Perfection of SI

Question 1

What makes a SI perfected?
What does perfection achieve?

Answer 1

The SI is perfected upon attachment of that interest and compliance with one of the methods of perfection;

perfection creates superior rights in the collateral for SP over 3rd party rights in the collatarol

Question 2

What are 4 methods of perfection?

Answer 2

Filing
Possession
Control
Automatic Perfection

Question 3

What does the filing of financing stament achieve?

Answer 3

It gives interested parties notice of the existence of the SI.

Question 4

For what types of SIs is “filing” a method of perfection?

Answer 4

Anything except deposit account, money, or letter of credit

Question 5

What terms must a financing statement include?

Answer 5

1. The debtor’s name
2. The secured party’s name, and
3. A description of collateral

This is a notice filing

Question 6

What needs to be done w/ FS if a debtor has a name change?

Answer 6

SP has four months to amend the FS; if not done, collateral acquired by the debtor after the 4 months will not be covered by the FS

Question 7

How must collateral be described on a FS?

Answer 7

Unlike the SA, the FS can have super generic description as long as the description sufficiently indicates the collateral.

Question 8

What is required for a FS to cover after-acquired property or future advances?

Answer 8

Nothing special! (unlike the SA)

Question 9

What happens if there is an error in the description of the collateral in the FS?

Answer 9

SP must prepare a termination statement with respect to the erroneous collateral

Question 10

How does debtor “authorize” a FS?

Answer 10

Debtor authentication IS req’d, but that doesn’t mean they have to sign it.
Ipso Facto Authorization: the debtor’s authentication of the SA serves as authorization to file the FS.

Debtor’s consent to the filing is presumed when SP seeks to perfect an SI in identifiable proceeds of collateral by filing.

Question 11

Where do you file a FS for collateral related to real propety?
All other collateral?

Answer 11

Real Property related: the office for recording a mortgage on the property; local filing

Everything Else: the Secretary of State of the state of the debtor’s location

Question 12

What is the effective date of filing?

Answer 12

It is effective upon delivery to the filing office and tender of the filing fee.

Question 13

What happens when there are errors relating to the filing of the FS?

Answer 13

Justified refusal: not filed
Unjustified refusal: treated as being filed; the FS is effective EXCEPT to a purchaser of the collateral who gives value in reasonable reliance upon the absence of the record from the file
Filing office error in indexing: doesn’t effect filing, risk of this type of error ress on those who search files, NOT those file the statement

Question 14

How long is a FS effective for?
How do you terminate?
How do you exend?

Answer 14

• Effective for 5 years
• File termination stmt
• no auto extension, file a continuation stmt - effective for another 5 years, can’t file that earlier than 6 months prior to expiration

Question 15

What if you need to amend a FS?
What affect does amending have?

Answer 15

File to add or delete collateral covered by FS;
The addition or deletion is effective from date of amended filing
It does NOT extend the effective period of the original filing.

Question 16

What can you perfect by Possession?

Answer 16

• Goods
• Instruments
• Negotiable Documents
• Money
• Tangible Chattel Paper
• Certificated security

Perfection exists ONLY during the period of possession!

Question 17

What can you ONLY perfect by Possession?

Answer 17

Money!

Question 18

What can you perfect by control?

Answer 18

• Investment property
• Deposit accounts
• Letter-of-credit rights
• Electronic chattel paper
• Electronic docs

Question 19

What 2 things can ONLY be perfected by control?

Answer 19

• Deposit accounts
• Letter-of-credit rights

Question 20

How do you perfect a PMSI in consumer goods?

Answer 20

It perfects automatically upon attachment; and is attached indefinitely; a SP doesn’t need to file a FS (but may want to to protect against subsequent purchasers)

Question 21

If new value is given under a SA, what happens to an SI in certificated securities, negotiable docs, or instruments?

Answer 21

The new value is automatically perfected for 20 days from attachment (then need to file updated FS or perfection lapses!)

Question 22

What happens when the collateral that is perfected by posession is delivered to the debtor for the purpose of selling it?

Answer 22

The SI in the collateral remains
temporararily perfected for 20 days

Question 23

What happens when:
1. Debtor moves to another state?
2. Collateral moves to a debtor in a new state?

Answer 23

1. Four month grace period for a perfected SI
2. One-year grace period for a perfected SI

Question 24

When does temporary perfection of proceeds apply?

Answer 24

if SI in original collateral is perfected, SI in proceeds is perfected for 20 days from attachment.

Question 25

Indefinite automatic perfection in proceeds pursuant to FS?

Answer 25

**If original FS is broad enough to cover proceeds or SP amends FS to cover proceeds w/in 20 days, then the SI in proceeds continues to be perfected.

Question 26

What is the “same office” rule regarding continued perfection in proceeds?

Answer 26

If a filed FS covers the original collateral and the proceeds are collateral in which an SI would be perfected by filing in the same office, the a perfected SI may continue indefinitely.

Doesn’t apply to proceeds acquired with cash proceeds.

It does NOT matter if the proceeds are a different TYPE of collateral.

Question 27

Perfection of SI in vehicles?

Answer 27

A non-Art 9 statute controls; filing will NOT be sufficient if a statute requires a notation of the SI on the certificate of title.