Perfection of Security Interest Flashcards
Methods of Perfection
- Filing
- Taking possesion of collateral
- Control
- Automatic perfection
- Temporary perfection
Time of Perfection
Attachment + One of five methods of perfection
Order does not matter
automatic perfection
- Automatically perfected upon attachment
- Most common situation is PMSI in consumer goods
perfection by possession (pledge)
- 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
perfection by control
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
perfection for motor vehicles
- Can only be perfected by notation on certificate of title issued by a state
- Exception: dealers (can file financing statement)
perfection by filing
- 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
Requirements for Financing Statement
- Debtor’s name and mailing address
- Secured party’s name and mailing address
- Description of collateral
Issues re: Debtor’s Name
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
Issues re: Description of Collateral
- 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
Issues re: Real Property-Related Financing Statement
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
Authorization of Financing Statement by Debtor
- 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)
Issue re: Address
- Requires both D and SP’s addresses
- If does not but office still accepts, statement is valid
Place of Filing Statement
General rule: “centrally” with SoS
Exception: if real estate related, must be filed locally (county)
Which state’s law governs perfection?
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
Exceptions to Which State Law Applies
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
Movement of D From One State to Another
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
continuation statements
- Financing statement valid for 5 years
- Continuation statement may be filed w/in 6 months of lapse of statement
- Authorization of debtor not required
termination statement
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
Perfection of Proceeds
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
