Secured Transactions Flashcards
Under Article 9, a creditor must take 2 steps to gain the full protection of secured transactions law
attach a security interest to the collateral and
perfect the security interest
Attachment
security agreement
possession
control
(rights visa vi the debtor)
security agreement
a written agreement that certain personal property will serve as collateral
(1) describe collateral
(2) the party offering the collateral must have rights in it
(3) party exchanging security interest must give value in exchange
Perfection
steps necessary to create a security interest effective against the world (creditor rights visa vi other creditors)
consumer goods
goods used or bought for personal or household purposes
inventory
goods held for sale or lease and supplies/materials quickly used up in business
equipment
any physical goods other than consumer goods, inventory, or farm products
accounts
a right to payment (accounts receivable)
deposit accounts
a bank account
PMSI
Purchase money security interest
* arises when the lender loans money to the borrower specifically for the buyer to purchase certain goods, and the lender takes a security interest in those goods.
Seller-financed PMSI
secured party sells collateral on credit
retains security interest in collateral
Financer-financed PMSI
loan to purchase collateral
load used to acquire that collateral
creditor takes security interest in that collateral
after acquired property clause (provision in K)
gen rule - security interest only reaches collateral debtor had rights in at time of signing security agmt (want diff? - say it)
exception - collateral if of a type rapidly depleted and replenished (ex. inventory accts)
future advance clause
grant of security agreement securing future loans with same collateral
1 way to perfect?
filing a financing statement
intangible property includes
accounts - right to payment for property sold or services rendered
a secured sale disguised as a lease
lessor receives item (rental car) when still has some meaningful economic value
- reasonably likely lessor will get item back? if no, governed by art. 9
Creation of security interest (attachment)
- security agreement
- can be oral if collateral in possession of secured party (pledge)- record w/ intent to create a security interest (any language)
- authenticated by debtor (signed)
- describe collateral (reasonably identify, not super generic)
- value given
- debtor has rights in collateral
How to perfect
- Attached &
- another method of perfection
methods of perfection
A perfect cat naps frequently
- automatic perfection
- possession
- control
- notation on certificate of title
- perfecting by filing a financing statement
automatic perfection
ex. PMSI in consumer goods (auto perfection upon attachment)
possession
ex. goods
$ - this is the only way
control
non-consumer deposit accts - this is the only way
- automatic control
- putting deposit account in secured partys name
- control agmnt
notation on certificate of title
ex. cars and trucks
- gov’t authority notes lien (only way for perfection here - title status)
exception - holding a car/truck as inventory
perfecting by filing a financing statement
(UCC-1)
- debtors name
- mistakes in statement ok unless statements seriously misleading
- not seriously misleading if SOS record would pull
- name change ok for 4 months
- describe collateral (super generic description ok here
- does not have to state after acquired property
- secured party’s name
- no signature required, however, must be authorized.
- file w/ SOS
- if real estate related - county clerk
where to file financing statement
where debtor located
corp - where incorporated
LLP - place of business
if debtor moves out of state - 4 months
if collateral moves out of state - 12 months
how long is a financing statement good for
5 years
how can you continue financing statement
by filing a CONTINUATION STATEMENT 6 months before the 5 year mark.
after creditor pays off
termination statement (20 days)
priority rules
determined which creditor is 1st in line to get paid.
perfected secured party v. perfected secured party
first to file or perfect (whatever is earlier)
unperfected secured party v. unperfected secured party
first to perfect wins
unperfected v. perfected
perfected wins
PMSI in goods (priority)
not inventory or livestock….jumps to front of priority line if perfected immediatley or within 20 days
superiority for PMSI in inventory/livestock
takes priority over conflicting security interest if
before debtor receives possession
- secured party perfects &
- sends authenticated notice to other holders &
- notice received within 5 years of debtor getting possession
special priority rules for conflicting security interests in deposit accounts
deposit accts control
best - co-owner
next best - maintain acct.
worst - control agmt
Secured party v. buyer
secured party wins unless authorized sale
BIOC rule
buyer in the ordinary course
- takes free of a security interest
- created by his/her seller
BIOC means -
buyer in good faith
without knowledge of violations
in ordinary course
from seller of goods of that kind
buyers not in ordinary course
take subject to perfected interests
take free of unperfected security interests
consumer to consumer special rule
buyer takes free of security interest if
- no knowledge
- value
- personal use
- no financing statement
secured party v. judgment lienholder
judgment lienholder wins if lien arose before security interest was perfected
secured party v. possessory (statutory) lien holder
statutory lienholder wins if they maintain possession of callateral
replevin
ct. proceeding to repo collateral if equipment can render it unusable
