MD Secured Transactions

Question 1

Secured interest

Answer 1

Where debtor uses property as collateral to secure repayment of funds to creditor. Art 9: for personal property or fixtures, including sales of acounts receivable, chattle paper, promissory notes, negotiable instruments, payment intangibles, and leases that are actually security interests. Includes proceeds and after sold or leased.

Question 2

Major types of collateral

Answer 2

consumer goods, inventory, farm products (other than standing timber), equipment, inventory, proceeds

Question 3

When attachment occurs:

Answer 3

(1) secured party gives value (2) debtor has rights in the collateral (3) debtor authenticates security agreement that describes the collateral (reasonable ID including UCC label, NOT super generic). OJO: in after acquired collateral fine if accts receivable or inventory, must be specified otherwise, CAN’T be for consumer goods.

Question 4

Purchase Money Security Interest: Definition

Answer 4

Security interest created as price of the collateral or in order to enable debtor to acquire rights in collateral IF so used

Question 5

Perfection: Definition

Answer 5

Security interested is perfected if (1) has attached and (2) applicable requirements met for: Filing, Possession, Control, or Automatic Perfection

Question 6

Perfection by filing

Answer 6

File a financing statement with (1) MD State Dept of Assessments and Taxation OR (2) IF fixture, office where you file mortgages for real property. Must be where debtor located: 1. where corp registered 2. place of business if unregistered and there’s only one 3. chief exec office if more than one place of business 4. principal residence if individual

Question 7

Perfection by possession

Answer 7

ONLY for tangible collateral. IF $$, this is the only way. If in the hands of a 3rd party, they must execute record saying they hold for the creditor.

Question 8

Perfection by control of investment property

Answer 8

when delivered (and indorsed) or, if closely held corp, if issuer agrees it will comply with the instructions of the secured property

Question 9

Perfection by control of a letter of credit rights

Answer 9

when issuer has consented to an assignment of the proceeds to the secured party

Question 10

Perfection by control of deposit accounts

Answer 10

(1) Home Bank Rule: if the secured party is the bank that holds the account (2) if the debtor, secured party, and bank agree that the bank will follow SP instructions without further consent from debtor (3) if SP becomes bank’s customer wrt the account

Question 11

Automatic perfection

Answer 11

PMSI in consumer goods, EXCEPT motor vehicles and fixtures

Question 12

Requirements for a financing statement

Answer 12

(1) name of debtor, SP, description of collateral (2) authorization by debtor (security agreement counts) (3) for fixtures: indicate that it’s a fixture, describe real property attached to it, give name of owner of property if not the debtor -> good for 5 yrs, must renew 6 months b4 expiration

Question 13

Filing statement: Effect of errors

Answer 13

Minor errors -> OK if requirements still substantially satisfied. If misleading -> does not perfect. If can’t find debtor’s name, misleading per se.

Question 14

Filing statement: Postfiling changes

Answer 14

(1) name change -> w/in 4 months (2) debtor moves to new state -> w/in 4 months (3) disposition of collateral for proceeds -> automatic for 20 days after attachment

Question 15

Security interest survives a sale EXCEPT:

Answer 15

(1) buyer in the ordinary course of business who takes in good faith w/o notice (2) garage sale exception: consumer to consumer transaction for consumer purpose who takes for value without notice before the filing of the financing statement

Question 16

Fixture v. Mortgage Priority

Answer 16

First in time EXCEPT fixture PMSI if perfected before goods become fixtures or w/in 20 days. OJO construction mortgage wins if recorded before the goods become fixtures

Question 17

Deficiency reduction by rebuttable presumption rule

Answer 17

If the sale of collateral after default was not commercially reasonable, creditor does not get a deficiency judgment

Question 18

Basic questions

Answer 18

 are they goods/fixtures?  What type?
 is there a valid security agreement?
 has the interest attached?
 is the interest perfected?
 who has priority?
 proper default proceedings?