Secured Transactions Flashcards
4 classes of of tangible collateral (goods)
consumer goods, inventory, farm products, equipment
classify:
- check or promissory note
- check along with security agreement
- right to be paid for service rendered
- savings account at bank
- instruments
- chattel paper
- accounts
- deposit account
you need an after acquired property clause except for what
inventory and accounts (rebuttable presumption)
4 requirements for a consignment to be subject to Art. 9
- consignor delivers goods to merchant (consignee) to sell
- merchant must deal in goods of that kind, not operate under name of consignor, not be known to be engaged in selling goods of others, not be an auctioneer
- value of goods must be at least $1k per delivery
- goods must not be consumer goods right before delivery
don’t need new security agreement when debtor buys additional collateral if original security agreement has what
after acquired property clause
when does buyer of goods take free of unperfected SI
- gives value
- receives delivery of the collateral
- without knowledge of the existing SI
after acquired clause are not effective in consumer goods unless
debtor acquires them within 10 days after SP gives value
even if they say it’s a lease, we will treat as art. 9 secured transaction if one of these four is met
- original lease is equal to or greater than goods remaining economic life
- lessee is bound to renew the lease for good’s economic life (or bound to become owner)
- lessee has option to renew lease for the goods remaining economic life for nominal or nothing
- lessee has option to become owner at the end of the lease for nominal or no
rule for when debtor moves to another state
rule for when collateral is transferred to person in another state who takes subject to the SI
- remains perfected for 4 months after move (unless f/s lapse earlier). Then must refile within that window to stay perfect
- SP has 1 year to file new f/s listing new debtor
five non moveable goods
- fixtures
- standing timber
- unborn animals
- growing crops
- double wides
upon default what happens when SP has priority in a fixture
can remove from the real estate but will be liable for any damage caused by removal
how must collateral be described in financing statement
must sufficiently indicate the collateral
chattel paper is a record with what two components
- monetary obligation and
- security interest in specific goods (security agreement) or a lease of specific goods
three things needed to attach
- value has been given by SP
- debtor has rights in collateral
- debtor has authenticated a s/a describing the collateral, or SP has control/possession of the collateral
what is a BIOCOB
- buys goods (not farm products) in ordinary course of biz
- from a merchant in that biz
- in good faith
- without actual notice that the sale violates the rights of another
no pawnbrokers
difference between accession and commingled goods and what happens to SIs attached to them
accessions -goods physically united with other goods but can be separated (frame on art). SI continues in the accession
commingled - goods that are physically united with other goods and can’t be separated (egg in cake). SI does not continue, but attaches to the larger product
minimum info for f/s
- debtors name
- name of SP or his rep
- the collateral covered
a SI in proceeds enjoys temporary perfection for 20 days and then what must happen to continue perfection
- if original f/s is broad enough to encompass it - okay
- amend f/s
- if proceeds are identifiable cash proceeds and the SI in original collateral was perfected - okay
- same office rule applies - okay
what can a BIOCOB do
take free of a perfected security interest (or unperfected) even if buyer knows about it
when does statutory lien claimant beat perfected Sp
statutory lien claimant if
1. the lien holder has possession of the goods and
2. lien secures payment or performance of an obligation for services or materials furnished in the person’s business
when does SP not have to give notice of disposition to other parties
- collateral is perishable or will tank in value very fast
- collateral is customarily sold on a recognized market or
- notice is waived by authenticated agreement after default
where do you file f/s
generally with Secretary of State of debtor’s location
security interest in _____ can be perfected only by control
deposit account
when does same office rule apply
temporary perfection in proceeds stays perfect forever under same office rule if
- filed f/s covers original collateral
- proceeds are collateral in which a SI may be perfected by filing in the same office as the original was
- proceeds are not acquired with cash proceeds
when can perfection occur as it relates to attachment
after or at same time as attachment
who has priority in car radio installed in vehicle that was perfected under certificate of title
accession is subordinate to a SI in whole collateral if that collateral was perfected via certificate of title
who wins in SP v. judicial lien creditor
judicial lien takes subject to existing perfected SI but generally has priority over unperfected
PMSI in what attaches automatically
consumer goods
PMSI in fixtures has priority over a prior interest in real property with which they are associated when what two things occur
- debtor has interest in the real property (owner) or is in possession (lessee)
- SI is perfected by a fixture filing before the goods become fixtures or within 20 days thereafter
what is garage sale rule
usually buyer takes subject to perfected SI. garage sale exception applies if
- buyer buys consumer goods for value
- from another consumer
- for his own personal, family, household use and
- without knowledge of the SI
exception to exception: SI with a PMSI in consumer goods can beat garage sale rule by filing a f/s on the consumer goods (which ordinarily you wouldn’t need to because of Automatic perfection)
general rule for perfect SP v. perfect SP
first to file or perfect
when there’s been a default the SP can repossess in what two ways
- judicial process (replevin)
- self help
what is the general rule for a SI in fixtures versus a real property interest to which it is associated?
security interest in fixtures is subordinate to conflicting interest of an owner of the related real property
in order for a SI in a fixture to have priority over an interest in the real property, what must happen?
SP must file a fixture filing before the property interest is recorded. must be filed in the office where the mortgage will be
rule for priority when you have unperfected SP v. unperfected SP
first to attach wins
what self help measures are generally okay
trespass to the collateral (getting in car) or debtor’s land (but not the garage or house)
priority rule for PMSI in goods other than inventory or livestock
PMSI will prevail over all other security interests even if those were perfected
as long as the security interest perfects before or within 20 days after debtor receives possession
priority rule for a lender with a PMSI versus a seller with a PMSI
seller wins
rule for construction mortgages and subsequent security interests in fixtures
construction mortgage has priority over any subsequent security interest in fixtures (including PMSI in fixtures) if is recorded BEFORE the goods become fixtures
and it covers only the goods that become fixtures before completion of construction
upon default what happens when SP has priority in an accession
can remove the accession from the other goods but will have to pay for damage
priority rule for PMSI in inventory or livestock
PMSI will have priority over all other security interests in the same inventory or livestock if the SP
- perfects before the inventory or livestock is delivered to debtor and
- sends an authenticated notification of the PMSI to other SPs
SP’s options upon default
- repossess and sell or retain in satisfaction
- initiate a judicial action to get a judgement
- pursue other courses of action to which debtor and SP have agreed
when is a disposition commercially reasonable
- sold in usual manner in recognized market that has standardized prices for fungible goods
- sold at price current in recognized market or
- disposed of in conformity with reasonable commercial practices long dealers in that type of collateral
if SP sells collateral, cash proceeds are paid out in what order
- reasonable costs of the sale
- debt of foreclosing party
- debt of junior interests
- surplus goes to debtor
what is the PMSI grace period for collateral besides consumer goods
20 day grace period - if SP files financing statement within 20 days of debtor taking possession, then the interest is perfected and we backdate to the date of attachment
what are the kinds of intangible goods
- instruments
- chattel paper
- investment property
- accounts receivable
- deposit accounts
rule for if after acquired property will be included
need a specific clause for this, except if its inventory
doesn’t work for consumer goods unless debtor gets new collateral within 10 days of SP making the loan
priority rule for unperfected sp v. unperfected sp
first to attach wins
what do you need for perfection
attachment AND one of five ways:
- file financing statement
- certificate of title
- possession
- control
- automatic PMSI in consumer goods
how do you maintain perfection through expiration
Financing statement is good for 5 years, just file continuation statement within 6 months of ending to get 5 more years
how to maintain perfection through name change
SP is still perfected for any collateral debtor had at the time of the name change and acquired within 4 months after the name change
SP must amend financing statement to new name within 4 months of name change to stay perfected on stuff acquired later than that
how to maintain perfection through collateral use change
don’t need to do anything
how to maintain perfection through debtor moving out of state
secured party has until financing statement expires or four months to file new financing statement in new jurisdiction or will be unperfected – whichever is sooner
how to maintain perfection through collateral moving out of state
SP has one year to file a new financing statement in the new jurisdiction
how to maintain perfection in proceeds
if perfected in original, automatically perfect in proceeds for 20 days. Then must AMEND financing statement (or re perfect another way) unless
- proceeds are identifiable cash
- same office rule applies
how do you analyze choice of law if debtor is an individual, registered org, or unregistered org
individual: principal residence
registered org: where incorporated
unregistered org with one place of biz: there
unregistered org with several places of biz: where CEO office is
special PMSI rule for lien creditor v. sp
If secured party files on a PMSI within 20 days of debtor getting possession of the collateral, SP still takes priority over LC who shows up between time of attachment and secured party filing
(Same for SP v. Buyer)
special rule for lien creditor v. sp with future advance
Rule for initial advance: did SP file first or did LC get the lien first?
Rule for future advances: a future advance by SP will take priority over LC if
1. Future advance is made without knowledge of the lien
2. Within 45 days of lien arising or
3. Pursuant to a commitment entered into without knowledge of the lien
Special PMSI rule for PMSI in goods other than inventory and livestock
When there is a PMSI in goods other than inventory or livestock, it has priority over conflicting security interests in the same goods or proceeds IF
* The PMSI is perfected at the time the debtor receives the possession of the collateral or within 20 days after
special PMSI rule for PMSI in inventory
The PMSI in inventory has to be perfected at time debtor gets possession of the inventory
o No grace period like a pmsi in goods has
Creditor must send an authenticated notice to holders of previously filed security interests in the inventory
what if you have two conflicting PMSIs?
if it’s seller v. lender, seller wins
if both lenders, FTFOP
what happens to buyer if there’s an unperfected secured party
Buyer takes free if buyer
1. Gives value and receives delivery of collateral
2. Without knowledge of the security interest and
3. Before the security interest is perfected
what if buyer bought and there was a mistake on f/s
buyer takes free if reasonably relied on the bad info
What if SP attaches on a non consumer good PMSI, but hasn’t perfected yet and B buys it before the 20 day PMSI financing statement grace period?
o As long as secured party gets the financing statement in on time, SP will take priority over B
three exceptions when a buyer won’t take subject to a security interst
- authorized sale
- BIOCOB
- Garage sale rule
what is the shelter princicple
If the buyer’s seller did not create the security interest but was a BIOCOB himself, then the buyer is also protected
definition of BIOCOB
o Buys in good faith
o Without knowledge that the sale violates the rights of a secured party
o Buys in ordinary course from person who is in the business of selling goods of that kind
rules for non BIOCOBS
Buyer takes free if
o Security interest is unperfected AND
o Buyer doesn’t know it exists
Buyer takes subject to if
o Security interest is perfected
o It’s an unperfected security interest but buyer knows about it
- Contrast to buyer in ordinary course – that guy can know about it, this guy can’t
does a transferee take free if it is funds from a deposit account?
yes, doesn’t matter if it was perfected or not
general rule for future advances
if creditor makes a future advance, the time of perfection for future advance is the time of perfection of the original advance
a buyer (not in ordinary course) can purchase the collateral and has priority if SP learned of the purchase and made the future advance anyway
what is an example of breaching the peace
verbal objection + act
rules around strict foreclosure for consumer goods
no partial
can’t do it if debtor has already paid 60% or more
Perfect SP v. Perfect SP
FTFOP
Perfect Sp v. Unperfect Sp
perfect wins
Unperfected Sp v. Unperfeced Sp
first to attach
Sp v. Judicial Lien
whichever arose first (perfection or lien)
Sp v. Buyer
buyer with interest attached unless exception applies
