Default

Question 1

default

Answer 1

• not defined by article 9
• refer to the SA and the rules of K interpret
• can be more than just non-payment to default on a SA

Question 2

Seek to possess the collateral after default

Answer 2

1) judgment- SP goes to court, proves up default, gets judgment OR
2) non-judicial re-possession- after default, a SP is entitled to take possession of the collateral through self-help repossession

Question 3

self-help repossession

Answer 3

• possession cannot breach the peace
• typically any criminal act is BOP
• if SP brings a cop to the repossession and there is not a writ of execution, officer’s presence is a per se breach of peace
• typically must be some potential for violence

Question 4

alternative to self-help repossession

Answer 4

• after a default, the Sp may render the equipment (heavy machinery) unusable (like go put a boot on it)
• this may also apply to consumer goods by agreement

Question 5

accounts- self-help

Answer 5

• SP has the option to step into the debtor’s shoes for 3P that owe the debtor
• SP can collect directly

Question 6

fixtures self-help

Answer 6

• SP is entitled to repossess (remove fixture)
• if RP owner to which the fixture is attached is someone other than the debtor, the SP must reimburse the owner for any damages caused by the removal BUT NOT for any diminution in value caused by the absence of the goods

Question 7

disposition of collateral

Answer 7

• a SP may sell, lease, license, or otherwise dispose of all or any collateral so long as the disposition is in all ways commerically reasonable.
• a SP may dispose of the collateral publicly or privately

Question 8

commerically reasonable stnd for disposition

Answer 8

• IS if
  1) is sold in the usual manner on a recognized market
  2) at the price current in any recognized market at the time if disposition OR
  3) in conformity with reasonable commercial practices amount dealers in the type of property that was subject to disposition

Question 9

commercially reasonable price

Answer 9

• price alone doesn’t etablish it wasn’t commerically reasonable
• a low price can trigger careful scrutiny by the court of all aspects of the disposition and its reasonableness

Question 10

commerically reasonable time

Answer 10

• art 9 does not mandate a specific time in which a disposition must occur
• surrounding circumstances may dictate what is a commercially reasonable time for disposition

Question 11

notice of disposition

Answer 11

must give to:

1) debtor
2) any other secured party or lienholder that was perfected by filing or pursuant to a statute and
3) any other party from whom the secured party has received authenticated notice of a claim or interest in the collateral

Question 12

notice-timing

Answer 12

• must be given in a reasonable time period

- art 9 provides a safe harbor that 10 days notice to disposition is reasonable

Question 13

notice- content

Answer 13

MUST contain:

1) debtor and SP’s name
2) description of the collateral
3) how, when, where the collateral will be disposed, and
4) a statement that the debtor is entitled to an accounting of the unpaid indebtedness and the charge if any for providing the accounting

Question 14

Notice of disposition– consumer good

Answer 14

must also include:

1) description of any liability for a deficiency of the person to whom the notification is sent
2) phone number from which redemption amount is available AND
3) telephone number or mailing address from which additional information concerning the disposition and secured obligation is available

Question 15

proceeds of disposition

Answer 15

a SP must apply, or pay over for application, cash proceeds of a disposition in the following order:

1) reasonable expenses for collection and enforcement (atty fee if in SA);
2) satisfy the debt owed to the foreclosing SP
3) satisfy any subordinate SI (provided that junior SP makes a demand prior to distrubof proceeds
4) remainder of the proceeds to the debtor

Question 16

order of proceed distribution from disposition

Answer 16

1) reasonable expenses
2) secured party
3) subordinate liens
4) debtor

Rusty Elders Should Play Soccer Late Dear

senior liens dont get proceeds, they continue to have a SI in the collateral; junior liens distinguished by the sale

Question 17

proceeds of disposition insufficient

Answer 17

-secured party can seek a deficiency judgment for the remaining amount (but may be an unsecured creditor for that amount)

Question 18

Acceptance of collateral

Answer 18

-a Sp can opt to keep the collateral in lieu of disposing of the collateral
-can be full or partial satisfaction if certain conditions are met
-

Question 19

Full Satisfaction

Answer 19

• may accept collateral in full satisfaction of an obligation secured by the collateral when:
  1) debtor consents, after default, to the acceptance in an authenticated record, OR
  2) debtor does not object to the SP’s proposal to accept the collat within 20 days after the proposal is sent

Question 20

partial satisfaction

Answer 20

-SP may accept collat in partial satisfaction of an obligation secured by the collateral when the debtor consents after default to the acceptance in an authenticated record

Question 21

notice for partial/full satis

Answer 21

• SP must send notice to other SPs who have an interest in the same collat and cannot accept the collat in full or parital satis if it receives objection to the proposed acceptance within 20 days after such notice was sent
• EXCEPTION: consumer debtors- a SP can accept colat only in full satis of the obligation
• Except to Except: if goods are CG and the debtor has paid 60% of the cash price in cas of a PMSI, or 60% of the obligation secured in a non-PMSi case, then the goods must be sold unless the debtor waives this right to force a sale of the collat, provided it is done after default in an autenticated agreement

Question 22

redemtpion

Answer 22

• up to any point before SP has disposed of (or entred K to dispose of) collat, debtor can fulfill all obligations and redeem collat.
• includes reasonable expenses for repossession

Question 23

SP fails to comply with art 9

Answer 23

• can lead to injunctive relief, damages, and the reduction of any deficiency judgment sought by the secured creditor
• EX: BOP, no notice of disposition, failing to dispose in commercially reasonable manner,

Question 24

Actual damages

Answer 24

• debtor or other SP can seek damages for any loss caused by the SP’s failure to comply
• can be inability to obtain other financing, or increased cost of obtaining such financing

Question 25

Statutory minimim for CG

Answer 25

-debtor may recover an amount not less than 10% of principal amount of the obligation or the time-price differential, plus 10% of the cash price, even if the actual damages are less

Question 26

reduction of deficiency in non-consumer transaction

Answer 26

• rebuttable presumpt that SP is not entitled to collect a deficiency which can be overcome by showing the deficiency would have existed even if the SP complied with Art 9

Question 27

reduction of deficiency in consumer transaction

Answer 27

• If tranaction is a consumer transaction and he SP’s collection, enforcement, disposition, or acceptance is not in accord with art 9, courts apply an absolute bar rule where non-complying SP cannot recover a deficiency
• Texas is minority in this regard

Question 28

conversion action for improper repossession

Answer 28

-when SP improperly repossesses collateral, the debtor may be able to pursue a conversion action under non-UCC law.