Perfection Flashcards
Perfection
Once a security interest attaches, a secured party must perfect its interest.
Requirements for Perfection Generally
A creditor can perfect its interest in goods by 1) filing an authorized financing statement with the proper public office, or 2) taking possession of the collateral.
PMSI in Consumer Goods Perfection
A PMSI in consumer goods is automatically perfected upon attachment.
Intangibles
Security interests in intangibles cannot be perfected by possession.
Perfection by Control
Security interests in investment property, nonconsumer deposit accounts and electronic paper chattel can be perfected by control.
Nonconsumer Deposit Accounts
The bank in which a nonconsumer deposit account is maintained automatically has control.
If a secured party in a deposit account is not the bank where it is maintained, it may obtain control by 1) putting the deposit account in its name, or 2) entering into a control agreement with the debtor and the bank.
Financing Statements
A secured party may obtain perfection by filing a financing statement, which contains the parties’ names and addresses and a description of the collateral (cannot be used for money and deposit accounts). The filing statement must be filed where the debtor is located – their principal residence if they are an individual, or if it is a registered organization, where it is organized, or if it is an unregistered organization, where its place of business is or at its chief executive office.
Financing Statement Errors
A minor error in the debtor’s name will not invalidate a financing statement, but seriously misleading errors will. An error is seriously misleading if it would not be discovered through a filing office search under the debtor’s correct name.
Financing Statement Debtor Name Change
If the debtor changes their name after the financing statement is filed, it is effectively only against collateral acquired by the debtor before the name change and within 4 months after.
Real Property Financing Statements
: must also contain a description of the property, the name of the record owner if not the debtor, and an indication that it is to be filed with the real property records.
Financing Statement Debtor Relocation
If the debtor relocates, the financing statement is perfected until 4 months after the move unless the secured party files a new financing statement in the new state. // if the collateral moves, then one year.
Perfection in fixtures
To perfect a security interest in a fixture, a fixture filing must be made in the office where the mortgage on the real estate is filed. The secured party will have priority over any other real estate interest that is subsequently recorded.
Prior real estate interest and PMSI fixtures
If there is a prior real estate interest, a PMSI in a fixture will take priority if it is perfected by a fixture filing before the goods become fixtures or within 20 days thereafter. (construction mortgage will take priority over PMSI in fixtures).
Accession
An accession is a good that is physically united with another good in such a manner that the identity of the original goods are not lost.
If an accession becomes part of a whole that is subject to a security interest perfected in compliance with a certificate-of-title statute, the security interest in the whole has priority over the security interest in the accession.
