Perfection of Security Interest

Question 1

Methods of Perfection

Answer 1

1. Filing
2. Taking possesion of collateral
3. Control
4. Automatic perfection
5. Temporary perfection

Question 2

Time of Perfection

Answer 2

Attachment + One of five methods of perfection

Order does not matter

Question 3

automatic perfection

Answer 3

• Automatically perfected upon attachment
• Most common situation is PMSI in consumer goods

Question 4

perfection by possession (pledge)

Answer 4

• Occurs when secured party takes actual possession and continues so long as possession is retained
• Certain collateral cannot be pledged by possession (general intangibles, deposit accoutns, nonnegotiable docs, electronic chattel paper, certificate of title goods, accounts)
• Interest in money can ONLY be perfected by possession

Question 5

perfection by control

Answer 5

Security interests in nonconsumer deposit accounts can only be perfected by control (unless as proceeds of collateral)

Methods of Obtaining Control
1. If deposit account is maintained in bank, bank has automatic control
2. If not a bank in control, must either (1) put deposit account in SPs name or (2) form control agreement w/ debtor and bank

Other Kinds of
* Investment Property: has taken steps necessary to have investment property sold
* Electronic Chattel Paper: system putin place to shower transfer reliabily establishes secured party as assignee

Question 6

perfection for motor vehicles

Answer 6

• Can only be perfected by notation on certificate of title issued by a state
• Exception: dealers (can file financing statement)

Question 7

perfection by filing

Answer 7

• Must file a financing statement
• Applies to all kinds fo ollateral except deposit accounts and money
• Indexed under debtor’s name
• Authenticated security agreement itself may be filed if it contains all necessary elements

Question 8

Requirements for Financing Statement

Answer 8

1. Debtor’s name and mailing address
2. Secured party’s name and mailing address
3. Description of collateral

Question 9

Issues re: Debtor’s Name

Answer 9

What is a name?
* Individual: name on unexpired DL or name in community
* Registered organization: public organic record (ex: articles)
* Trade name is insufficient

If an error in name…
* Seriously misleading errors = invalid financing statement
* Not seriously misleading if would be discovered in filing office search under debtor’s correct name, using standard search logic
* Error by filing office does not invalidate statrement

Debtor name change
* Effective only against collateral acquired by debtor before name became insufficent AND within 4 months after

Question 10

Issues re: Description of Collateral

Answer 10

• Must reasonably identify collateral by broad catagory or specific characteristic
• Unlike security agreement, may contain supergeneric description of collateral
• Need not mention after-acquired property so long as description is broad enough

Question 11

Issues re: Real Property-Related Financing Statement

Answer 11

In addition to general requirements, also requires
* Description of related real proeprty
* Name of record owner
* Indication that it is to be filed in real property records

Question 12

Authorization of Financing Statement by Debtor

Answer 12

• By signed writing either before or after filing (financing statement itself does not have to be signed by D)
• Automatically if debotr authenticates financing statement or security agreement covering same collateral as financing statement (ipso factor)

Question 13

Issue re: Address

Answer 13

• Requires both D and SP’s addresses
• If does not but office still accepts, statement is valid

Question 14

Place of Filing Statement

Answer 14

General rule: “centrally” with SoS
Exception: if real estate related, must be filed locally (county)

Question 15

Which state’s law governs perfection?

Answer 15

General rule: state where debotr is located
* Indiviudal: personal residence
* Registered org: where organized
* Unregistered org: place of business (if one), or chief executive office if more than one PoB

Registered if must file something with state to exist

Question 16

Exceptions to Which State Law Applies

Answer 16

Possessory Interest in Fixtures or Timber
* State in which collateral is located

Goods Covered by Certificate of Title
* State issuing the most recent cert. of title

Deposit Accounts
* State in which bank has chief exec. office

Investment Property
* If certificated security, state where certificated security is located
* If uncertificated, state where issuer was organized
* If securities account, state where intermediary’s chief exec. office is located (unless uatomatically perfected)

Ag. Liens
* State in whic. farm product covered by lien is located

Question 17

Movement of D From One State to Another

Answer 17

If D’s Location Applies
* S/I will become unperfected 4 months after debtor’s move unless updated in new jdx

If D’s Location does not apply
* Transfer to new owner located in diff state – unperfected after one year unless updated in new jdx

Question 18

continuation statements

Answer 18

• Financing statement valid for 5 years
• Continuation statement may be filed w/in 6 months of lapse of statement
• Authorization of debtor not required

Question 19

termination statement

Answer 19

If no outstanding obligation or commitment OR debotr did not authorize filing, S/P must on demand within 20 days file termination statement or provide one to D

If consumer goods, S/P must file continuations statement within 1 month after no obligation or commitment or if D demands, w/in 20 days

Question 20

Perfection of Proceeds

Answer 20

If perfected security interest in goods, auto perfection of proceeds for 20 days after reciept

Continued perfection
* Proceeds are identifiable
* Perfected by filing financing statement, security int in type of collateral constituting proceeds would be filed in same place AND proceeds were not purchased with cash proceeds of colalteral OR
* Secuirty int in proceeds is perfected w/in 20 day period