Sec Flashcards
SECURED TRANS
TRANS INTENDED TO CREATE SI IN PERSONAL PROP OR FIXTURES
CREDIT SALE
BUYER DOESNT PAY FULL PURCHASE PRICE AT TIME OF SALE
DEBTOR
WHO OWES THE $
CREDITOR
PERSON WHO $ IS OWED TO
SECURED CREDITOR
CREDITOR W SPECIAL COLLECTION RIGHTS (SI)
SECURITY AGREEMENT
K B/W D & C MUST HAVE LANGUAGE CREATING SI
SI
INT IN PERSON PROP OR FIXTURES SECURING PAYMENT OR PERFORMANCE
COLLATERAL
PROPERTY SUBJ TO SI
PURCHASE MONEY SI.
CREATING: SELLER FINANCED PMSI
SEC PARTY SELLS COLLATERAL ON CREDIT
RETAINS SC IN COLLATERAL
PMSI
CREATING: FINANCER FINANCED PMSI
LOAN TO PURCHASE COLLATERAL
LOAN USED TO ACQUIRE THT COLLATERAL
CREDITOR TAKES SECURITY INT IN THT COLLATERAL
AFTER ACQUIRED PROPERTY CLAUSE
GRANT OF SI IN PROPERTY OBTAINED IN FUTURE
FUTURE ADVANCE CLAUSE
GRANT OF SA SECURING FUTURE LOANS W SAME COLLATERAL
ATTACHMENT
STEPS NECESSARY TO CREATE SI EFFECTIVE AGAINST DEBTOR
PERFECTION
STEPS NECESS TO CREATE SI EFFECTIVE AGAINST THE WORLD
GOODS
TANGIBLE MOVABLE PERSONAL PROPERTY
GOODS EITHER 1-4
1) CONSUMER GOODS
2) EQUIPMENY
3) FARM PRODUCTS OR
4) INVENTORY
CLASSIFY BASED ON HOW COLLATERAL IS USED
CONSUMER GOODS
USED OR BOUGHT FOR USE PRIMARILY FOR PERSONAL OR HOUSEHOLD PURPOSE
EQUIPMENT
GOOD USED OR BOUGHT FOR USE IN BUSINESS
CATCHALL
FARM PRODUCTS
CROPS OR LIVESTOCK OR SUPPLIES USED OR PRODUCED
IN FARMING OPERATIONS OR PRODUCTS OF CROPS OR LIVESTOCK
INVENTORY
GOODS HELD BY A PERSON WHO HOLDS THEM FOR SALE OR LEASE
SEMI INTANGIBLE AND INTANGIBLE PROPERTY
INSTRUMENTS (CHKS PN)
documents (bills of lading, warehouse receipts)
chattel paper (monetary obligation, SI in specific goods)
record (writing)
investment property (stocks bonds)
accts (right to payment)
non-consumer deposit accts
comm tort claim
general intangibles (intellectual property goodwill)
ATTACHMENT REQS
1) SECURITY AGREEMENT
2) VALUE GIVEN
3) DEBTORS RIGHTS IN COLLATERAL
SECURITY AGREEMENT
CAN HAVE ORAL SA SO LONG AS THE COLLATERAL IS IN THE POSSESSION OF THE SECURED PARTY
REQS OF WRITTEN SA
1) RECORD SHOWING INTENT TO CREATE SECURITY INTEREST
2) AUTHENTICATED BY DEBTOR (USUALLY SIGNED)
3) DESCRIBE COLLATERAL (REASONABLY IDENTIFY)
VALUE
ANYTHING THT WOULD WORK IN K LAW + PAST CONSIDERATION WOULD WORK TOO
AFTER ACQUIRED PROPERTY
SI ONLY REACHES COLLATERAL D HAD RIGHTS IN AT TIME OF SIGNING SA
AFTER ACQUIRED PROPERTY EXCEPTION
COLLATERAL IS OF A TYPE RAPIDLY DEPLETED AND REPLENISHED (INVENTORY, ACCOUNTS)
PROCEEDS
ANYTHING RECEIVED FROM SALE EXCHANGE COLLECTION OR OTHER DISPOSITION OF COLLATERAL OR PROCEEDS
TO DETERMINE WHICH PART OF A COMINGLED MASS OF CASH IS IDENTIFIABLE (SP HAS A SI IN IT)- LOWEST INTERMEDIATE BALANCE TEST
LOOK AT BALANCE OF COMINGLED BANK ACCOUNT STARTING AT THE TIME THE PROCEEDS ARE DEPOSITED AND ENDING AT THE TIME YOURE APPLYING THE TEST- LAW DEEMS LOWEST BALANCE DURING THT TIME PERIOD IS THE SECURED PARTYS IDENTIFIABLE PROCEEDS BUT IT CANT EXCEED THE VALUE OF THE CASH PROCEEDS ORIGINALLY DEPOSITED
HOW TO PERFECT SI
ATTACH + ADDITIONAL STEP
1) AUTOMATIC PERFECTION (PMSI IN CONSUMER GOODS)
2) POSSESSION (GOODS-COMMON)
3) CONTROL (DEPOSIT ACCTS)
4) NOTATION ON CERTIFICATE OF TITLE (CAR STATUTE)
**EXCEPTION: MUST FILE FINANCING STATEMENT AGAINST INVENTORY
5) FILING A FINANCIAL STATEMENT (UCC-1)
FS INDEXED BY
DEBTORS NAME
(UNEXPIRED DL)
CONTROL OF NON CONSUEMR DEPOSIT ACCTS
AUTOMATIC CONTROL BY BANK MAINTAINING ACCT
PUTTING ACCT IN SECURED PARTYS NAME
CONTROL AGREEMENT
MISTAKES IN FS OK AS LONG AS
ERRORS NOT SERIOUSLY MISLEADING
FS NOT SERIOUSLY MISLEADING WHEN
SEARCH W CORRECT NAME
USING STANDARD SEARCH LOGIC
WOULD FIND FS
NAME CHANGE
FS UNDER OLD NAME STILL GOOD ON COLLATERAL RECEIVED FOUR MONTHS OR LESS AFTER CHANGE
IN FS SUPERGENERIC DESCRIPTIONS
VALID
FS NEED NOT BE
SIGNED BUT MUST BE AUTHORIZED
D AUTOMATICALLY AUTHORIZES FS IF THEY
AUTHENTICATE A SA COVERING THE SAME COLLATERAL
FILE FS W THE
SECRETARY OF STATE
REAL ESTATE RELATED COLLATERAL
MAKE A COUNTY FILING WHERE THE REAL ESTATE IS LOCATED
DEBTOR MOVES
SECURED PARTY BECOMES UNPERFECTED 4 MONTHS AFTER THE DEBTORS MOVE UNLESS IT FILES A FS IN THE NEW JX B4 THT 4 MO PERIOD IS UP
COLLATERAL MOVING ACROSS STATE LINES TO A NEW OWNER WHOS LOCATED IN A DIFF STATE
SP WILL BECOME UNPERFECTED ONE YEAR AFTER THE COLLATERAL MOVES UNLESS IT FILES A FS IN THT NEW JX BEFORE THT 1 YR PERIOD IS UP
LENGTH OF FS EFFECTIVENESS
5 YRS
IF YOU HAVE SECURITY INTEREST IN PROCEEDS YOU AUTOMATICALLY GET
20 DAYS OF FREE PERFECTION
(SI IN THOSE PROCEEDS WILL BECOME UNPERFECTED ON DAY 21 - UNLESS THE PROCEEDS ARE IDENTIFIABLE CASH- OR UNLESS THAT SAME OFFICE RULE APPLIES EX: DO YOU FILE AT THE SAME PLACE FOR INVENTORY AS YOU WOULD FOR EQUIPMENT)
PROCEEDS
W/E WAS RECEIVED UPON THE SALE EXCHANGE OR OTHER DISPOSITION OF COLLATERAL
HOW DO YOU ACQUIRE PROCEEDS W/O BUYING THEM
SOME KIND OF IN KIND EXCHANGE
NUMBER ONE EXAMPLE THT USES THE SAME OFFICE RULE IS
WHEN THE DEBTOR HAS INVENTORY THAT IS SOLD ON CREDIT
DID WE FILE A FS AGAINST THE INVENTORY: YES
WHEN THE INVENTORY GOT SOLD ON CREDIT AND ACCOUNTS GOT PRODUCED, WHAT ARE THE ACCOUNTS?
THEYRE PROCEEDS
STEP 3: DO YOU FILE A FS AGAINST ACCOUNTS IN THE SAME PLACE WHERE YOU FILE AGAINST INVENTORY: YES
(ANY COLLATERAL THTS NOT REAL ESTATE RELATED: SECRETARY OF STATE)
SAME OFFICE RULE APPLIES ONLY IF
THE PROCEEDS WERE NOT ACQUIRED W CASH
AND IF IT DOESNT APPLY- WHEN OUR 20 DAYS OF FREE PERFECTION EXPIRES OUR SI WILL BE UNPERFECTED UNLESS B4 THT 20 DAY PERIOD IS UP WE GO AND PERFECT IN THAT (“PROCEED” I.E. GO AMEND FS)
WHAT IF THE D CHANGES ITS USE IN COLLATERAL (I.E. FROM EQUIPMENT TO INVENTORY)
FILED FS REMAINS EFFECTIVE TO PERFECT THE SI
THE SC HAS NO DUTY TO MONITOR THE COLLATERAL OR TO AMEND THE FS EVEN IF IT KNOWS THT THE DESCRIPTION IS SRSLY MISLEADING
GENERAL RULE: AS B/W TWO PERFECTED SC
FIRST TO FILE OR PERFECT- WHICHEVER OCCURS FIRST HAS PRIORITY
FIGHT B/W TWO UNPERFECTED SC
FIRST TO ATTACH
PERFECTED SC V UNPERFECTED SC
THE PERFECTED SC HAS PRIORITY
PMSI IN GOODS OTHER THAN INVENTORY OR LIVESTOCK (NORMALLY A PMSI IN EQUIPMENT)
A PMSI IN SUCH GOODS HAS PRIORITY OVER A CONFLICTING SI IN THE SAME GOODS OR ITS IDENTIFIABLE PROCEEDS IF THE PMSI IS PERFECTED AT THE TIME THE DEBTOR RECEIVES POSSESSION OF THE COLLATERAL OR W/IN 20 DAYS THEREAFTER - WHEN YOU BLOW THE SPECIAL RULE- FALL BACK TO THE GENERAL RULE
**PERFECTED SC FIGHTING PERFECTED SC (FIRST TO FILE OR PERFECT)
A PMSI IN INVENTORY OR LIVESTOCK HAS PRIORITY OVER CONFLICTING SI IN THE SAME INVENTORY OR LIVESTOCK IF
BEFORE THE DEBTOR RECEIVES POSSESSION OF THE INVENTORY OR LIVESTOCK THE SP PERFECTS AND
SENDS AN AUTHENTICATED NOTICE TO HOLDERS OF PREVIOUSLY FILED CONFLICTING SI IN THE COLLATERAL
THE HOLDER OF THE CONFLICTING SI MUST RECEIVE THIS NOTICE W/IN 5 YRS B4 THE DEBTOR RECEIVES POSSESSION OF THE INVENTORY
A COSIGNERS INTEREST IN THE CONSIGNED GOODS IS CONSIDERED TO B A PMSI IN INVENTORY THEREFORE
A CONSIGNER CAN ACQUIRE PMSI SUPERPRIORITY IN COSIGNED GOODS IF SHE COMPLIES W THE ABOVE REQS FOR GAINING PMSI SUPERPRIORITY IN INVENTORY
SELLER FINANCED V FINANCER FINANCED PMSI
SELLER FINANCED BEATS THE FINANCER FINANCED
INVESTMENT PROPERTY
CONTROL BEATS OTHER PERFECTION METHODS
EARLIER CONTROL BEATS LATER CONTROL
DEBTORS INTERMEDIARY (LIKE A BROKER) BEATS OTHER CREDITORS
A SI PERFECTED BY CONTROL HAS PRIORITY OVER A SI PERFECTED BY PROCEEDS IF CONFLICTING INTERESTS EACH WERE PERFECTED BY CONTROL
THEY RANK ACCORDING TO THE TIME OF OBTAINING CONTROL
A SECURED PARTY WHO HAS OBTAINED CONTROL BY PUTTING THE DEPOSIT ACCOUNT IN ITS OWN NAME HAS
PRIORITY OVER ALL OTHER SECURED PARTIES W CONTROL
A BANK THT HAS CONTROL BC IT MAINTAINS THE DEPOSIT ACCOUNT HAS PRIORITY OVER ALL SP’S W CONTROL, EXCEPT
FOR THE SP W THE DEPOSIT ACCT IN ITS NAME
IF A PURCHASER OF CHATTEL PAPER IN GOOD FAITH GIVES NEW VALUE AND TAKES POSSESSION IN TEH ORD COURSE OF BUSINESS THE PURCHASER WILL HAVE PRIORITY OVER
A SI IN CHATTEL PAPER THT ARISES MERELY AS PROCEEDS OF INVENTORY AND ANY OTHER SI IN THE CHATTEL PAPER AS LONG AS THE CHATTEL PAPER PURCHASER ACQ’D ITS INTEREST W/O THE KNOWLEDGE THT THE PURCHASE VIOLATED THE RIGHTS OF THE SP
LOW
A PURCHASER OF AN INSTRUMENT HAS PRIORITY OVER A PERFECTED SI IN THE INSTRUMENT IF
THE PURCHASER GIVES VALUE AND TAKES POSSESSION OF THE INSTRUMENT IN GOOD FAITH AND W/O KNOWLEDGE THT THE PURCHASE VIOLATES THE RIGHTS OF THE SP
LOW
GENERAL RULE (BUYER SP)
IF YOU BUY SOMETHING W A SI ON IT - THE SECURITY INTEREST STAYS ON IT
EXCEPTIONS TO GENERAL RULE ON SP V BUYER
AUTHORIZED SALE
(IMPLIED (INVENTORY) V EXPRESS)
BUYER IN ORD COURSE OF BUSINESS
TAKES FREE OF A SI CREATED BY HIS SELLER
(THE DEBTOR -(APPLIANCE WORLD)- CREATES THE SI)
WHAT IS A BIOC
BUYER IN GOOD FAITH
WITHOUT KNOWLEDGE OF VIOLATIONS (FOR ALL I KNOW THE CREDITOR HAS AUTHORIZED THE SALE OF THIS ITEM FREE OF ITS LIEN)
IN ORD COURSE
FROM SELLER OF GOODS OF THT KIND
BUYERS NOT IN THE ORD COURSE TAKE SUBJ TO
PERFECTED SI
-TAKE FREE OF UNPERFECTED SI (UNLESS THEY KNOW OF THE SI)
CONSUMER TO CONSUMER SALES
A BUYER TAKES FREE OF A SI EVEN THOUGH ITS PERFECTED IF HE BUYS W/O KNOWLEDGE OF THE SI FOR VALUE AND FOR HIS PERSONAL FAMILY OR HOUSEHOLD PURPOSES UNLESS PRIOR TO THE PURCHASE THE SP HAS FILED A FS
MUST BE CONSUMER GOODS IN THE HANDS OF SELLER AND BUYER
JUDGMENT LIENHOLDER
A CREDITOR WHO WON A JUDGMENT IN CT
SECURED PARTY V JUDGMENT LIENHOLDER - WHO WINS
JUDGMENT LIENHOLDER WINS IF LIEN AROSE B4 SI WAS PERFECTED
PMSI V LIEN CREDITOR
IF THE SP FILES W RESPECT TO A PMSI W/IN 20 DAYS AFTER THE D RECEIVES POSSESSION OF THE COLLATERAL, HE TAKES PRIORITY OVER THE LIEN CREDITOR
FUTURE ADVANCE V LIEN CREDITOR
IF THE FUTURE ADVANCE IS MADE W/O KNOWLEDGE OF THE LIEN OR WITHIN 45 DAYS OF THE LIEN ARISING OR PURSUANT TO A COMMITMENT ENTERED INTO W/O KNOWLEDGE OF THE LIEN
SP V STATUTORY LIEN CLAIMANT (MECHANIC LIEN EX)
STATUTORY LIEN HOLDER WINS IF THEY MAINTAIN POSSESSION OF THE COLLATERAL
DEFAULT
EVENT CAUSING SI TO SPRING TO LIFE
REPOSESSION-JUDICIAL PROCESS
REPLEVIN LAWSUIT- CT ORDER THT DIRECTS THE SHERIFF TO GO OUT AND REPOSSESS THE DEBTORS PROPERTY
SELF HELP REPOSSESSION
CREDITOR TAKES COLLATERAL W/O GOING TO CT FIRST
(CANT BREACH THE PEACE)
BREACH OF PEACE
ANY CONDUCT BY THE SP THT HAS THE POTENTIAL TO LEAD TO VIOLENCE IS A BREACH OF THE PEACE
GENERALLY D’S PHYS PRESENCE OR A REP (LIKE FAM MEMBER) PLUS VERBAL OBJECTION
UNAUTHORIZED ENTRY OF A HOME
PICKING LOCK AND NOT RELOCKING =
BREACH OF PEACE
THE SP MAY ALSO MAKE EQUIPMENT UNUSABLE AND DISPOSE OF IT ON THE DEBTORS PROPERTY IF SHE CAN DO SO W/O
BREACH OF THE PEACE
IF THE D DEFAULTS AND THE COLLATERAL IS ACCOUNTS THE SC CAN NOTIFY THE PERSONS OWING MONEY TO THE D TO
MAKAE PAYMENT TO THE SP INSTEAD OF TO THE DEBTOR
STRICT FORECLOSURE
CREDITOR JUST WANTS TO KEEP THE COLLATERAL ITSELF TO SATISFY DEBT (INSTEAD OF SELLING IT)
A SP THT WANTS TO DO A STRICT FORECLOSURE HAS TO SEND ITS PROPOSAL TO ANY OTEHR SP TO WHOM
THE FORECLOSING PARTY HAS RECEIVED NOTICE OF A CLAIM TO THE COLLATERAL AND ANY OTHER SP WHO HAS PERFECTED A SI IN THE COLLATERAL BY FILING A FS OR NOTING ITS SI ON THE CERTIFICATE OF TITLE
IF A NOTIFIED PARTY (STRICT FORECLOSURE) OBJECTS W/IN 20 DAYS AFTER THE SP SENT NOTICE THE COLLATERAL MUST BE DISPOSED OF BY
SALE
THE D CONSENTS TO STRICT FORECLOSURE BY
AGREEING IN AN AUTHENTICATED RECORD AFTER DEFAULT OR IN THE CASE OF A FULL STRICT FORECLOSURE FAILING TO MAKE AN AUTHENTICATED OBJECTION W/IN 20 DAYS AFTER THE SP SENT NOTICE
A D CANNOT CONSENT TO A PARTIAL STRICT FORECLOSURE IN THIS MANNER
WHEN THERE IS A FORECLOSURE SALE, THE FORECLOSING LIEN GETS WIPED OFF AND ANY JUNIOR LIENS GET WIPED OFF BUT …
ANY LIENS THAT ARE SENIOR TO THE FORECLOSING LIEN DO NOT GET WIPED OFF
EVERY ASPECT OF THE SALE- METHOD, MANNER, TIME, PLACE, TERMS MUST BE
COMMERCIALLY REASONABLE
DEFIECIENCY JUDGMENT
AMT CREDITOR CAN COLLECT FROM D BEYOND VALUE OF COLLATERAL
CONDUCTING COMMERCIALLY UNREASONABLE SALE
ACTUAL DAMAGES
MINIMUM RECOVERY FOR CONSUMER GOODS- IF VIOLATED- D IS ENTITLED TO A MINIMUM OF 10% OF THE CASH PRICE OF THE GOODS PLUS AN AMT EQUAL TO ALL OF THE INTEREST CHARGES TO BE PAID OVER THE LIFE OF THE LOAN (STATUTORY PENALTY FOR CONSUMER GOODS)
NO COMMERCIALLY REASONABLE SALE= NO DEFICIENCY JUDGMENT= SP PRESUMPTIVELY LOSES ANY DEFICIENCY
RIGHT TO REDEEM
D’S ABILITY TO RECOVER COLLATERAL BY PAYING EVERYTHING OWED TO CREDITOR
FIXTURES
GOODS THT HAVE BECOME SO RELATED TO PARTICULAR REAL PROP THT AN INTEREST IN THEM ARISES UNDER REAL PROP LAW
IN GENERAL PERS PROP ATTACHED TO REAL ESTATE W THE INTENT THAT IT BECOME A PERMANENT PART OF THE REAL ESATE IS A
FIXTURE
FIXTURE FILING
MUST REASONABLY IDENTIFY THE REAL ESTATE AND MUST SHOW THE NAME OF THE OWNER
REAL ESTATE RELATED COLLATERAL-FILE W COUNTY FILING WHERE THOSE FIXTURES ARE LOCATED
WHEN THE SI IN THE FIXTURE HAS PRIORITY OVER ALL INTEREST IN THE REAL PROPERTY, THE HOLDER OF THE SI IN THE FIXTURE MAY UPON DEFAULT
REMOVE THE FIXTURE FROM THE REAL PROPERTY
SP V REAL ESTATE INTEREST
FIRST IN TIME WINS UNLESS SECURITY INTEREST IS IN PMSI THEN PMSI WINS
A CONSTRUCTION MORTGAGE TAKES PRIORITY OVER A SUBSEQUENT PMSI IN FIXTURES EVEN IF
THE SI IS PERFECTED BY A FIXTURE FILING W/IN 20 DAYS OF FIXATION
ACCESSIONS
GOODS PHYSICALLY UNITED W OTHER GOODS (LIKE TIRES ON A CAR)
IF A SI IS PERFECTED WHEN THE COLLATERAL BECOMES AN ACCESSION
THE SI REMAINS PERFECTED IN THE COLLATERAL
EXCEPT
SI IN ACCESSION
-SUBORDINATE TO SI IN WHOLE
-PERFECTED BY COMPLIANCE W TITLE STATUTE
