Perfection of the security interest Flashcards
Perfection deals primarily with rights as between…
secured party and third parties (subsequent purchasers, unsecured creditors, priority creditors)
Perfection is NOT necessary to create a valid, enforceable security interest as between…
the debtor and the secured party
Methods of perfection (5)
1) automatic
2) possession of collateral by secured party
3) perfection by “control”
4) notation of lien on certificate of title
5) filing a financing statement
Methods of perfection: automatic (upon attachment)
Purchase money security interest in CONSUMER GOODS
Methods of perfection: possession of collateral by secured party (or bailee)
when impossible?
usually GOODS
security interest perfected from moment of possession w/o relation back to time of attachment
perfection continues only so long as possession is retained
can have ORAL security agreement (can be perfected secured creditor w/o writing)
impossible w/ items can’t take possession of (gen intangibles, accounts, depot accounts)
Methods of perfection: perfection by “control”: what collateral CAN be perfected this way and what collateral MUST be?
CAN:
investment property
electronic chattel paper
MUST:
non-consumer deposit accounts
Methods of perfection: perfection by “control”: when does secured party have control of item of investment property?
when secured party has taken whatever steps necessary to be able to have the investment property SOLD W/O FURTHER ACTION FROM THE OWNER
Methods of perfection: perfection by “control”: when does secured party have control of non-consumer depot accounts? (2 diff ways)
1) bank in which nonconsumer deposit account is maintained AUTOMATICALLY has control over the deposit account
2) if not such a bank, can OBTAIN control by 1) putting deposit account in secured party’s name 2) agreement in authenticated record w/ debtor and bank in which deposit acct maintained that bank will follow secured party’s orders w/o further consent by debtor
Methods of perfection: perfection by “control”: when does secured party have control over electronic chattel paper?
when a system showing transfer of interests in chattel paper RELIABLY ESTABLISHES the secured party as the assignee (ex of system that meets standard: one in which secured party has an AUTHORITATIVE COPY of the records constituting paper, copy IDs sec party as assignee of record, and any other copy of or amendments to record are marked as such)
Methods of perfection: notation of lien on certificate of title
exception
ONLY WAY to perfect security interest in automobile
exception: if debtor (car dealer or rental care co) holding automobile as inventory, secured party must perfect by filing a FINANCING STATEMENT against inventory (no need here to note lien on certificate of title)
Method of perfection: filing a financing statement: contents of statement (6 things)
1) DEBTOR’S NAME and mailing address
2) DESCRIPTION OF COLLATERAL covered by the financing statement- reasonably identifies collateral, specifically or by type; “all assets” or “all personal property” OK here but not for security agreement
3) SECURED PARTY’S NAME and address (since searches not conducted under this name, error won’t be seriously misleading)
4) REAL PROPERTY (timber, fixtures, minerals to be extracted), DESCRIBE REALTY (REASONABLY IDENTIFY real estate) including name of record owner AND indicate that it is to be filed in the real property records
5) NO SIGNATURE required but debtor must AUTHORIZE filing- via signed writing, automatically authorizes if authenticates a security agreement covering same collateral for attachment
6) authenticated security agreement ITSELF may be filed if has all elements discussed above
Financing statement contents: name
- statements indexed by debtor’s name
- use name on unexpired driver’s license
- if no license, name by which known in community (just not trade name)
- name only INVALID if SERIOUSLY MISLEADING (if search under debtor’s correct name, using filing office’s standard search logic, would retrieve the erroneous financing statement?)
- debtor’s NAME CHANGE effective (even if seriously misleading b/c can’t find financing statement w/ former name using officer’s search logic) to perfect sec int in collateral acquired by debtor before or within 4 mo after change
Where to file financing statement generally?
Secretary of state
Where to file financing statement for Real-estate-related filings (collateral is timber or fixtures)
real estate records of the county where real property located
Where to file financing statement if it’s a multiple state transaction?
In state where debtor LOCATED
if debtor is individual- principle residence
if a registered org (corp, limited partnership, limited liability co, limited liability partnership- where registered org is organized (incorporated)
if unregistered org (general partnership)-
place of business (if more than one, at chief executive office)
