representatives.Must address these be on the f/s? Exception?
b) Address of the debtor, secured party, or their representatives. These must be included in a financing statement UNLESS the financing statement is ACCEPTED by the filing office.
PERFECTIONKINDS OF PERFECTIONPerfection by Filing a Financing Statementc) Description of collateral.How broad can it be?
c) Description of collateral.Here, the description CAN be SUPERGENERIC such as “all assets” or “all personal property.”It DOES NOT need to include the statement “after acquired property”, BUT after acquired property NEEDS to be INCLUDED in security agreement.
PERFECTIONKINDS OF PERFECTIONPerfection by Filing a Financing Statementd) Description of land in f/s when (4)?
d) Description of land in f/s if it has TIMBER, MINERAL, FIXTURES, OR CROPS
PERFECTIONKINDS OF PERFECTIONPerfection by Filing a Financing Statemente) The debtor’s authorization to file. A debtor can authorize the financing statement after filing.1) by entering into s/a, what effect on debtor?2) How to decide the location of filing (4)?3) Where to file f/s when s/p has POSSESSION of the collateral?—-EXCEPTIONS?
e) The debtor’s authorization to file. A debtor can authorize the financing statement after filing.1) Also, by entering into a security agreement, the debtorIMPLIEDLY AUTHORIZES FILING. 2) There are ways to DECIDING the LOCATION of filing a financing statement.a) When the secured party does not have possession of collateral, financing statement should be filed in the state where the debtor is located.b) If the debtor is an individual, filing should be done at his principal residence.c) If the debtor is an organization with one place of business, filing is at the principal place of business.If the organization has more than one place of business, filing is at the chief executive office.d) And if the debtor is a corporation, filing is at the state of incorporation.3) On the other hand, when the secured party has the POSSESSION of collateral, the financing statement is generally filed in the state where collateral is located.—-EXCEPTIONS to this rule include:a) For fixtures, filing occurs in the state where land islocated.b) For timber, filing is at the state where timber is located.c) For certification of title items, in the state where themost recent certificate was issued.d) For deposit accounts, at the state the bank has its chiefexecutive office.e) For agricultural liens, at the state where farmproduct is located.
PERFECTIONKINDS OF PERFECTIONPerfection by Filing a Financing Statemente) The debtor’s authorization to file. A debtor can authorize the financing statement after filing.1) What happens if debtor moves to another state (2 things)?2) Who/which party can file f/s?3) How long does f/s last? How to extend? How long the extension?—-When can you file extension document?—-What if this period lapses (negative consequence)?
1) If the debtor moves to another state, the security interest is perfected for another 4 months. However, if the creditor does not file in the new state within 4 months, then the security interest was never perfected.2) The party filing the financing statement does not have to be a secured party. It can be any person as long as he is the appropriate person authorizes the filing.3) Also, a financing statement lasts for 5 years, and then the secured party needs to file a continuation statement to extend for another 5 years.—-This continuation statement can only be filed within 6 months before the expiration of the 5 year period.—-If the financing statement period lapses, then the security interest becomes unperfected and is treated as if it was never perfected in the first place. In this case, the creditor who once had second priority now has first priority.
PERFECTIONKINDS OF PERFECTIONPerfection by Filing a Financing Statemente) The debtor’s authorization to file. A debtor can authorize the financing statement after filing.1) Termination statement: when must is be filed for what types of collateral (2)?2) What if debtor makes written demand?3) What constitutes a fraudulent filing (3)? Penalties?
1) Concerning a termination statement, in cases of CONSUMER GOODS, when debt is repaid, the secured party must file a termination statement within 1 month or within 20 days after receiving a written demand from debtor.For NONCONSUMER GOODS such as equipment and inventory, when debt is repaid, the secured party does not have to do anything until the debtor makes a written demand.2) Here, when the debtor makes a written demand, the secured party must provide the debtor with a termination statement within 20 days, which the debtor has to file.3) The person filing cannot file a financing statement that a) he knows is forged, b) contains false statement, or c) is groundless.This is fraudulent filing.The minimum penalty is $5,000 plus court costs and attorney’s fees.
PERFECTIONKINDS OF PERFECTIONAutomatic Perfection1) What thing CAN BE automatically perfected?2) How can the thing be created (2)?3) What kinds of collateral can Automatic Perfection NOT occur (2)? Even if?
Automatic Perfection1) Purchase Money Security Interest in consumer goods is automatically perfected when it attaches.2) PMSI can be created when:a) A secured party sells goods to the debtor on credit and then takes a security interest in the goods sold,b) Or when a secured party loans the debtor cash to buy goods, the debtor actually buys the goods, and the secured party takes asecurity interest in those goods.3) Automatic perfection, however, does not apply to CERTIFICATION OF TITLE items and FIXTURES EVEN IF they are CONSUMER GOODS.
PERFECTIONKINDS OF PERFECTIONAutomatic Temporary Perfection1) What is automatically temporarily perfected (1)? For how long and from when?3 Scenarios:a) if the debtor exchanges collateral for other collateral and no cash is involved…………b) If the debtor exchanges collateral for cash………….c) And if the debtor exchanges collateral for cash and buyssomething else with that cash…………..d) If the description covers new collateral………….2) What other types of collateral are perfected? For how long and from when (3)?Study MORE!!!
Automatic Temporary Perfection1) PROCEEDS are automatically perfected for 20 days if the original collateral was PERFECTED.a) Regarding the continuation of perfection beyond 20 days, if the debtor exchanges collateral for other collateral and no cash is involved, the secured party does not need to file a new financing statement to keep perfection as long as the filing office for the collateral is the same.b) If the debtor exchanges collateral for cash, the secured party does not need to file a new financing statement to keep the collateral perfected. c) And if the debtor exchanges collateral for cash and buys something else with that cash, then the secured party has to look at the financing statement and see what the description of the original collateral is.d) If the description covers new collateral, then the secured party does not need to file a new financing statement.If the description was narrow, then the secured party does not have to file a new financing statement to perfect the security interest in new collateral.2) Also, INSTRUMENTS, NEGOTIABLE DOCUMENTS, and CERTIFIED SECURITES are perfected for 20 days from the time of ATTACHMENT IF NEW VALUE was GIVEN.
PERFECTIONKINDS OF PERFECTIONRe: Certification of Title1) What can CoT Perfect (3)? How?2) Exception?
Certification of Title1) Next, a Certification of Title can only perfect a securityinterest in AUTOMOBILES, BOATS, OR MANUFACTURED HOMES by making a notation of security interest on the certificate of title.2) The exception is that IF the collateral is INVENTORY, such as in a dealership, a secured party MUST file a FINANCING STATEMENT.
PERFECTIONKINDS OF PERFECTIONRe: Deposit Accounts1) When can a party NOT take a s/i in deposit accounts?2) What types of collateral does creditor have a right to sell/cash without further action (3)?
Deposit Accounts1) A party can take a security interest in a bank account as long as it is not a CONSUMER TRANSACTION.2) The creditor has the right to sell or cash in the collateral without further action in the following forms:a) Investment property.b) Nonconsumer deposit accounts.c) And electronic chattel paper.
PRIORITY OF SECURITY INTEREST1) General Rules2) Secured vs. Unsecured Interest
Priority of Security Interest1) General RulesThe secured party and debtor cannot alter priority rights.2) Secured vs. Unsecured InterestHowever, the secured party can make an inter-creditor agreement with another secured party and alter priority rights.The secured party with priority has priority even if he hasnotice that there is another secured party. In comparing Secured versus Unsecured Interest, secured interest always wins.The perfected status of the secured creditor is irrelevant
PRIORITY OF SECURITY INTEREST1) Priority among Conflicting SI—-Unperfected v Unperfected?—-Perfected v Unperfected?
1) Priority among Conflicting SI—-In comparing UNPERFECTED secured V UNPERFECTED secured interest, the FIRST SECURITY INTEREST TO ATTACH WINS.—-And in situations of PERFECTED secured V UNPERFECTED secured interest, the PERFECTED secured interest WINS EVEN IF the SECOND IN TIME HAD KNOWLEDGE of being second.
PRIORITY OF SECURITY INTERESTPerfected v Perfected1) General rule?2) Exceptions to FF/P (3)?3) Exceptions if one creditor has PMSI in the inventory (2)?—-Two things notice must contain (2)?—-Effective duration of proper notice?4) Three rules to be aware of where PMSI involved?
Perfected Secured vs. Perfected SI1) The first party to either FILE OR PERFECT the interest generally WINS. Here, attachment is irrelevant.2) There are EXCEPTIONS to the rule that the FIRST TO FILE OR PERFECT the interest wins.a) when collateral is not in inventory or when the collateral is perfected by Purchase Money SecurityInterest.b) When both collaterals are perfected, the one not in inventory and with Purchase Money Security Interest prevails even if it is not perfected first.c) The Purchase Money Security Interest is perfected at the time the debtor receives possession of the collateral or within 20 days of when the debtor received possession of the collateral.3) There are also EXCEPTIONS if one creditor has PMSI in the INVENTORY.Purchase Money Security Interest PREVAILS IF:a) Purchase Money Security Interest creditor perfected at the time debtor receives POSSESSION of the inventory, b) And authenticated NOTICE to all creditors who have already filed with respect to the collateral.—-A NOTICE must be given BEFORE the debtor receives POSSESSION of INVENTORY AND CONTAIN:a) Explanation that the creditor is obtaining a Purchase Money Security Interest in inventory.b) Description of the collateral.—-Also, a notice is effective for 5 years for deliveries of the same type of collateral.4) Nevertheless:a) If one creditor PMSI in LIVESTOCK, same rules as PMSI with INVENTORY apply.b) In DEPOSIT ACCOUNT cases, the secured party with CONTROL wins.c) And in INVESTMENT PROPERTY, the secured party with CONTROL also wins!
SECURED PARTY V PURCHASER1) General Rule
1) General RuleThe General Rule is if a debtor sells collateral to a purchaser, the secured party wins.
SECURED PARTY V PURCHASERSix Exceptions to general rule that: if a debtor sells collateral to a purchaser, the secured party wins.
Exceptionsa) If the debtor has permission to sell, the purchaser wins.b) Between the purchaser and unperfected interest at the time of purchase, the purchaser wins if he:–Gives value, –Receives delivery of collateral,–And has NO KNOWLEDGE of the security interest at time of delivery.Nevertheless, the purchaser loses if it is a Purchase Money Security Interest that is perfected within 20 days after the debtor sells collateral to the purchaser.c) The buyer in the ordinary course of business (BIOC) wins even over a perfected secured party if he buys goods in good faith without knowledge that the sale violates rights of another person in the ordinary course of business.Regarding the requirement that he is without knowledge of the sale violating the rights of another person, the buyer in the ordinary course of business can know that there is a security interest.And regarding the requirement that a buyer is in the ordinary course of business, it means that he is buying from a person who is in the business of goods of that kind. This does not include a pawnbroker.The exception here is that a secured party who is perfected by possession wins.The purchaser takes free of any security interest created by the seller but not free of other security interest not created by the seller.d) consumers buying from consumers. Consumer Buying from Consumer Example: Garage sale.In cases where a consumer is buying from a consumer, the purchaser wins if:–Goods are consumer goods in the hands of the seller and buyer,–The buyer has no knowledge of the security interest,–The buyer pays value,–And no financing statement on goods is filed at the time of purchase.However, a secured party who perfected by possession still wins.e) a case of the purchaser versus the secured party for future advances.The purchaser wins if the secured party obtains knowledge of the purchase or 45 days have elapsed from the date of the purchase.f) The holder in due course wins over everyone.
SECURED PARTY V PURCHASERSECURED PARTY V. LIEN CREDITOR
Secured Party vs. Lien CreditorLien creditor is an unsecured creditor who acquired a judicial lien or is a bankruptcy trustee.Generally, if the secured party is perfected at the time lien attaches, the secured party wins.If the secured party is not perfected at the time lien attaches, the lien creditor wins.The exception, however, is if an unperfected Purchase Money Security Interest attaches to the collateral before a lien attaches, the Purchase Money Security Interest holder will have priority if he perfects by filing within 20 days after the debtor receives collateral.The secured party will lose to the lien creditor for futureadvances after both:a) The secured party obtains the knowledge of the lien,b) And 45 days elapse from the date of the lien.
SECURED PARTY V PURCHASERSECURED PARTY V. STATUTORY MECHANICS LIENThe Lien wins if (3):
Secured Party vs. Statutory Mechanics LienThe lien wins if:1) The party with mechanics lien furnished services or materials with respect to the goods covered by the security interest,2) Furnishing was in the ordinary course of business,3) And collateral is in possession of the lien holder.
SECURED PARTY V PURCHASERDEPOSIT ACCOUNTS1) Control v No Control?2) Control v. Control (3)?
Deposit Accounts1) When it is control versus no control, the secured party with control has priority over secured party with no control.2) On the other hand, in cases of control versus control:a) The secured party who becomes the bank’s customer on deposit account has the best priority.b) The secured party who is a bank where the account is located is the next.c) And the secured party who has control by agreement is the last.
SECURED PARTY V PURCHASERChattel Paper Special PriorityWhen does purchaser of chattel paper have priority? And over what types of security interests (2)?
Chattel Paper Special PriorityIf the purchaser of the chattel paper in good faith gives new value and takes possession of the chattel paper in ordinary course of business, then he has priority over the following security interest:1) A security interest in chattel paper which is claimed merely as proceeds of inventory if the chattel paper does not identify another interest in it.2) Any other security interest, as long as purchaser acquires its interest without the knowledge that purchase violates rights of secured party. Here, to have priority, thepurchaser cannot have any knowledge that there is any interest.
SECURED PARTY V PURCHASERPROCEEDSPriority in what collateral? As long as what?
ProceedsThe priority is the same as the priority in the original collateral as long as the security interest in the proceeds is perfected.
SECURED PARTY V PURCHASERFIXTURES1) What are fixtures?2) What do fixture priorities deal with?3) Secured party may win if (2)?4) What about the PMSI creditor? When can PMSI creditor prevail?—-How does this affect competing real estate interest?—-What will be treated as regular goods?5) Re: Judicial lien. A S/I in FIXTURES tht is perfected prevails over what?
Fixtures1) Fixtures are collateral that was personal property but has becomes so affixed to real property that an interest in it arises under real estate law.2) Fixture priority deals with the secured party versus the holder of real property mortgage.3) The secured party may win if it is:a) Perfected before real estate interest recorded,b) And perfected with a fixture filing that describes the real property and is filed in the office where a mortgage on the realproperty would be recorded.4) Now, the Purchase Money Security Interest creditor, even though perfected after real property interest is of record, can prevail if the Purchase Money Security Interest creditor perfected by fixture filing, within 20 days of good becoming a fixture.—-The competing real estate interest is not a construction mortgage. To clarify, construction mortgage is the loan thatenabled the whole building process to begin and thus is not defeated by a later Purchase Money Security Interest.—-Readily removable collateral will be treated as a regular good and may be perfected without a fixture filing.5) Also, regarding a judicial lien, a security interest in fixtures that is perfected in any manner prevails over a later-acquiredjudicial lien even if the perfection was not done via a fixturefiling.
SECURED PARTY V PURCHASERCROPSWhat about a perfected s/i in crops? Does it have priority over something?
CropsA perfected security interest in crops has priority over a conflicting interest in the land on which the crops are growing.It does not matter who filed or perfected first.
REMEDIES OF S/P UPON DEFAULTREPOSSESSION 1) What can s/p do after default? How?2) What can s/p not delegate?3) What must the repo person NOT do?4) Who can repo?
Repossession1) Upon default, the secured party can repossess the collateral without notice.Repossession can be done without judicial process if it does not breach the peace.2) The secured party cannot delegate the duty not to breach the peace.3) If the repossession person breaches the peace, the secured party is strictly liable.4) Also, any secured party can repossess even if he does not have priority
REMEDIES OF S/P UPON DEFAULTAFTER REPOSSESSION 1) What can Creditor do?2) What if creditor still doesnt get enough $?3) What if creditor performs strict foreclosure?
After Repossession1) The creditor can sell collateral or perform strict foreclosure.2) If the creditor sells collateral, he can sue for deficiency and give surplus to the debtor.3) And if creditor performs strict foreclosure, he can keep the collateral and release the debtor.
REMEDIES OF S/P UPON DEFAULTWITH REGARDS TO THE COLLATERAL 1) Compliance Requirement?2) What must s/p do before? Unless?3) How must notice be sent?4) What must the notice include (7)?
Collateral1) There is a compliance requirement where every aspect of the disposition must be COMMERCIALLY REASONABLE.2) Also, the secured party must GIVE NOTICE BEFORE the collateral UNLESS the collateral is perishable collateral like strawberries, the collateral is threatening to decline speedily in value such as concert tickets, or the collateral is customarily sold on a recognized market, such as stocks.3) Otherwise, this notice must be sent a reasonable amount of time before the sale, and it should be given to sureties and thedebtor unless the debtor waived notice in a signed agreement after default.The notice must include:a) Description of the debtor and secured party,b) Description of the collateral,c) Method of sale such as public or privated) Statement that the debtor is entitled to an accounting,e) Time and place of public sale,f) Time after which private sale will be made,g) And for consumer goods, the notice must explain that the debtor is liable for deficiency and the phone number and address wherethe debtor can get information about this sale.
REMEDIES OF S/P UPON DEFAULTWITH REGARDS TO THE COLLATERAL 1) What right does debtor have after default to regain collateral?—-Circumstances where debtor can do this (5)?2) What right does secured party have after default upon disposition of collateral?—-Diff btw Public Sale and Private sale for secured party?3) What does reselling secured party warrant with respect to the sale? Unless?
5) Nevertheless, a debtor has right to redeem, which means he has the right to cure the default and regain the collateral.—-This is if:a) The creditor has not yet sold or entered into a contract to sell, b) Strict foreclosure has not yet occurred,c) The debtor has not waived the right to redeem after default,d) The debtor will tender fulfillment of all obligations,e) And the debtor will tender the creditor’s reasonable expenses.2) The secured party has the right to purchase at resale.—-In a public sale, he can purchase at resale, whereas in a private sale, he has no right to purchase unless the collateral is customarily sold in a recognized market or is subject to widely distributed standard price quotations.3) The reselling secured party warrants title, possession, and quiet enjoyment of the collateral UNLESS the secured party disclaims the warranties.
REMEDIES OF S/P UPON DEFAULTWITH REGARDS TO THE COLLATERAL 1) How should resale proceeds be applied (3/1/1) [5 total]?2) Who is liable for penalty of noncompliance?3) If consumer goods?4) If nonconsumer goods?
1) The resale proceeds should be applied to:a) The secured party’s reasonable expenses.b) Satisfaction of the debt.c) And satisfaction of subordinate creditors.d) The surplus, if any, should be applied to the debtor.e) After resale, if there is still a deficiency, the secured party can sue the debtor for it.2) As for the penalty for not complying with resale requirements, the secured party is liable for actual damages.3) If it is consumer goods, then there is automatic penalty of finance charge plus 10% of principal.The effect on ability to recover deficiency in consumer transactions is an absolute bar to recovery of deficiency.4) On the other hand, in nonconsumer transactions, there is a rebuttable presumption that the value of collateral was equal to amount of debt.
REMEDIES OF S/P UPON DEFAULTWITH REGARDS TO THE COLLATERAL Strict Foreclosure1) General Rule?—-Consumer v Nonconsumer Goods distinction?2) Three Requirements?3) Exception?
Strict Foreclosure1) The General Rule is that the secured party may retain the collateral in total satisfaction of the debt.—-In consumer goods, the secured party can keep the collateral in total satisfaction of the debt.—-In contrast, in nonconsumer goods, the secured party can keep the collateral in total or partial satisfaction of the debt.2) There are three requirements.a) The DEBTOR MUST CONSENT either expressly or impliedly.—-This means that he can consent expressly in a written agreement made after default.—-Or if he fails to object to a secured party’s proposal within 20 days after the secured party sent the notice, he has consented impliedly.b) The S/P MUST SEND WRITTEN NOTICE to retain collateral to the debtor unless the debtor has waived notice in a written agreement after default.—-If collateral is a nonconsumer goods, then written notice is sent to creditors who have perfected by filing, who have a notation on certificate of title, or have given notice tosecured party.c) IF the debtor or another creditor OBJECTION in writing WITHIN 20 days, THEN the CREDITOR may not keep the collateral and MUST CONDUCT a RESALE.3) There is an exception for HIGH EQUITY CONSUMER GOODS: If the debtor has paid at least 60% of the price, resale is necessarywithin 90 days of repossession.
