FL Secured Transactions

Question 1

What is the rule regarding construction mortgages and subsequent security interests in fixtures?

Answer 1

A construction mortgage has PRIORITY over any subsequent security interest in fixtures–including PMSIs in fixtures–if it is recorded BEFORE the goods become fixtures, and it covers only those goods that become fixtures before completion of the construction.

Question 2

Once there has been a default, the secured party can repossess the collateral in what two ways?

Answer 2

(1) By use of judicial process (e.g., replevin action); or
(2) Self-help repossession

Question 3

What are “Accounts”?

Answer 3

Accounts include the
- right to payment for property sold, leased, licensed, or for services rendered
- Also included are rights to payment under insurance policies, amounts owing on credit cards, as well as a company’s Accounts Receivable

Question 4

Perfected Security Interest vs. Judicial Lien holder

Who has priority?

Answer 4

A judicial lien creditor takes the collateral subject to an existing perfected security interest but generally has priority over an unperfected security interest.

Question 5

“Goods” encompasses anything that is moveable at the time that a security interest attaches

Also included in “goods” that are technically not moveable.

Give 5 examples of these non-moveable goods.

Answer 5

(1) Fixtures
(2) Standing Timber
(3) Unborn animals
(4) Growing or Unharvested Crops (including crops grown on trees, vines, bushes)
(5) Manufactured Homes

Question 6

Rule regarding PMSI in goods (other than inventory)

Answer 6

This PMSI will prevail over all other security interests in the same collateral, even if those other security interests were previously perfected (e.g., an existing after-acquired equipment clause by a lender), so long as the security interest is perfected BEFORE or WITHIN 20 days AFTER the debtor receives possession of the collateral.

Question 7

Under what circumstances does the same office rule extend temporary perfection?

Answer 7

Under the same office rule, temporary perfection in PROCEEDS may continue indefinitely if:

(1) A filed financing statement covers the ORIGINAL collateral;

(2) The PROCEEDS are COLLATERAL in which a security interest may be perfected by FILING in the same office as the original financing statement; and

(3) The PROCEEDS are NOT ACQUIRED w/ CASH PROCEEDS

Question 8

What is the priority rule for a lender with a PMSI versus a seller with a PMSI?

Answer 8

The seller PMSI beats the lender PMSI.

(In other words, the seller of collateral has priority over the lender whose loan enabled the purchase of the collateral.)

Question 9

Once a default has occurred, what are the secured party’s options?

Answer 9

The secured party may:

(1) Seek possession of tangible collateral (repossess) and either SELL IT or RETAIN it in satisfaction of the obligation owed;

(2) Initiate a judicial action to obtain a judgment against the debtor or obligor; or

(3) Pursue other courses of action to which the debtor and secured party have AGREED.

Question 10

True or False:

A PMSI in goods other than inventory or livestock will prevail over all other security interests in the collateral if the secured party perfects within 20 days of the debtor receiving possession of the collateral.

Answer 10

True

Question 11

True or False:

A PMSI in inventory will take priority over all other security interests if the secured party perfects within 20 days of delivery to the debtor and the secured party sends an authenticated notification to other secured parties.

Answer 11

False; this is the rule for goods.

For inventory, the secured party must perfect BEFORE the delivery of the inventory

Question 12

If there are two or more competing PMSIs, what is the general rule for priority?

Answer 12

the first to file or perfect rule generally governs priority

Question 13

A PMSI in consumer goods takes priority over

Answer 13

all other security interests,
no matter when they are perfected

Question 14

Is a financing statement required to mention proceeds or after-acquired property?

Answer 14

No. Only the security agreement needs to mention after-acquired property, (unless it is Inventory or Accounts which the court implies covers after-acquired property)

Question 15

The “filed but unattached” security interest exception applies with regard to a contest between __________.

Answer 15

a judicial lien creditor vs. unperfected security interest

Question 16

Which of the following statements regarding an authenticated security agreement is FALSE?

The debtor must authenticate the agreement.

The agreement must contain a description of the collateral.

The agreement must be in writing.

The agreement must be in a record

Answer 16

The agreement DOES NOT need to be in writing

Question 17

What is the correct order for application of cash proceeds of a disposition?

Answer 17

“Reasonable Foreclosuredebts Subordinate Surplus”

1. Reasonable expenses for collection and enforcement;
2. Foreclosing party’s debt;
3. Subordinate security interests;
4. Surplus to the debtor.

Question 18

In order to avoid the “garage sale” exception, the holder of an automatically perfected security interest can take which of the following actions?

Answer 18

Properly file a financing statement covering the goods BEFORE THEY’RE SOLD

Question 19

Which of the following statements regarding the notice of a disposition is FALSE?

Notice of disposition is required to be sent to the debtor, any secondary obligor, any other secured party, and any other party from whom the secured party has received notice of a claim or interest in the collateral.

The notification must be commercially reasonable as to its content, the manner in which it is sent, and its timeliness.

If notice is sent within 15 days of the disposition sale in a commercial transaction, it is presumed to be commercially reasonable.

The notice must include a statement that the debtor is entitled to an accounting for the unpaid indebtedness.

Answer 19

If notice is sent within 15 days of the disposition sale in a commercial transaction, it is presumed to be commercially reasonable.

Question 20

Which of the following statements regarding acceptance of the collateral in full or partial satisfaction of an obligation is FALSE?

In a consumer transaction, a secured party can accept the collateral only in full satisfaction of the obligation.

A secured party may accept collateral in partial satisfaction of an obligation when the debtor does not object to the secured party’s proposal to accept the collateral within 20 days.

In order for a secured party to accept collateral in partial satisfaction of an obligation, the debtor must consent, after default, to the acceptance in an authenticated record.

In a consumer transaction, a secured party cannot accept the collateral in full satisfaction of the obligation once the consumer has paid back at least 60 percent of the debt or the value of the good unless the debtor consents after default.

Answer 20

A secured party may accept collateral in partial satisfaction of an obligation when the debtor does not object to the secured party’s proposal to accept the collateral within 20 days.

Question 21

After collateral is sold or otherwise disposed of, the secured party has an automatically perfected security interest in the proceeds for __________ days.

Answer 21

20

Question 22

Under the UCC 9-204, a security agreement may create or provide for a security interest in after-acquired collateral unless the after-acquired property is a

Answer 22

1) consumer good
2) a commercial tort claim

Question 23

Goods are classified at the time that

Answer 23

the security interest ATTACHES

(E.g. taking office equipment home to use personally won’t change the classification from Equipment to Consumer Good)

Question 24

Equipment =

Answer 24

goods that are not considered Farm Products; Inventory; or Consumer Goods

Question 25

A security interest attaches when

Answer 25

1) Debtor has RIGHTS in the collateral;
2) Secured party gives VALUE;
3) Debtor authenticates a security agreement

(E.g. when customer BUYS goods on credit for their office –> security interest attaches
NOT when they RECEIVE delivery/possession of the goods)

Question 26

A PMSI in goods other than inventory or livestock prevails over all other security interests in the collateral so long as the PMSI is perfected before

Answer 26

1) the debtor receives POSSESSION of the collateral
OR
2) within 20 days thereafter

*In such circumstances, the PMSI’s priority exists even if the other security interests were perfected prior to the PMSI becoming perfected