general Flashcards
art 9 statement
“Art 9 of the UCC govorns any transaction regardless of its form that creates a security interest, including SIs in both tangible and intangible property”
types of tangible collateral
o Consumer Goods – PFH use
o Equipment – goods used by a BUSINESS but NOT SOLD
o Inventory – goods HELD FOR SALE by BUSINESS
o Farm Products – goods UNIQUE to the farming operations
o Fixtures – something attached to a building in a certain way
NOTE: Ownership attaches to property SO
ownership interest in the property BEATS a conflicting security interest in the fixture itself (with 2 exceptions)
intangible collateral
o Accounts Receivable – rights to collect payment
o Chattel Paper – security interest papers + ownership interest papers
o Deposit Accounts
o Investment Property – stocks & bonds
attachment
–can happen in any order–
o (1) secured party must give VALUE
o (2) debtor must actually have RIGHTS in collateral
o (3) debtor just agrees to give secured party a SECURITY INTEREST (A or P)
(P) Possession of tangible, Control of intangible
OR
(A) Usually via security agreement: need BOTH (1) and (2)
- (1) Description of collateral (more specific than “all assets”)
o “reasonably identify what is described” such that collateral is “objectively and reasonably determinable”
o NOTE: always reasonable if you use a category name (ex. all inventory, equipment, etc) - (2) Authentication – regular/electronic signature
how do you create an SI in current property and after acquired property post attachment?
add an “after acquired property” clause to the security agreement
what happens if debtor sells/transforms the collateral between attachment and perfection
You get auto perfection for 20 days in whatever he transformed (assuming its identifiable) it into BUT it becomes unperfected on day 21 unless you file a financing statement —> these are called PROCEEDS
A perfected SI will attach to ANY identifiable proceeds from the disposition of collateral BUT that interest becomes unperfected on day 21 UNLESS:
(1) the proceeds are identifiable cash proceeds
OR
(2) the original SI was perfected at the time it attached to the proceeds (the disposition event) or within 20 days thereafter
OR
(3) Same office rule:
A Perfected SI in proceeds may continue indefinitely if: (all 3)
(1) the filed FS covers the original collateral;
(2) proceeds are collateral in which a SI may be perfected by filing in the same office as FS;
(3) proceeds not acquired w/ cash
how to perfect
file financing statement
Secured party takes possession or control of collateral
auto perfect: usually either PMSI in consumer goods OR assignment of accounts that doesn’t transfer a significant part of the assignor’s outstanding accounts
how to file a financing statement
File at secretary of state office/other appropriate office
Include all 3:
- Name of debtor —> MOST IMPORTANT
o NOTE: if error in debtors name is seriously misleading —> no perfection
o Safe harbor: if “standard search logic” still leads you to the right person, its harmless error and the FS is saved - Name of secured party
- Indication of collateral —> SUPER GENERIC DESCRIPTION ALLOWED (ex. “all assets”)
o “the purpose of an FS is to begin the inquiry of putting third person on notice, not end it. Therefore, super-generic descriptions of collateral are sufficient to allow a third party to understand they must dig deeper”
continuation
BICOB
1. Buyer buys goods in good faith
2. w/o knowledge the sale violates SI of someone else (but you can know a SI exists)
3. In the ordinary course of business from a merchant (regular seller of those goods)
Shelter principle: if X is a BICOB (or acquires property free of SI) —> any subsequent transfers are also free of the SI
Consumer buyers buying consumer goods (p/f/h) from other consumers take free of SI if buyer buys:
(1) for value; (2) w/o knowledge of SI; (3) primarily for buyers PFH; (4) before FS is filed
priority rules
BICOB
perf v. perf
perf v. unperf
lien creditors v. Perf SI
lien creditors vs. future advances
Unperf v. Unperf
Unsecured Security Interest
BICOB –> apex predator
perf v. perf –> first to FILE FS (or perfect if no FS’s)
perf v. unperf –> perf every time
lien creditors v. Perf SI –> party has to become lien creditor before secured party perfects or files, otherwise Perf SI wins
lc vs future advances –> lc has priority over future advances secured before lien or future advances w/I 45 days of the lien being filed
Unperf v. Unperf –> first to attach
Unsecured Security Interest –> the incel of the jungle
PMSI priority rules
general rule
Perfected PMSI v. The World
PMSI in Consumer Goods v. The World
PMSI in non consumer goods vs the world
PMSI in Inventory v. Perfected Security
General rule:
Perf PMSI > Perfected Interest > Unperfected PMSI
Perfected PMSI v. The World —>
PMSI boddies any competing interest if its perfected at least w/i 20 days of debtor receiving possession
PMSI in Consumer Goods v. The World —> PMSI-CG is auto-perfected, no filing required
PMSI in non consumer goods vs the world —> auto perfected BUT ONLYfor the first 20 days (but you still have to file before Day 21 or you lose superpriority)
PMSI in Inventory v. Perfected Security —> PMSI trumps conflicting perfected security interest in the SAME inventory if: (1) the PMSI is perfected before debtor receives possession AND (2) authenticated notice is provided to prior creditors by the PMSI secured party
repossession by secured party
(1) they can repossess the property BUT cant breach the peace
BOP – some states say breaking into anything to get it back violates, others say ANY opposition, however slight, is a BOP
(2) They can sell it in a commercially reasonable manner
debtors rights (really just 3 options) after their broke ass defaults
o (1) give up the collateral to secured party
o (2) keep the collateral by fully paying the debt (redemption)
o (3) if Consumer Goods AND they’ve paid 60% of the loan they can give the goods back to secured party to sell in a reasonable manner and hope it covers the outstanding loan balance
debtors protections in foreclosure sale
(1) sale must be commercially reasonable
(2) debtor must receive written notice of sale to know when chance to redeem collateral is going to pass
* Doesn’t apply if collateral threats to decline rapidly
