Secured Transactions Flashcards
Consumer goods
Goods used or bought primarily for personal, family, or household purposes
Equipment
Goods that are used or bought for use in a business
Farm Products
Crops or livestock or supplied used or produced in farming operations or products of crops or livestock in their unmanufactured states
Inventory
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
Instruments
Pieces of paper representing the right to be paid money
Documents
A document that represents the right to receive goods
Chattel paper
A record or records which evidence both a monetary obligation and a security interest in or a lease of specific goods
Investment Property
Stocks, bonds, mutual funds, and brokerage accounts
Deposit Accounts
An account maintained with a bank (nonconsumer deposit accounts - NCDA are typically covered by Article 9)
Attachment
- parties must agree to create the security interest (authenticated SA, control of NCDA, possession of collateral)
- value must be given and
- debtor must have rights in the collateral
Commingled Cash Proceeds
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
5 Methods of Perfection
- filing financing statement
- taking possession
- control over NCDA
- automatic perfection
- temporary perfection
Automatic Perfection
Occurs with PMSI in consumer goods
***note: not for motor vehicles or fixtures
Control and NCDA
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
Perfection - Motor Vehicles
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)
FS Requirements
- debtor’s name and mailing address
- secured party’s name and mailing address
- description of the collateral (can be supergeneric)
Perfection in Proceeds
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
PMSI superpriority - Equipment
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
PMSI superpriority - Inventory
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
Conflicting PMSIs
Seller-financed PMSI has priority or first to file or perfect if no seller
Priority and NCDAs
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
Buyer in the ordinary course
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
Buyers NOT in ordinary course
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
Consumer to Consumer Sales
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
Secured party v. judicial lien
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)
Secured party v. statutory lien holder
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
Fixture Perfection
Fixture filing must be made in the office where a mortgage on the real estate would be filed
Secured party in fixture v. subsequent real estate interest
Secured in fixture has priority over any real estate interest recorded subsequent to perfection by fixture filing
Secured party in fixture v. prior real estate interest
Prior real estate interest has priority
***For PMSIs - exception if perfected by fixture filing before the goods become fixtures or within 20 days thereafter
Accessions
Goods that are physically united with other goods in such a manner that the identify of the original goods is not lost
Accessions and vehicles
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
