Secured Transactions

Question 1

Attachment

Answer 1

Definition: Attachment gives the creditor rights against the debtor. It is the steps legally required to give the secured party a security interest in the collateral that is effective as against the debtor.

Three steps to attach a security interest:
(1) the parties must AGREE to create a security interest, evidenced by (a) an authenticated security agreement granting the creditor a security interest in collateral that describes the collateral OR (b) the creditor must take possession or control of the collateral

*authentication need only be a symbol

*description must reasonably identify the collateral. No supergeneric descriptions

(2) the creditor (secured party) must give value, and

*past consideration is actually fine here

(3) the debtor must have rights in the collateral

Question 2

Perfection

Answer 2

Definition: to obtain rights against another claimant to a debtor’s collateral, a secured party must also perfect its security interest.

Attachment must happen FIRST or simultaneously

5 methods of perfection:

(1) filing, in the proper public office, a financing statement that is authorized by the debtor in an authenticated record,
(2) taking possession of the collateral,
(3) control,
(4) automatic perfection, and
(5) temporary perfection.

*Typically, whoever perfects first gets priority, subject to exceptions.

Question 3

PMSI

Answer 3

A PMSI is created when a creditor advances credit or provides the funds needed to make a purchase possible and takes a security interest in the goods purchased.

The secured party sells the goods to the debtor on credit and retains a security interest in the goods sold, or

The creditor loans the funds to the debtor to enable the debtor to buy specific collateral, those funds are used by the debtor to acquire the specific collateral, and the creditor takes a security interest in that collateral. The PMSI secures whatever portion of the purchase price still has to be paid.

**a PMSI in consumer goods is automatically perfected upon attachment.

Question 4

Consumer Goods

Answer 4

Consumer goods are goods that are used or bought primarily for personal, family, or household purposes

Question 5

Equipment

Answer 5

goods that are used or bought for a business OR goods that are not consumer goods, inventory, or farm products (negative definition!)

Question 6

Collateral

Answer 6

The property subject to a society interest. It is the property that the secured party can repossess upon default to ensure that the debt is paid.

Question 7

Farm products

Answer 7

crops or livestock or supplies used or produced in farming operations or products of crops or livestock in their unmanufactured states (such as ginned cotton, wool-clip, maple syrup, milk, and eggs) if they are in the possession of a debtor engaged in farming operations

Question 8

Inventory

Answer 8

goods held for sale or lease, goods that are to be furnished under service contracts, and materials used or consumed in a business in a short period of time

Question 9

Instrument

Answer 9

Pieces of paper representing the right to be paid money, like promissory notes, drafts (for example, checks), and certificates of deposit

Question 10

Documents

Answer 10

A document that represents the right to receive goods (for example, a bill of lading, a warehouse receipt)

Question 11

Chattel Paper

Answer 11

A record or records which evidence both (1) a monetary obligation, and (2) a security interest in or a lease of specific goods.

Question 12

Investment Property

Answer 12

stocks, bonds, mutual funds, and brokerage accounts containing such items

Question 13

Accounts

Answer 13

Includes a right to payment (that is not evidenced by an instrument or chattel paper) for property sold or services rendered. Note: A contractual obligation arising from a loan of money is not an account—it is a general intangible (see below).

Question 14

Deposit Accounts

Answer 14

An account maintained with a bank. Note: In general, Article 9 only applies to security interests in nonconsumer deposit accounts and account monies that are claimed as proceeds of other collateral.

Question 15

Commercial Tort Claim

Answer 15

A tort claim where (1) the claimant is an organization (for example, a partnership or corporation), or (2) the claimant is an individual, the claim arose out of the claimant’s business or profession, and the claim does not include damages for personal injury or the death of an individual (note that Article 9 also applies to noncommercial tort claims that are claimed as proceeds of other collateral)

Question 16

General Intangibles

Answer 16

Any personal property not coming within the scope of the other definitions, such as patent and trademark rights, copyrights, and goodwill. A general intangible under which the account debtor’s principal obligation is a monetary obligation is a payment intangible.

Question 17

A secured sale disguised as a lease: covered by Art. 9

Answer 17

`—that is, leases that are intended to serve as security arrangements (but not true leases); and a lease where the rental obligation is not terminable by the lessee and either: (1) the lease term is equal to or greater than the remaining economic life of the goods, (2) the lessee is bound to purchase the goods at the end of the lease or to renew the lease for the remaining economic life of the goods, or (3) at the end of the lease, the lessee has an option to purchase the goods or renew the lease for the remaining

Question 18

Future Advances

Answer 18

A security agreement may provide that the collateral will serve as security not only for the present obligation, but also for advances the creditor makes to the debtor in the future.

Question 19

After-Acquired Property

Answer 19

Without an explicit after-acquired property clause in the security agreement, the secured party’s security interest only reaches collateral that the debtor had rights in at the time the debtor signed the security agreement. If the security agreement has an explicit after-acquired property clause, the security interest will attach to the property as soon as the debtor acquires an interest in the collateral. Priority date, however, is when perfected w/ initial items

**generally needs to be explicit, but with inventory and accounts, or items replenished rapidly, a security interest attaches automatically even without clause. Also attaches automatically to identifiable proceeds.

**doesn’t apply to consumer goods unless debtor squires rights w/in 10 days after creditor gives value

Question 20

Proceeds

Answer 20

• As mentioned, a security interest in collateral automatically attaches to identifiable proceeds of the collateral. Proceeds include whatever is received upon the sale, exchange, collection, or other disposition of collateral or proceeds
• Commingled cash proceeds: lowest intermediate balance applies.

Question 21

Automatic Perfection: PMSI in consumer goods

Answer 21

Automatically perfects upon attachment.

BUT for cars, can be perfected only by notation on the vehicle’s certificate of title, unless you are a dealership, and then you file a financing statement to perfect

A PMSI in fixtures will have priority over an encumbrancer of the real estate only if the PMSI holder files a fixture filing.

Question 22

Perfection by Possession (Pledge)

Answer 22

• Where the secured party takes actual possession of the collateral, the security interest is perfected from the moment of possession and continues as long as possession is retained.
• Security interests in general intangibles, deposit accounts, nonnegotiable documents, electronic chattel paper, certificate of title goods, and accounts cannot be perfected by possession.

*Note that taking possession can simultaneously satisfy the requirements for attachment and perfection; that is, possession may be the last thing needed for attachment, and attachment plus possession results in perfection.

Question 23

Perfection by Control

Answer 23

Security interests in investment property, nonconsumer deposit accounts, and electronic chattel paper may be perfected by “control.” Note that security interests in nonconsumer deposit accounts can only be perfected by control (unless they’re perfected as proceeds of collateral; see Section 4.10, infra).

Can assume control if:

1. you are the bank in which the account is held, you automatically have control over deposit account
2. If secured party not the bank, can obtain control by
   
   1. putting deposit account in secured party’s name or
   2. agreeing in an authenticated record with the debtor and the bank in which the deposit account is maintained that the bank will comply with the secured party’s orders without the debtor’s further consent

Question 24

Perfection by Financing Statement (good for any type except non consumer deposit accounts and money)

Answer 24

Must contain:

(1) debtor’s name and mailing address (must match license, or be “individual name.” For corporations, LLCs, LLPs, must match name on public organic record–can’t be trade name. Minor error in name won’t invalidate statement, but seriously misleading errors will. It will not be seriously misleading if can find the statement using the debtors name using filing office search logic)

*name change! if debtor changes name and thus it becomes seriously misleading, then financing statement effective only against collateral acquired by the debtor before the name became insufficient and within 4 months after.

(2) secured party’s name and mailing address
(3) description of the collateral covered by the financing statement

*As with an authenticated security agreement, the description of collateral in a financing statement is sufficient if it reasonably identifies the collateral, but these can have super generic descriptions.

*need not mention after acquired property to perfect such property if description is broad enough statement to cover after acquired property.

(4) debtor’s authorization via signed writing (automatic if authenticated the security agreement)

Question 25

Real property-related financing statements

Answer 25

In addition to the requirements discussed above (that is, the names and addresses of the debtor and secured party and a description of the collateral), financing statements that cover real property-related collateral (that is, minerals, timber to be cut, and fixtures) must also contain:

(1) a description of the related real property,
(2) the name of the record owner (if not the debtor), and
(3) an indication that it is to be filed in the real property records.

Question 26

Where to file filing statement

Answer 26

Generally: centrally in the office of the sec of state. Typically where the debtor is domiciled (person), incorporated (corporation), or place of business or its chief executive office (unincorporated)

Exception: timber, minerals, fixtures: locally (in county where a mortgage on real estate is filed).

Question 27

Which law governs perfection

Answer 27

Generally: law of state in which debtor is located

*if debtor moves, then SI unperfected 4 months after move unless secured party files new statement before 4 months.

*if collateral is transferred or moved, SI unperfected 1 year after collateral moves, unless files before 1 year.

Exceptions:

• possessory security interests and security interests in fixtures and timber to be cut: state in which collateral located.

*possessory SI’s remain perfected when move, as long as perfected under new state law.

• goods covered by cert. of title: law of state issuing the most recent cert. of title governs.
• deposit counts: law of state in which bank has chief executive office
• investment property:
• agricultural lein: state in which farm product covered

Question 28

Continuation Statements

Answer 28

A financing statement is valid for 5 years. A continuation statement may be filed, good for an additional 5 years.

The continuation statement can only be filed within 6 months before the lapse of the filed statement.

The authorization of the debtor is not required for a continuation statement; the secured party may authorize it.

Question 29

Termination Statements

Answer 29

Generally, a secured party is not obligated to terminate a financing statement.

However, if there is no outstanding obligation of the debtor and no commitment on the part of the secured party to make further advances, or if the debtor didn’t authorize the filing of the initial financing statement, the secured party must, on demand of the debtor, within 20 days, file a termination statement or provide one to the debtor.

Question 30

Garage sale exception

Answer 30

If a buyer of consumer goods

1. resells them to another consumer (must buy as a consumer good)
2. for value,
3. that second consumer takes free of a security interest of which he has no knowledge,
4. provided he makes the purchase before any financing statement covering the goods has been filed.

Question 31

Consent by creditor to transfer collateral

Answer 31

If a secured party consents to a sale, lease, or other transfer of the collateral free of the security interest, the transferee will take free of the secured party’s perfected security interest

Question 32

BIOC exception

Answer 32

A buyer of goods in the ordinary course of business from a seller engaged in the business of selling them can take goods free of nonposessory security interests created by the seller unless they know the sale violates a security agreement.

Definition: A “buyer in the ordinary course” is one who buys goods (1) in good faith, (2) without knowledge that the sale violates the rights of another person in the goods, and (3) in the ordinary course of business from a seller in the business of selling goods of the kind purchased. The typical case of the buyer knowing that the sale violates the rights of another is where the buyer knows that the sale violates the security agreement.

Buyers not in ordinary course of business: (1) take subject to perfected security interests, and (2) take free from unperfected security interests unless they know of the SI when they give value or take delivery.

• Exception: future advances
• Exception: PMSI Grace period

Question 33

Accessions

Answer 33

Goods that are physically united with other goods in such manner that the identify of the original goods is not lost.

Question 34

Perfection by motor vehicle statute + accessions

Answer 34

Article 9’s general priority rules apply to accessions. However, if the accession becomes part of a whole that is subject to a security interest perfected in compliance with the requirements of a certificate-of-title statute, the security interest in the whole has priority over the security interest in the succession.

**note: in the essay this came from, a finance company took a security interest in vehicles + and any accessories now or hereafter installed. It notated title, but did not file a separate financing statement. I thought that maybe bc they didn’t file financing statement, only vehicles, and not other accessories, were perfected. It seems that is not the case

Question 35

PMSI in equipment

Answer 35

A PMSI in equipment has priority over conflicting security interest if the PMSI is perfected when the debtor receives possession of the goods (or within 20 days thereafter).

Example: Global filed a financing statement for PMSI in equipment on August 2. Its PMSI attached and was perfected once Debtor obtained possession of the GPS units on August 10th. Was perfected when obtained goods.

Question 36

Temporary Perfection (and continuation for proceeds)

Answer 36

• If a secured party has a perfected security interest in collateral, the secured party automatically has a perfected security interest in any proceeds of the collateral for 20 days after receipt of the proceeds.
• It will continue BEYOND 20 days if:
  
  • proceeds are identifiable cash proceeds, OR
  • the security interest in the OG collateral was perfected by filing a financing statement, a security interest in the type of collateral constituting proceeds would be filed in the same place as the financing statement, and the proceeds were not purchased with cash proceeds of the collateral (same office rule), OR
    
    • NOTE: i think even if proceeds purchased with cash proceeds of collateral, okay as long as financing statement broad enough?
  • the security interest in the proceeds is perfected within the 20 day period.

Question 37

Temporary Perfection for Instruments, Negotiable Documents, and Certificated Securities

Answer 37

• New value: when new value go en under an authenticated security agreement for instruments, negotiable docs, and cert sec, perfection is valid for 20 days after attachment, neither filing or possession is necessary
• Delivery of collateral to debtor for disposition: perfection valid 20 days, then creditor must reperfect or lose perfection.

Question 38

Change in Use of Collateral

Answer 38

If the debtor changes its use of the collateral (for example, from equipment to inventory), the filed financing statement (with the description of “equipment”) remains effective to perfect the security interest. The secured creditor has no duty to monitor the collateral or to amend the financing statement, even if the creditor knows that the description is seriously misleading.

Question 39

Secured Party v. Secured Party

Answer 39

• Two perfected parties: first to file or perfect
• Two unperfected: first to attach
• One perfected, one unperfected: perfected generally prevails

[see exceptions below]

Question 40

PMSI Superpriority

Answer 40

Generally: PMSI enjoy a superpriortiy: they’re superior to prior perfected security interests in the same collateral if certain conditions are met.

PMSI in equipment: priority over other conflicting security interests in same goods or proceeds if the interest is perfect before or within 20 days after debtor receives possession of goods

PMSI in Inventory and livestock: PMSI in inventory collateral has priority over a conflicting security interest in the same inventory or proceeds of the inventory that are chattel paper, instruments, or cash if:

• it is perfected at the time the debtor gets possession of the inventory (filing must take place before the inventory is delivered to debtor), ANDDDDDDD
• any secured party who has filed their security interest in the same inventory receives authenticated notification of the PMSI before the debtor receives possession of the inventory, and the notification states that the purchase money party has or expects to take e a PMSI in inventory of the debtor described by kind or type. The notification is effective for deliveries of the same type of collateral for 5 years.

Question 41

Conflicting PMSIs (conflicting superpriorities)

Answer 41

c. Conflicting PMSIs

If more than one party has PMSI superpriority in collateral, the following rules apply:

A secured party who has a PMSI in collateral as a seller (a seller-financed PMSI) has priority over a secured party who has a PMSI in the same collateral as a lender (a financer-financed PMSI)

Otherwise, the first secured party to file or perfect prevails

Question 42

Special Priority Rules for Conflicting Security Interests in Investment Property

Answer 42

A security interest perfected by control has priority over a security interest perfected by any other method (that is, by filing or automatic perfection). For conflicting security interests perfected by control, they rank according to the time of obtaining control (unless one of the secured parties with control is a securities intermediary, in which case the securities intermediary will prevail). In all other cases, the “first to file or perfect” rule governs priority questions for investment property.

Question 43

Special Priority Rules for Conflicting Security Interests in Deposit Accounts

Answer 43

• A security interest in a deposit account that is perfected by control has priority over a conflicting security interest that is perfected by another method (namely, as proceeds of other collateral). If there are conflicting security interests that are perfected by control, they rank according to the time of obtaining control, subject to the following exceptions:
  
  • A secured party who has obtained control by putting the deposit account in the party’s name has priority over all other secured parties with control, and
  • A bank that has control because it maintains the deposit account has priority over all secured parties with control, other than the party who has obtained control by putting the account in their name.

Note: If a debtor transfers money or deposit account funds (for example, by writing a check or making an electronic funds transfer) to a person, that person takes free of any security interest in the money or funds, unless the transferee acts in collusion with

Question 44

Chattel Paper Purchasers

Answer 44

If a purchaser of chattel paper in good faith gives new value and takes possession of the chattel paper in the ordinary course of business (or takes control of electronic chattel paper), the purchaser has priority over:

1. A security interest in chattel paper that arises merely as proceeds of inventory, as long as the chattel paper doesn’t indicate that it has been assigned to anyone other than the purchaser, and
2. Any other security interest in the chattel paper, as long as the chattel paper purchaser acquired their interest without knowledge that its purchase violated the rights of the secured party.

Question 45

Purchasers of Intrustments

Answer 45

A purchaser of an instrument has priority over a perfected security interest in the instrument if the purchaser gives value and takes possession of the instrument in good faith and without knowledge that the purchase violates the rights of the secured party.

Question 46

Priority in Proceeds

Answer 46

1. Generally, a perfected security interest in proceeds will have the same date of priority as the perfected security interest in the original collateral (for example, under the “first to file or perfect” rule), as long as the perfection of the security interest in the proceeds extends beyond the 20-day temporary perfection period. Recall that there are also special superpriority rules for certain proceeds of collateral subject to PMSIs.
2. Because the rules governing priority in non-filing collateral contain many exceptions to the “first to file or perfect” rule (for example, a party with control over a deposit account has priority over a party without control, regardless of when control was obtained), the Code contains a special priority rule for certain proceeds of that collateral. A secured party has priority in the proceeds of non-filing collateral if: (1) the secured party has priority in the original collateral, (2) their security interest in the proceeds is perfected, and (3) the proceeds are cash proceeds or proceeds of the same type as the original collateral. If the proceeds are proceeds of proceeds, all intervening proceeds must be cash proceeds, proceeds of the same type as the original collateral, or accounts relating to the collateral.
   * exception: Filing Collateral as Proceeds of Non-Filing Collateral

If a security interest in original collateral that is non-filing collateral is perfected by a method other than filing, and the proceeds of the original collateral are filing collateral, the first secured party to file a financing statement covering the proceeds has priority in the proceeds.

Question 47

Secured Party v. Buyer or Other Transferee

Answer 47

General rule: buyer or lessee takes with security interest still on it.

Authorized sales:

• sale or lease is authorized by secured party free of security interest, the transferee takes free of the security interest. Can be (1) express authorization or (2) implied from (a) type of sale, or (b) seller’s conduct.

Unauthorized sales: [SEE OTHER FLASHCARDS FOR MORE INFORMATION]

• BIOC
• Garage sale exception
  *

Question 48

Consumer-to-consumer sales (garage sale exception)

Answer 48

In the case of consumer goods, a buyer takes free of a security interest, even though it’s perfected, if the buyer buys (1) without knowledge of the security interest, (2) for value, (3) for the buyer’s own personal, family, or household purposes, and (4) before a financing statement covering the goods has been filed. Note that the goods must be consumer goods in the hands of both the buyer and the seller.

Question 49

Secured Party vs. Holder in Due Course or the Like

Answer 49

A holder in due course of a negotiable instrument (and similar holders of negotiable documents of title or securities) has priority over a security interest in the negotiable instrument.

Question 50

Secured Party vs. Judicial Lein Creditor

Answer 50

A judicial lien creditor (that is, a person who has acquired a lien on the collateral through judicial attachment, levy, or the like, or a bankruptcy trustee) prevails over the holder of a security interest in collateral if the lien creditor becomes such before the security interest is perfected. On the other hand, a prior perfected security interest has priority over a judicial lien.

• Additionally, a prior FILED SI (even if did not yet attach and perfect) will also have priority if the secured party obtained a security agreement and filed a financing statement (but did not attach and perfect) before the judicial lien arose, as long as the secured party eventually attaches and perfects.
• PMSI grace period exception: If the secured party files a financing statement with respect to a PMSI within 20 days after the debtor receives the collateral, the secured party will have priority over a judicial lien arising between the time the security interest attaches and the time of filing.
• Future advances exception: For a perfected future advance to gain priority over a subsequent judicial lien, the future advance must be made (1) without knowledge of the lien, (2) within 45 days of the lien arising, or (3) pursuant to a commitment entered into without knowledge of the lien.

Question 51

Secured Party vs. Posessory (Statutory) Lien Holder

Answer 51

A possessory lien imposed by other (that is, non-Code) state law in favor of those who supply goods or services (for example, an artisan’s lien or a materialman’s lien) has priority over a security interest (even if perfected) as long as the goods or services were provided in the ordinary course of business and the collateral remains in the lien holder’s possession.

Question 52

Self-Help Repossession

Answer 52

• After default, the secured party is entitled to take possession of the collateral without judicial process (that is, by “self-help”) if this can be done without a breach of the peace. When a secured party breaches the peace, the secured party loses the authorization to repossess, may be sued for conversion (and possibly assault, battery, trespass, etc.), and is liable for actual (and frequently punitive) damages.
• breach of the peace=potential to lead to violence

Can also make something unusable:

• Without removal, the secured party may also make equipment unusable and dispose of it on the debtor’s property if the secured party can do so without a breach of the peace. This right is directed toward the problem of taking possession of heavy, bulky equipment that is not easily movable

Question 53

Self-Help in Accounts

Answer 53

If the debtor defaults and the collateral is an account, the secured party can notify the person owing money to the debtor (that is, the account debtor) to make payment to the secured party, rather than to the debtor. Upon notification, the account debtor must pay the secured party, rather than the debtor. Payment to the debtor will not discharge the obligation.

Question 54

Strict Foreclosure

Answer 54

After default and repossession, the secured party may retain the collateral in full or partial satisfaction of the debt (in other words, the secured party may make a full or partial strict foreclosure) if the secured party does the following:

• The secured party must send its proposal to retain the collateral to (1) any other secured party from whom the foreclosing party has received notice of a claim to the collateral, and (2) any other secured party who has perfected a security interest in the collateral by filing a financing statement or noting its security interest on a certificate of title. If a notified party objects within 20 days after the secured party sends the notice, the collateral must be disposed of by sale.
• The secured party must also obtain the debtor’s consent. The debtor consents by either: (1) agreeing in an authenticated record after default, or (2) in the case of a full strict foreclosure, failing to make an authenticated objection within 20 days after the secured party sends notice (a debtor can’t consent to a partial strict foreclosure in this manner).

Exceptions:

• consumer transaction, can’t keep collateral in partial satisfaction of debt and then seek deficiency, the secured party may keep the collateral only in full satisfaction.
• If the debtor has paid 60% of the cash price on a PMSI in consumer goods, or 60% of the loan on a non-PMSI in consumer goods, the secured party must dispose of the collateral within 90 days after repossession.

Question 55

Resale of Collateral

Answer 55

1. after default, may sell, lease, license, or otherwise dispose of the collateral in its condition when repossessed or after reasonable preparation. The sale discharges SI under which sale is being made and all subordinate SIs.
2. NOTICE: Must give reasonable notice of sale: authenticated by secured party (can’t be oral), given to debtor and sureties, to any other secured parties who have notified secured party of interests, and any secured parties who have perfected by filing a financing statement or making a notation on a certificate of title. Notice not necessary when perishable goods, or stock. Must give notice within reasonable time before sale.
3. Every aspect must be commercially reasonable: sufficient advertising, market for the item contacted, convenience of time and place of sale (if public auction), whether attempted to get the best price for the item.
4. Proceeds of sale get paid of like liens do on property. Any left overs go to debtor. But if not enough money, can get deficiency judgment.
5. Liability of fail to comply with rules: liable for actual damages, if collateral is consumer good, debtor gets damages, could presumptively lose right to any deficiency.

Question 56

Debtor’s right to redeem

Answer 56

Any time before the secured party has resold the collateral or has entered into a contract for its disposition, or the obligation has been discharged by the secured party’s retention of the collateral, the debtor (as well as any surety or other secured party or lienholder) may redeem the collateral. To do so, the debtor must tender fulfillment of all obligations secured by the collateral, plus additional reasonable expenses.

Question 57

Fixtures

Answer 57

1. Fixture filing must be made in the office where a mortgage on the real estate would be filed. The filing must reasonably identify the real estate and show the name of the owner if the debtor does not have an interest of record in the real estate.
2. Rights on default: When the security interest in the fixture has priority over all interests in the real property, the holder of the security interest in the fixture may, upon default, remove the fixture from the real property. If the debtor does not own the property from which the collateral is removed, the creditor must reimburse the owner of the property for the cost to repair damage to the property caused by removal, but not for any other diminution in value.

Question 58

Fixtures: Priority: Secured Party v. Real Estate Interest

Answer 58

Subsequent real estate interest: a security interest in fixtures has priority over any real estate interest that is recorded subsequent (after) to the perfection of the SI by fixture filing

Prior real estate interest: A prior real estate interest that is properly recorded has priority over a security interest that subsequently arises.

• Exception: a PMSI takes priority over an earlier time in realty interest if its perfected by fixture filing before the goods become fixtures or within 20 days thereafter.
• Exception: a construction mortgage takes priority over a subsequent PMSI in fixtures, even if the security interest is perfected by a fixture filing within 20 days of affixation.

Question 59

When is a fixture filing unnecessary?

Answer 59

1. Readily removable collateral
2. Consent, Disclaimer, or Right to Remove

Question 60

Accessions

Answer 60

Definition: accessions are goods that are physically united with other goods in such a manner that the identity of the original goods is NOT lost

Perfection: IF SI is perfected when the collateral becomes an accession, the SI remains perfected in the collateral.

Priority: normal rules apply

• special rule: vehicles–a SI in an accession is subordinate to a SI in a whole which is perfected by compliance with requirements of certificate of title statute.
• A secured party may remove an accession from other goods if the security interest in the accession has priority over the claims of every person having an interest in the whole. The secured party removing the accession is responsible for the cost of repair of any physical injury to the whole or the other goods. A person entitled to reimbursement may refuse permission to remove until the secured party gives adequate assurance for the performance of the obligation to reimburse.