Secured Flashcards
What are goods?
Anything moveable at the time that the SI attaches and includes fixtures.
What are the four types of goods
Consumer goods
Farm products
Inventory
Equipment
What are consumer goods
Are goods acquired primarily for personal, family, or household purposes
What are farm products?
Crops grown, growing or to be grown, livestock born or unborn, supplies used in farming and products of crops and livestock in an unmanufacrtured state
What is inventory?
Goods, other than farm products held for sale or lease;
furnished under a service contract;
Raw materials, works in process or
Material used and consumed in business
Note difference in these raw material and “equipment” used in business
What is equipment?
Goods that are not consumer goods, farm products or inventory.
*This is things primarily bought to use at work such as a desk or machines etc
What are the other types of collateral other than goods?
Chattel paper
Documents
Instruments
Investment property
Accounts
Commercial tort claims
Deposit accounts
Letter of credit
General intangibles
When does attachment occur making a SI enforceable?
(I) value has been given by the secured party
(ii) the debtor has rights in the collateral and
(iii) the debtor has authenticated a security agreement that describes the collateral or the secured party has possession or control of the collateral pursuant to a security agreement.
When is a security agreement authenticated?
SA should be in a record (tangible medium), contain a description of the collateral and be authenticated by the debtor (usually signed by debtor)
What is chattel paper?
Records evidencing
(1) a monetary obligation and
(2) security interests in specific goods or a lease of specific goods
*can be electric or tangible
What is a document?
Document if title, which confers on the holder ownership rights in the goods help by a bailee. (Bill of landing, transportation docs, warehouse receipt, order for delivery)
What are instruments?
Negotiable and nonnegotiable instruments evidencing a right to payment of monetary obligations and transferred in the ordinary course of business by delivery. (Ex: certificates of deposit from bank)
What is investment property?
Certificates and uncertificated securities. (Such as stocks, bonds, securities accounts)
What are accounts?
Right to payment for property sold, leased, licensed, or otherwise disposed of or services rendered or to be rendered.
What is a deposit account?
Includes savings, passport, time, or demand account maintained with a bank. (NO accounts such as investment or evidence by instruments)
What are general intangibles?
Catch all, any personal property not in another category.
When is a lease a security interest?
When although in the form of a lease, it’s really a secured transaction.
Note for possession under attachment, the possession must be pursuant to a SA which may be oral or written.
What is after acquired collateral?
Collateral the debtor acquires in the picture.
Ex: all inventory owned now and hereafter acquired.
Majority rule is after acquired collateral is presumed but argue minority too.
What are proceeds and what is the accept on a SI?
Proceeds automatically attach to identifiable proceeds.
Anything acquired upon the sale, lease, or exchange of collateral.
What does a PMSI apply to?
Goods and software
What is an accession?
Goods that are physically united with other so that the original identity is NOT lost. (Tires in car, memory of computer?
What is commingled goods?
Goods that are physically united with others such that their identity is lost in a product or mass.
(Ex: cakes)
Why is perfection necessary/ a good idea?
Perfection is generally necessary for a secured party to have rights in the collateral that is superior to any claimed by a 3rd party.
What are the four ways to perfect?
Filing a FS in central filing office
Possession
Control
Automatic Perfection
What can a filing not be used for?
Deposit account money or letter of credit rights.
What must a FS contain?
Debtor name
Secured party’s name or their representative
Collateral covered
Where is real property and fixtures filed?
Local Real property records.
How long is perfection good for?
5 years
What does perfection by possession not work for?
Money
What collateral can be perfected through control?
Investment property
Deposit accounts
Letter of credit rights
Electronic chattel paper or electronic documents
What can ONLY be perfected by control?
Deposit account.
Secured party is the bank which has the account or becomes the banks customer
What is automatic perfection?
The collateral will be automatically perfected upon attachment.
What can be automatically perfected indefinitely?
PMSI in consumer goods
What can be temporary perfected automatically for 20 days?
New value given under a SA or a SI in certificates securities, negotiable docs, or instruments.
When is perfection accomplished?
Perfected upon the attachment of a security interest and compliance with one of the other methods of perfection.
What is the priority rule for a judicial lien creditor?
A creditor who has a lien on the collateral by judicial process with take subject to an existing perfected SI but has priority over those unperfected.
A statutory or common law creditor with a lien on property of another by a statute or common law will have priority over a SI even if perfected in goods.
A buyer of goods, tangible chattel paper, tangible documents or a security certificate takes free of an [unperfected] SI in the same collateral if the buyer:
- Gives value
- Receives delivery of the collateral and
- Does so without knowledge of the existing SI.
**if it’s perfected they take subject to the perfected interest unless the secured party authorizes sale free of the SI
What is a buyer in the ordinary course of business? HIGHLY TESTED
Take free of a SI EVEN IF perfected and they know of its potential existence if:
- Buy goods (other than farm products)
- In the ordinary course
- From a seller who is in the business of selling goods of that kind
- In good faith and
- Without actual knowledge of the existing SI
*** notice or reason to know is not enough must be Actual
BOCB doesn’t work for them Farmers or their products
What is the consumer buyer rule for perfection?
Takes free of a SI, EVEN IF perfected UNLESS prior to the purchase the secured party filed a FS covering the goods if:
- Buys consumer goods for value
- For his own personal, family or household use
- From a consumer seller and
- Without knowledge of the SI
***remember if filed then this won’t apply and won’t take free
What is the priority rule for a secured party vs a secured party?
First to file or perfect has priority.
Who has priority between a perfected and unperfected SI?
Perfected wins
Unperfected vs Unperfected?
First in time, first in right. Critical time is attachment.
A PMSI in goods other than livestock or inventory…
Prevails over all other SI in collateral even those previously perfected.
Once default has occurred, a secured party can:
1) Seek possession and either sell or retain in full or partial satisfaction.
2) initially a judicial action or
3) pursue any court of action with the obligor and EBT or agreed
A secured party does not have to give notice of default or his intent to take possession of the collateral.
What are the limitations on possession?
Cannot breach the peace
Anything criminal is breach
Can render the equipment unusable but still cannot breach peace. Courts look at public harm or loss of public order.
All aspects of the disposition of collateral must be in a commercially reasonable manner. What is reasonable?
If conducted
1) usual manner in a recognized market
2) at the price current in any recognized market and
3) in conformity with reasonable commercial practices among dealers of the type of property
Who must notice of disposition be sent to?
Debtor
Secondary obligors
Any other secured party or lien holder
