FL Secured Transactions Flashcards
1
Q
An after acquired clause is NOT allowed for what types of collateral?
A
Commercial Tort Claims
2
Q
When secured party has possession of the collateral, what may they charge the debtor?
A
Any reasonable expenses incurred in presentation of the collateral
including cost of insurance
3
Q
Who bears the risk of loss when secured party has possession of the collateral?
A
Debtor – to the extent of any insurance coverage deficiency
4
Q
If the secured party has possession of the collateral, what may they hold as additional security?
A
Any increase in value of or profits from the collateral
EXCEPT FOR money
5
Q
How can a security interest in a deposit account be perfected?
A
CONTROL –> secured party exercises control of deposit account
6
Q
By who must a continuation statement be authorized by?
A
Secured party ONLY
7
Q
How can a security interest in equipment be perfected?
A
Filing OR possession
8
Q
What is a secured transaction?
A
A transaction intended to create a security interest in personal property or fixtures
9
Q
When does a PMSI arise?
A
- arises onluy where the seller sells goods to debtor on credit & reserves a security interest in the goods (seller financed PMSI); OR
- where the creditor advances funds used by the debtor to purchase goods (financer financed PMSI)
10
Q
What’s an after-acquired property clause?
A
A secured party obtaining interest in property that the debtor will obtain in the future
this is ALLOWED
11
Q
What is attachment?
A
Steps that must be followed by law by creditor to link collateral with the debt to give creditor the legal right to collateral against the debtor
12
Q
What is perfection?
A
Steps legally required to give the secured party an interest in the collateral that is effective against the world
13
Q
What needs to be filed in order to perfect a security interest?
A
A financing statement (UCC-1)
document used to provide public notice of the security interest
14
Q
What is the test for classification?
A
HOW is the debtor using the collateral?
- focus on the intended use of the collateral at the time security interest is granted
what did the debtor represent to be the intended use of the collateral?
- classificiation does NOT change because of a later change in use
15
Q
What are the types of goods you can classify as collateral?
A
DEPENDS on how the debtor is using collateral:
1. consumer goods
2. equipment
3. farm products
4. inventory
16
Q
What are consumer goods?
A
goods used or bought primarily for personal, family, or household purposes
17
Q
What are farm products?
A
- crops or livestock or supplies used or produced in farming operations
- products of crops or livestock in their unmanufactured states IF in possession of debtor engaged in farming operations
18
Q
What collateral is considered inventory?
A
- goods held for sale or lease
- goods that are to be furnished under service K’s
- materials used or consumed in a business in a short period of time
19
Q
What collateral is considered equipment?
A
Goods used or bought for use in business
DEFAULT –> if good doesn’t fit into any category, classify as equipment
20
Q
What are the types of intanglible or semi-intangible collateral?
A
- instruments
- documents
- chattel paper
- investment property
- accounts
- deposit accounts
- commercial tort claims
- general intangibles
21
Q
What type of collateral is classified as instruments?
A
Pieces of paper representing right to be paid MONEY:
1. promissory note
2. drafts (checks)
3. certificates of deposit
4. commercial paper
22
Q
What is a promissory note?
A
An instrument that evidences a promise to pay money
an instrument is a negotiable instrument
23
Q
What type of collateral is classified as documents?
A
Document that represents right to RECEIVE goods:
1. bill of lading
2. warehouse receipt
24
Q
What is a warehouse receipt?
A
A document that shows proof of ownership of goods that are stored in a warehouse
25
What is chattel paper?
Refers to a record or set of records that evidences BOTH:
1. a monetary obligation; AND
2. a property interest in specific goods or a lease of specific goods
26
What type of collateral is classified as investment property?
1. stocks
2. bonds
3. mutual funds
4. brokerage accounts containing any of 1-3
27
What is an account?
**RIGHT to payment of money** for all types of property that were or are to be disposed of in any respect, for **services that were or are to be rendered**, for policies of insurance to be or actually issued, for incurring a secondary obligation
| if right to payment evidenced by instrument or chatttel paper, NOT acct
28
What type of collateral is classified as deposit accounts?
Account maintained with a bank
- article 9 applies to nonconsumer/business deposit accounts & account money that are claimed as proceeds of other collateral
29
What type of collateral is classified as commercial tort claim?
Tort claims where:
1. claimant is an organization; OR
2. claimant is an individual, claim arose out of claimants business or profession & claim does NOT include damages for PI or death
30
What type of collateral is classified as general intangibles?
Any personal property NOT any other type of classification:
1. patent rights
2. trademark rights
3. copyrights
4. goodwill
5. payment intangibles
31
A contractual obligation arising from a loan of money is what type of collateral?
general intangible
32
What is a payment intangible?
A "general intangible" in which the persons principal obligation to pay money
33
A security interest is NOT enforceable against the debtor until what happens?
Attachment
34
What are the requirements for attachment?
1. security agreement (has own requirements)
2. **value** must be **given** to secured party
3. **debtor** must have **rights** in collateral
35
What are the requirements for a valid security agreement?
The agreement MUST:
1. evidenced by record (**intent** to create security interest)
2. authenticated by debtor (**signed** by debtor)
3. contain **description** of collateral
36
The secured party must give value. What is value?
- value is consideration the secured creditor gives to bind the debtor to security interest
- can be past consideration
- usually involves a direct loan or a commitment to sell goods on credit
37
How must collateral be described?
MUST describe collateral in a way that **REASONABLY IDENTIFIES** it
- **example**: "all debtors personal property" is NOT sufficient for security agreement but it IS for financing statement
38
What type of collateral cannot be described by type?
1. commercial tort claims
2. consumer goods
3. consumer securities account
39
How can a creditor describe collateral?
1. item (26 ft viking explorer yacht)
2. category (exercise equipment or household pets)
3. type defined in §9-102(a) (accounts, farm products)
| "commercial tort claim" or "consumer goods" does NOT reasonably ID
40
When will a secured party's interest attach to after acquired property, even without the after-acquired property?
1. attach automatically to collateral of a type that is rapidly depleted & replenished (accounts & inventory)
2. attach automatically to **identifiable proceeds** of collateral
41
Does an after-acquired clause apply to consumer goods?
NO
- UNLESS the debtor acquires rights in the goods **within 10 days** after creditor gives value
42
What are proceeds?
Whatever is acquired upon sale, lease, license, exchange or other disposition of collateral
| second generation proceeds included
43
When are proceeds identifiable?
When proceeds can be traced back to the original collateral
44
In the case of **commingled** cash proceeds, how can the identifiable proceeds be traced?
Using the **LOWEST INTERMEDIATE BALANCE RULE**:
- look at bank account starting at time proceeds are deposited & ending when applying the rule
- lowest amount of $$ in account during time is proceed amount
| amount CANNOT exceed value of the cash proceeds originall deposited
45
does unperfected mean unsecured?
NO! A party is secured against debtor but NOT perfected.
46
How does one perfect?
The party must:
1. attach; AND
2. perfect in 1 of 5 ways
| order does NOT matter (can perfect before attachment)
47
What security interest is automatically perfected at the time of attachment?
PMSI in consumer goods
48
What are the different methods of perfection?
1. possession (directory or through agent or bailee)
2. recordation on a certificate of title (cars sold NOT in inventory)
3. compliance with federal filing statement (financing stmnt)
4. control
5. automatic perfection (BIG)
49
What type of collateral is needed to perfect an intererst with **possession** of the collateral?
TANGIBLE collateral:
1. goods
2. instruments
3. documents
4. chattel paper (not electronic)
| perfected as long as secured party keeps possession
50
Who must have possession to perfect an interest through perfection?
1. secured party
2. its agent; OR
3. third party
51
What types of collateral can be perfected by control?
1. investment property
2. nonconsumer depsit accounts (only way to perfect)
3. electronic chattel paper
52
What are the requirements for the financing statement (UCC-1)?
Financing statement is sufficient ONLY IF:
1. provides **name of the debtor**
2. provides **name of secured party** or a rep of that secured party
3. indicates the **collateral covered** by financing statement
53
What debtor name should be put in the financing statement?
Individual
- individuals name (usually drivers license)
corporation
- corporate name
partnership
- partnership name
| NO TRADE NAMES
54
When can a financing statement have minor errors & omissions?
when it is NOT seriously misleading
| filing under wrong debtor name IS seriously misleading
55
What happens when debtor's name is changed & seriously misleading for the financing statement (UCC-1)?
Financing statement will only be effective against the collateral acquired by debtor for 4 months after name change
- secured party has **4 months to refile using debtors correct name**
56
When does a debtor automatically authorize the financing statement?
IF the debtor:
1. authenticates the UCC-1; OR
2. authenticates a security agreement covering collateral of UCC-1
57
Where do you file UCC-1?
Florida Secured Transactions Registry
58
What law governs perfection of security interest?
State where debtor is located
| secured party MUST file UCC-1 in that state
59
What happens when a debtor moves from one state to another?
security interest will become **unperfected after 4 months**
- **UNLESS** the secured party **files UCC-1 in new jurisdiction** before 4 months is up
60
How long is a financing statement valid?
5 years
61
What does a secured party need to do once the 5 years of the UCC-1 is almost up?
Continuation statement may be filed for 5 more years
- can only be filed within 6 months before lapse (won't work if too early or too late)
62
Who has priority between perfected secured parties?
first party to either:
1. file; or
2. perfect
| NOT date of attachment
63
Who has priority between unperfected & perfected secured parties?
generally, perfected security intererst prevails
64
Who has priority between a PMSI and a secured party?
PMSI's enjoy SUPERMAJORITY
- **PMSI in goods other than livestock & inventory** have priority over conflicting security interests in the same good or proceed if perfected before or within 20 days after debtor receives possession of goods
- **PMSI in inventory or livestock** has priority over conflicting security interests IF perfected before debtor gets possession & authenticated notification to any secured party
65
If collateral is sold or leased, when does a transferee take free of the security interest?
when sale or lease **AUTHORIZED** by secured party, can be express or implied
| must be for inventory to ordinary consumers
66
Does a buyer take a good free of a security interest?
YES, if the buyer is a **BUYER IN THE ORDINARY COURSE OF BUSINESS**
| even if security interest is perfected & buyer knows of interest
67
Who is a buyer in the ordinary course?
One who buys goods:
1. in good faith
2. without knowledge that the sale violates the rights of another person in the goods, AND
3. in the ordinary course of business from a seller in the business of selling goods of land purchased
68
When does a buyer of consumer goods take goods free of security interest?
When the buyer buys:
1. without knowledge of security interest
2. for value
3. for buyers own personal, family, or household purposes, AND
4. before a financing statement covering goods is filed
| MUST be consumer good in seller & buyers hand
69
Who has priority between a secured party & a judicial lien creditor?
Judicial lien creditor prevails IF lien creditor becomes such before the security interest is perfected
| prior perfected security interest has priority
70
When does a PMSI have priority over a judicial lien creditor?
If PMSI holder **files UCC-1 within 20 days after** debtor receives collateral
71
What triggers the right of the secured party to proceed against the collateral?
Default
72
Can a secured party use "self-help" after debtor defaults?
Yes if it can ebe done without a **Breach of the Peace**
73
What constitutes a breach of the peace?
Any conduct by the secured party that has the potential to lead to violence
- physical presence of debtor + verbal objection before debtor over the repossession of goods
74
What happens when a secured party breaches the peace?
secured party:
1. loses authorization to repossess,
2. may be sued for conversion (and any other intentional tort applicable); AND
3. liable for actual damages
75
Can a secured party enter a debtors home after default?
No, most likely a breach of the peace
76
Who has priority between a seller financed PMSI & a financer financed PMSI?
Seller financed PMSI
77
Explain how a PMSI in different types of goods are perfected?
1 - **Consumer Goods**
- automatically perfected
2 - **Equipment**
- can be perfected any time within 20 days after debtor gets possession of collateral
3 - **Inventory & Livestock**
- must be perfected by time debtor gets possession of collateral & others with a previously filed security interest in collateral must be given notice
78
What can a secured party do to collateral it repossesses after default?
1. sell collateral for full or partial satisfaction
2. lease
3. license
4. dispose
79
What may a secured party do if debtor defaults on the security agreement?
1. use self-help to take possession of collateral
2. auction off collateral to recover amount owed
3. retain collateral in full/partial satisfaction of debt
4. levy on collateral after bringing a judicial action for amounts due
80
Does a secured party need to give debtor notice of sale of defaulted collateral?
| exceptions?
YES, **reasonable notice** that is **authenticated by secured party**:
EXCEPTIONS TO NOTICE:
1. collateral is perishable & threatens to decline rapidly in value
2. collateral is of a kind ordinarily sold in market
3. when debtor or surety waive notice in authenticated agreement
81
A sale must be what?
**COMMERCIALLY REASONABLE** in every aspect: method, manner, time, place, and terms (factors include):
1. sufficiency of ad for sale
2. if collateral had limited market
3. whether people in market contacted
4. whether collateral needed cleaning or repairing
5. if sale public, convenience of time & place
82
What are the requirements for notice of resale?
1 - MUST be sent within **reasonable time before sale** (at least **10 day notice** reasonable)
2 - MUST be specific content
- **public sale** = time & place of sale
- **private sale** = time after which sale will occur
83
Can secured party buy collateral at sale?
- **public sale** = YES!
- **private sale** = yes, ONLY IF collateral is of a type customarily sold and recognized
84
Where does the money from the foreclosure sale go?
**FIRST** - repay costs of repossession & sale
**SECOND** - pay off debt of creditors with lower priority than the foreclosing creditor
**THIRD** - any extra is surplus & goes to debtor
85
If debtor a consumer & the foreclosure sale resulted in a deficiency or surplus, what must the secured creditor do?
**Send debtor an explanation of calculation** of any debt still owed or money debtor will receive
86
If the collateral is consumer goods & secured creditor violates any rules on default, what is debtor entitled to do?
Minimum of 10% of cash price of the goods surplus, plus an amount equal to all interest charges to be paid over life of loan
87
What is the rebuttable presumption that attaches when secured party fails to follow code rules?
Sale proceeds = amount of debt
| secured party loses any deficiency
88
When may debtor redeem property?
Anytime BEFORE secured party has:
1. resold collateral
2. entered into K for disposition
3. obligation has been discharged by secured party's retention of collateral
| debtor MUST give ALL amount plus additional reasonable expenses
89
How do you perfect security interest in fixtures?
1. fixture filing w/ clerk of circuit court in county where land sits
2. UCC-1 must reasonably identify real estate; AND
3. UCC-1 must show name of owner (if debtor has no property interest)
90
When is a security interest in fixtures valid against someone with a conflicting interest in real property?
Generally NEVER, UNLESS:
1. security interest perfected by fixture filing; and
2. real property interest arose after either goods affixed, OR security interest perfected (whichever was later)
91
What are accessions?
Goods that are physically united with other goods in such manner that the identity of the original goods is NOT listed
| ex: tires on car
