Secured Transactions

Question 1

Consumer goods

Answer 1

Goods used or bought primarily for personal, family, or household purposes

Question 2

Equipment

Answer 2

Goods that are used or bought for use in a business

Question 3

Farm Products

Answer 3

Crops or livestock or supplied used or produced in farming operations or products of crops or livestock in their unmanufactured states

Question 4

Inventory

Answer 4

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 5

Instruments

Answer 5

Pieces of paper representing the right to be paid money

Question 6

Documents

Answer 6

A document that represents the right to receive goods

Question 7

Chattel paper

Answer 7

A record or records which evidence both a monetary obligation and a security interest in or a lease of specific goods

Question 8

Investment Property

Answer 8

Stocks, bonds, mutual funds, and brokerage accounts

Question 9

Deposit Accounts

Answer 9

An account maintained with a bank (nonconsumer deposit accounts - NCDA are typically covered by Article 9)

Question 10

Attachment

Answer 10

1. parties must agree to create the security interest (authenticated SA, control of NCDA, possession of collateral)
2. value must be given and
3. debtor must have rights in the collateral

Question 11

Commingled Cash Proceeds

Answer 11

Lowest intermediate balance rule: Bank account balance at time the proceeds are deposited vs. ending balance. Lowest balance during the time period is the secured party’s identifiable proceeds

Question 12

5 Methods of Perfection

Answer 12

1. filing financing statement
2. taking possession
3. control over NCDA
4. automatic perfection
5. temporary perfection

Question 13

Automatic Perfection

Answer 13

Occurs with PMSI in consumer goods
***note: not for motor vehicles or fixtures

Question 14

Control and NCDA

Answer 14

The bank in which the account is maintained automatically has control over the NCDA. Otherwise:
- putting the account in the secured party’s name OR
- agreeing in an authenticated record with the debtor and the bank that the bank will comply with the secured party’s wishes

Question 15

Perfection - Motor Vehicles

Answer 15

ONLY be perfected through notation on the certificate of title UNLESS for dealers who have vehicles in inventory for sale or lease (can use financing statement)

Question 16

FS Requirements

Answer 16

1. debtor’s name and mailing address
2. secured party’s name and mailing address
3. description of the collateral (can be supergeneric)

Question 17

Perfection in Proceeds

Answer 17

If perfected in collateral, SP is automatically perfected in proceeds for 20 days after receipt of the proceeds and will continue to IF:
1. proceeds are identifiable cash
2. if originally perfected by filing, a security interest in the type of collateral of proceeds would be filed in the same place AND were not purchased with cash proceeds
3. the security interest is perfected within the 20-day period

Question 18

PMSI superpriority - Equipment

Answer 18

PMSIs in equipment are superior to prior perfected security interests in the same collateral IF: perfected before or within 20 days after the debtor receives possession of the goods

Question 19

PMSI superpriority - Inventory

Answer 19

PMSIs in equipment are superior to prior perfected security interests in the same collateral IF:
1. perfected at the time debtor gets possession of inventory and
2. any secured party who has filed receives authenticated notice before the debtor receives possession

Question 20

Conflicting PMSIs

Answer 20

Seller-financed PMSI has priority or first to file or perfect if no seller

Question 21

Priority and NCDAs

Answer 21

Perfected by control or if all by control then: perfected by putting the deposits in the party’s name has priority over bank that maintains

Question 22

Buyer in the ordinary course

Answer 22

Takes free of non-possessory interest created by the buyer’s seller, even if perfected
BIOC if bought:
1. in good faith
2. without knowledge that the sale violates the rights of another person and
3. in the ordinary course of business from a seller in the business of selling goods of that kind

Question 23

Buyers NOT in ordinary course

Answer 23

Take subject to perfected security interests and take free from unperfected security interests unless they know of the interest when they give value or take delivery

Question 24

Consumer to Consumer Sales

Answer 24

Takes free even if perfected IF: 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 FS covering the goods has been filed

Question 25

Secured party v. judicial lien

Answer 25

judicial lien wins if it becomes a judicial lien creditor before the security interest is perfected (OR obtained a SA and filed a FS)

***If PMSI - must file FS within 20 days after debtor receives goods to have priority (grace period)

Question 26

Secured party v. statutory lien holder

Answer 26

Statutory lien wins if the goods or services were provided in the ordinary course of business and the collateral remains in the lien holder’s possession

Question 27

Fixture Perfection

Answer 27

Fixture filing must be made in the office where a mortgage on the real estate would be filed

Question 28

Secured party in fixture v. subsequent real estate interest

Answer 28

Secured in fixture has priority over any real estate interest recorded subsequent to perfection by fixture filing

Question 29

Secured party in fixture v. prior real estate interest

Answer 29

Prior real estate interest has priority
***For PMSIs - exception if perfected by fixture filing before the goods become fixtures or within 20 days thereafter

Question 30

Accessions

Answer 30

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

Question 31

Accessions and vehicles

Answer 31

A security interest in an accession is subordinate to a security interest in a whole which is perfected by compliance with the requirements of a certificate-of-title statute