Secured Transactions Flashcards
What is a BIOCOB
Buyer in the Ordinary Course of Business.
Must:
(1) buy goods (not farm products) in the ordinary course of business
(2) from a merchant who is in the business of selling goods of that kind
(3) in good faith
(4) without actual notice that the sale violated the rights of another in the same goods
can not be a pawnbroker
Accession goods
physically united with other goods so that the identity of the original goods is not lost - security interest in the accession continues in the accession
ex. car radio
Commingled goods
physically unites goods with other goods to the point their identity is lost- security interest in the good itself does not continue but it attached to the larger product
ex. eggs in a cake
Is a buyer of collateral subject to a perfected security interest?
Generally - yes
However secured party may authorize the sale free of the interest
When does a security interest continue in proceeds
(1) the original financing statement is broad enough to encompass the proceeds or the secured party amends the financing statement within 20 days
(2) if the proceeds are identifiable cash proceeds and the security interest in the original collateral was perfected (note that cash proceeds includes checks and deposit accounts)
(3) the same office rule applies
Statutory Lien Claimant v Perfected Secured Creditor
Statutory lien claimant has priority provided:
(1) lienholder has possession of the goods
(2) lien secures the payment or performance of an obligation for services or materials furnished in the ordinary course of the person’s business
ex. mechanic lien
Secured party is not required to send a notice of disposition when
(1) collateral is perishable or threatens to decline speedily in value
(2) collateral is customarily sold on a recognized market’
(3) notice is waived by an authenticated agreement after default
Where must a financing statement be filed
Generally, must be filed with the Secretary of State of the state of the debtor’s location
Deposit accounts may be a security interest only if:
Secured party takes control
Same Office Rule
temporary perfection in proceeds may continue indefinitely if:
(1) filed financing statement covers the original collateral
(2) proceeds are collateral in which a security interest may be perfected by filing in the same office as the original financing statement
(3) proceeds are not acquired with cash proceeds
Judicial Lien Creditor v. Security Interest
Perfected:
judicial lien creditor takes subject to an existing perfected security interest
Unperfected:
judicial lien creditor generally has priority over an unperfected security interest
When does a PMSI in fixtures have priority over a prior interest in the real property it is fixed to when
(1) debtor has an interest in the real property (is the owner) or is in possession (lessee)
(2) the security interest is perfected by filing before the good becomes a fixture, or within 20 days from when it becomes a fixture
Garage Sale Rule
Governs consumer to consumer sales
Buyer will take free of a security interest even if it is perfected, if:
(1) the buyer buys consumer goods for value
(2) from a consumer seller
(3) for personal, family, or household use
(4) without knowledge of the security interest
Exception - if prior to the sale, the secured party filed a financing statement for the goods, the interest is still good against the new buyer
Attachment requires
(1) value has been given by the secured party
(2) debtor has rights in the collateral
(3) security agreement/ possession/ control
What provides notice of a security interest to establish a claim superior to others?
Perfection
