Secured Transactions

Question 1

Attachment

Answer 1

1. security agreement
   1A: in writing, authenticated by debtor, reasonably identifies collateral
   1B: control (non consumer deposit accounts, electronic chattel paper, investment property); possession
2. creditor gives value
3. debtor has rights in the collateral

Question 2

types of collateral (4 + 8)

Answer 2

• consumer goods = used/bought for HH/personal use
• equipment = used/bought for business use
• farm products = used/bought for farming
• inventory = held for sale/lease; used/consumed in business in a short time
• deposit account = bank account
• account = right to payment for property/services rendered
• instruments = paper representing right to money
• documents = right to receive goods
• chattel paper = record of monetary obligation + security interest in goods
• investment property = stocks/bonds
• commercial tort claim
• general intangible

Question 3

methods of perfection (6)

Answer 3

1. automatic – PMSI in consumer goods
2. possession
3. control (ONLY WAY to perfect non consumer deposit accounts)
4. notation on certificate of title (ONLY WAY to perfect vehicles)
5. financing statement (debtor’s name not SERIOUSLY MISLEADING, reasonably identify collateral, creditor’s name)
6. proceeds

Question 4

priority rules (secured, unsecured, buyers, judgment lien creditors, statutory lien holders)

Answer 4

0. perfected security interests prevail over unperfected security interests
1. between perfected security interests = first to file or perfect
   ~interests perfected by control prevail over non-control
   ]3. between unperfected security interests = first to attach
2. A secured party loses to an authorized sale (express or implied)
3. A buyer in the ordinary course takes free of any security interests created by th seller
4. A buyer not in the ordinary course takes free of unperfected security interests (unless notice), but subject to perfected security interests
5. consumer-consumer sales: a buyer takes free of security interests if no knowledge, of value, for household purposes, before a financing statement was filed
6. judgment lienholder prevails over a security interest if the lien arose before the interest was perfected
7. statutory lien holders/Art. 2 claimants with possession have priority

Question 5

PMSI Priority Rules

Answer 5

• PMSI in consumer goods: perfected automatically upon attachment
• PMSI in goods other than inventory/livestock: prevail over conflicting interests if perfected within possession or within 20 days
• PMSI in inventory/livestock: prevail over conflicting interests if perfected by the time debtor gains possession of collateral and prior creditors are given notice
• between two PMSIs: seller financed beats financer financed
• PMSI filed within 20 days after collateral receipt takes priority over a judicial lien created during that time

Question 6

Rules for Deposit Accounts

Answer 6

• must be perfected by control–> automatic by bank maintaining control, OR put in secured party’s name, or authorize secured party to access
• priority: first to account in secured party’s name, then bank maintaining account
• a transferee from a deposit account takes free of security interests

Question 7

Rules for Proceeds - definition, perfection, priority

Answer 7

Definition of proceeds = anything received from the sale/exchange/collection of collateral

• creditor automatically has a security interest in identifiable proceeds if attached in the collateral
• lowest intermediate balance rule: to find identifiable cash proceeds that are intermingled, compare the bank balance at deposit to point at which identifying the rule. lowest balance is identifiable (can’t exceed deposit amount)

-perfection: receive automatic perfection for 20 days; which continues if identifiable cash, “same office” rule (OG collateral is perfected, proceeds would be perfected by filing in the same place, proceeds weren’t bought with cash), or if perfect

-priority:
filing collateral has same priority date as the original
non filing collateral (i.e. collateral perfected through possession): receive priority if had priority in the original collateral, perfect proceeds, proceeds are cash or the same type as original collateral

Question 8

Fixtures

Answer 8

• definition = so related to real property that goods become permanently attached
• perfection: fixture filing in the county where mortgage would be filed
• priority: construction mortgage > PMSI with a fixture filing within 20D > prior real estate interest > fixture > subsequent real estate interest
• foreclosure: creditor can remove the fixture but may need to reimburse the owner of real property

Question 9

Accessions

Answer 9

• definition = physically united with other goods but can still see them
• perfection: if perfected when collateral becomes an accession, stay perfected
• priority: interest in accession < interest in whole perfected through certificate of title statute

Question 10

Ways to extend the scope of a security interest

Answer 10

1. future advance clause
2. after-acquired property clause (in the absence of a clause, security interest only reaches collateral the debtor had at the time agreement was signed, unless of a type that is rapidly depleted/replenished)
3. proceeds

Question 11

remedies on default

Answer 11

• self-help repossession (with judicial process or another method without breach of the peace)
• strict foreclosure, unless a secured party objects in 20D, no consent for debtor
• resale of collateral