Post Spring Break Flashcards
9-310 When Filing is Required to Perfect SI or Ag Lien
A FS must be filed to perfect al SI and Ag liens except
(b) to perfect the SI That is perfected under 9-308 9-309 when it attaches Subject to a statute or regulation Goods in possession of a baliee under 9-312
- Is a cert. security which is perfected w/o filing, control, or possession under 9-312
- Possession
Perfected by delivery of security cert. to the SP
- Dep accounts, electronic chattel paper, document,s investment property, LOC rights - perfected w/control
- Proceeds which is perfected under 9-315
FS Required if SP assigns a SI (9-310(c))
IF a SP assigns a perfected SI or ag lien, a filing under this art. is NOT required to continue the perfected status of the SI against creditors of and transferees from the orig. debtor (NOTE: Need to file a FS to protect from assignor).
9-103: PMSI
a) Purchase- Money Collateral means goods of software that secures a purchase-money obligation incurred w/respect to that collateral; and
(b) A SI in goods is a purchase-money SA:
•To the extent that goods are purchased money collateral w/ respect to that SI
•If the SI is in inventory that is or was purchase-money collateral, also to the extent that the SI secures a purchase-money obligation incurred w/respect to other inventory in which the SP holds or held a purchase-money SI; and
•Also to the extent that the SI secures a purchase money obligation incurred w/respect to software in which the SP holds or held a purchase-money SI
•Example: PMSI in consumer goods:
oValue of the appliance itself
oAgreement: Signed Installment K
oWhich created adequate evidence
oDebtor has rights in collateral by virtue of the purchase
oYou have PMSI when advancing the value to the debtor for the purpose of allowing the debtor to acquire the collateral
•Easiest most direct PSI
•Direct Exchange: Appliance/ Agreement creating a PMSI (Installment Sales K)
•Not limited to consumer goods, can be equipment purchased by a factory, etc.
9-314: Perfection by Control
(a) Perfection by Control: A SI in investment property, deposit accounts, letter of credit rights, electornic chattel paper, or electornic docs may be perfected by control of the collateral.
(b) Specified Collateral: Time of perfecting by control - Continuous perfection -
(c) Investment Property: Time of Perfection by Control: Continuation of Perfection - A SI in investment prop remains perfected from the time the SP obtains control and remains perfected by control until:
(1) The SP does not have control;
(2) One of the following
- The collateral is a cert. sec. the debtor has or acquires possession of the sec. cert.
(3) If the collateral is a S entitlement the debtor is or becomes the entitlement holder
9-15: Use of Disposition of Collateral
SP has control of electronic chattel paper if a system employed for evidencing the transfer of interests in the chattel paper reliably est. the secured party as the person to which the chattel paper was assigned
9-204: After- Acquired Property and Future Advances
Broadly Permits: A SA may provide that collateral secures, or that accts, chattel paper, payment intangibles or promissory notes are sold in connection w/future advances or other value, whether or not the advances or value are given pursuant to commitment. (Recall: The second transaction relates back to the first AS LONG as there is an after-acquired property clause).
DOES NOT attach to consumer goods other than an accession when given as additional security, unless the debtor acquires rights w/in 10 days after the SP gives value, or commercial tort claim
Bankruptcy: After acquired - after B is filed = VOID.
What does a future advance clause cover?
Direct loans and OTHER obligations.
A broad SA w/future advance clause can create a BOW claim against the debtor. The BOW is an obligation of the debtor to the SP.
Secondary Obligors and Assignments of SI
9-203(f): Proceeds and Supporting Obligations: The attachment of a SI in collateral gives the SP the rights to proceeds and is also attachment of a SI in a supporting obligation of collateral.
9-315: SP’s Rights on disposition of Collateral and in Proceeds
(1) Good SI in collateral (continues in collateral notwithstanding sale or exchange)/gets in proceeds and continues in collateral disposed of
(2) Also have good perfected SI in whatever the debtor receives in exchange for the item sold, exchanged, L, etc.
(d) Continuation of Perfection - A perfected SI in proceeds becomes unperfectd on the 21st day after the SI attaches to the proceeds unless:
- FS covers the original collateral
- Proceeds are collateral in which a SI may be perfected by filing the the office in which the FS has been filed; and
- Proceeds are not acquired w/cash proceeds
- Proceeds are Identifiable cash proceeds
- The SI in the proceeds is perfected other than sub. c when the SI attaches to the proceeds or w/in 20 days thereafter.
1-201(b)(9) - Buyer
Person that buys in good faith w/o knowledge that the sale violates the rights of another person … Only a buyer that takes possession of goods or has a right to recover in ART. 2 may recover .. Does NOT include a person that acquires goods in a bulk sale or as security for or in total or partial satisfaction of a money debt.
9-320: Buyer of Goods
a) Buyer in the ord. course of biz: A buyer in the ord. course of business other than a person buying FP takes free of a SI created by the buyer’s seller even if the SI is perfected and the buyer knows of its existence
•(b) : GARAGE SALE: Buyer in consumer goods: Except in (e) a buyer of goods from a person who used or bought the goods for primarily personal, family, or HH purposes takes free of the SI, even if perfected if the buyer buys:
oW/o knowledge of the SI
oFor value
oPrimarily for the buyers personal, family, HH purposes,
oBefore filing a FS covering goods
(e) Possessory SI not affected - sub (a) and (b) do not affect a SI in goods in possession of the SP under 9-313. (Buyer MUST take possession)
9-313: When Possession by Delivery to SP Perfects SI w/o Filing (Generally)
(a) Perfection by possession or Delivery - a SP may perfect a SI in tangible negotiable docs, goods, instruments, money, or tangible chattel paper by taking possession of the collateral. A SP may perfect I in cert. sec. by taking delivery.
9-313(c): Collateral in Possession of a Person Other than the Debtor
Collateral in possession of person other than debtor → Perfectly acceptable to have an agent re: physical possession – the person in possession needs to authenticate a record acknowledging that it holds possession of the collateral for the SP’s benefit.
The debtor cannot act as the agent.
2-501(2): Insurable Interests in Goods: Manner of ID of Goods
Seller retains an insurable interest in goods so long as title to or any SI in the goods remains in him and where the ID is by the seller alone he may default or insolvency or notification to the buyer.
TEST: If the goods have been IDed to the K?
2-716: Right to Replevin
The buyer has a right to replevin for goods IDed to the K if after reasonable effort his is unable to recover for such goods or the circumstances indicate that such efforts will be unavailing .. In the case of goods bought for personal or HH use, the buyer’s rights rest upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.
•Comment #3: A buyer who acquires a right to replevin under (3) will take free of SI created by the seller if it attaches to the goods after the goods have been IDed to the K. (see 2-501).
The buyer will take free, even if the buyer does not buy in ordinary course and even if the SI is perfected.
Farm Products and 9-320
Farm products are taken out of 9-320 & instead covered under the Food Securities Act (FSA).
Under the FSA, if someone is a buyer in the ord. course of business and buys farm products instead of items from the store -
A buyer of farm products must receive notice of the SI ONE YEAR prior or the buyer takes free of the SI.
(THINK: The notice provides the buyer where to pay etc. if they receive no notice, they don’t know who to pay or what to do)
FSA Authorized special State filing systems for farm products (Texas does not do this) - if there is not a filing system, send to ANY potential buyer
Burden is on the BUYER to go and check that the SP gets paid. Checks can be jointly payable or be made directly to the SP
9-317: Interests that Take Priority Over or Take Free of SI or Ag Lien:
(a) A SI or ag lien is subordinate to the rights of:
- Person entitled to priority under 9-322
- except (e) - person who becomes a lien creditor before perfection or conditions specified in 9-203 is met and FS is filed
(b) A buyer other than a SP, of tangible chattel paper, tangible docs, goods, instruments, or a cert. security takes free of SI or ag lien if the buyer gives value and receives delivery of collateral w/o knowledge of the SI or ag lien before it is perfected
THINK: Non-Ord. Course Buyer meets this requirement and busy in good faith, takes free of SI over unperfected
(e) SUPER PMSI - If a person files a FS w/respect to a PMSI before or within 20 days after the debtor receives delivery of the collateral, the SI takes priority over the rights of a buyer, ee, or LIEN CREDITOR which arises between the SI attaches and the time of filing
7-503 DOT to Goods Defeated in Certain Cases
A DOT confers no right in goods against a person that before issuance of the doc had a legal interest or a perfected SI in the goods and did not (…)
i. Example: Robber steals everything, puts it in storage and gets neg. WH receipt (one theory: It’s gone. Holder is entitled to ownership. 7-503: Says no. That person making the deposit had no right to do so.)
7-501: Form of Negotiation and Requirements of Negotiation
Basically HDC (Purchased in good faith, w/o notice of defense/claims) unless it is est. that the negotiation is not in the regular course of business or financing or involves receiving the doc in settlement or payment of a monetary obligation (antecedent debt) •Can still be a legit buyer just not an HDC (i.e. is still subject to claims/defenses)
Comment #1 P. 3: Duly Negotiate (Who is the transferor a person w/whom it is reasonable to deal as having full powers?) In re: to DOT the only holder whose possession or control appears, commercially to be in order is almost invariably a person in the trade (A tramp, or professor would not “duly negotiate a BOL.”. Otherwise it is not in the reg. course of business.
Here: The bank set up the transaction under LOC, has told the manufacturer “Send us the draft, we’ll send the BOL.” The bank did that. This would be duly negotiated. (It is in the regular course of the bank’s business.)
9-312 Perfection of SI in Chattel Paper, Deposit Accounts, Docuents, Goods Covered by Documents, LOC Rights, and Money, …
Filing FS is permitted in chattel paper, eng. docs, instruments, or investment property
Control is okay - A SI in dep account - only control & LOC, money = possession
TEMPORARY FILING: A SI in cert., neg. documents, or instrument is perfected w/o filing or taking possession or control for a 20 day period from the time it attaches to the extent that it arises form new value given under an authenticated SA.
9-331: Priority of Purchasers of Instruments, Docs, and Securities of Inst. Fin. Assets and Sec. Entitlements
(a) Rights under Art. 3, 7,8 - This art. does not limit the rights of an HDC or a neg. instrument, a holder to which a neg. document of title has been duly negotiated or a protected purchaser of security. These holders or purchasers take priority over an earlier SI even if perfected. To the extent provided in Art. 3, 7, 8.
9-322: Priorities Among Conflicting SI and Ag liens on Same Collateral
Conflicting SI and Ag Liens rank according to priority in time of filing or perfection. Priority dates from the earlier time of filing covering the collateral is the first made or the SI or Ag Lien is first perfected, if there is no period thereafter when there is neither filing nor perfection (← Continuous)
National v. Lien Creditor = Lien Creditor Wins
•9-317: A SI or Ag Lien is subordinate to the rights of 9-322 except a person that becomes a lien creditor before the earlier time of (A) a SI or Ag Lien is perfected; or 9-203(b)(3) is met and a FS is filed
State v. Lien Creditor = State
•9-317(e): PMSI – If a person files a FS w/respect to PMSI before or w/in 20 days after debtor receives delivery of the collateral, the SI takes priority over the rights of a buyer, lessee, or lien creditor which arise between the time the SI attaches and the time of filing
Remember: Categorize the people •Is it a SP? •Is it perfected? •Is the other part a SP? 9-322 oLien Creditor → 9-317 oBuyer → 9-321
9-324 Priority of PMSI
(a) A perfected PMSI in goods other than inventory or livestock has priority over a conflicting SI in the same goods and except as otherwise provided in 9-327(dep accounts) a perfected SI in its IDed proceeds also has priority, if the PMSI is perfected when the debtor receives the collateral or w/in 20 days after
(b) A perfected PMSI in inventory has priority over a conflicting SI in the same inventory, has priority over a conflicting SI in chattel paper or an instrument constituting proceeds of the inventory and in proceeds of the chattel paper … also has priority in IDed cash proceeds are received on or before the delivery of the inventory to a buyer if:
(1) The PMIS is perfected when the debtor receives possession of the inventory
(2) The PM SP sends an authenticated notification to the holder of the conflicting SI
(3) … (4) …
9-316: Effect of Change in the Law
Except as otherwise provided in (e), a SI in goods covered by a cert. of title which is perfected by any method under the law of another juris. when the goods become unperfected under the law of the other jurisdiction had the good not become so covered
(1) The time perfection would have ceased under the law of that juris.
(2) Expiration of 4 mo. after a change of the debtor’s location to another juris
(3) The expiration of 1 year after a trnsfr of collateral to a person that thereby becomes a debtor and is located in another juris
(COT see ex. 7)
