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Bar Exam > Secured Transactions > Flashcards

Secured Transactions Flashcards

1
Q

4 classes of of tangible collateral (goods)

A

consumer goods, inventory, farm products, equipment

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2
Q

classify:

  1. check or promissory note
  2. check along with security agreement
  3. right to be paid for service rendered
  4. savings account at bank
A
  1. instruments
  2. chattel paper
  3. accounts
  4. deposit account
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3
Q

you need an after acquired property clause except for what

A

inventory and accounts (rebuttable presumption)

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4
Q

4 requirements for a consignment to be subject to Art. 9

A
  1. consignor delivers goods to merchant (consignee) to sell
  2. 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
  3. value of goods must be at least $1k per delivery
  4. goods must not be consumer goods right before delivery
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5
Q

don’t need new security agreement when debtor buys additional collateral if original security agreement has what

A

after acquired property clause

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6
Q

when does buyer of goods take free of unperfected SI

A
  1. gives value
  2. receives delivery of the collateral
  3. without knowledge of the existing SI
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7
Q

after acquired clause are not effective in consumer goods unless

A

debtor acquires them within 10 days after SP gives value

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8
Q

even if they say it’s a lease, we will treat as art. 9 secured transaction if one of these four is met

A
  1. original lease is equal to or greater than goods remaining economic life
  2. lessee is bound to renew the lease for good’s economic life (or bound to become owner)
  3. lessee has option to renew lease for the goods remaining economic life for nominal or nothing
  4. lessee has option to become owner at the end of the lease for nominal or no
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9
Q

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

A
  1. remains perfected for 4 months after move (unless f/s lapse earlier). Then must refile within that window to stay perfect
  2. SP has 1 year to file new f/s listing new debtor
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10
Q

five non moveable goods

A
  1. fixtures
  2. standing timber
  3. unborn animals
  4. growing crops
  5. double wides
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11
Q

upon default what happens when SP has priority in a fixture

A

can remove from the real estate but will be liable for any damage caused by removal

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12
Q

how must collateral be described in financing statement

A

must sufficiently indicate the collateral

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13
Q

chattel paper is a record with what two components

A
  1. monetary obligation and
  2. security interest in specific goods (security agreement) or a lease of specific goods
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14
Q

three things needed to attach

A
  1. value has been given by SP
  2. debtor has rights in collateral
  3. debtor has authenticated a s/a describing the collateral, or SP has control/possession of the collateral
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15
Q

what is a BIOCOB

A
  1. buys goods (not farm products) in ordinary course of biz
  2. from a merchant in that biz
  3. in good faith
  4. without actual notice that the sale violates the rights of another

no pawnbrokers

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16
Q

difference between accession and commingled goods and what happens to SIs attached to them

A

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

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17
Q

minimum info for f/s

A
  1. debtors name
  2. name of SP or his rep
  3. the collateral covered
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18
Q

a SI in proceeds enjoys temporary perfection for 20 days and then what must happen to continue perfection

A
  1. if original f/s is broad enough to encompass it - okay
  2. amend f/s
  3. if proceeds are identifiable cash proceeds and the SI in original collateral was perfected - okay
  4. same office rule applies - okay
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19
Q

what can a BIOCOB do

A

take free of a perfected security interest (or unperfected) even if buyer knows about it

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20
Q

when does statutory lien claimant beat perfected Sp

A

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

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21
Q

when does SP not have to give notice of disposition to other parties

A
  1. collateral is perishable or will tank in value very fast
  2. collateral is customarily sold on a recognized market or
  3. notice is waived by authenticated agreement after default
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22
Q

where do you file f/s

A

generally with Secretary of State of debtor’s location

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23
Q

security interest in _____ can be perfected only by control

A

deposit account

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24
Q

when does same office rule apply

A

temporary perfection in proceeds stays perfect forever under same office rule if

  1. filed f/s covers original collateral
  2. proceeds are collateral in which a SI may be perfected by filing in the same office as the original was
  3. proceeds are not acquired with cash proceeds
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25
Q

when can perfection occur as it relates to attachment

A

after or at same time as attachment

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26
Q

who has priority in car radio installed in vehicle that was perfected under certificate of title

A

accession is subordinate to a SI in whole collateral if that collateral was perfected via certificate of title

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27
Q

who wins in SP v. judicial lien creditor

A

judicial lien takes subject to existing perfected SI but generally has priority over unperfected

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28
Q

PMSI in what attaches automatically

A

consumer goods

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29
Q

PMSI in fixtures has priority over a prior interest in real property with which they are associated when what two things occur

A
  1. debtor has interest in the real property (owner) or is in possession (lessee)
  2. SI is perfected by a fixture filing before the goods become fixtures or within 20 days thereafter
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30
Q

what is garage sale rule

A

usually buyer takes subject to perfected SI. garage sale exception applies if

  1. buyer buys consumer goods for value
  2. from another consumer
  3. for his own personal, family, household use and
  4. 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)

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31
Q

general rule for perfect SP v. perfect SP

A

first to file or perfect

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32
Q

when there’s been a default the SP can repossess in what two ways

A
  1. judicial process (replevin)
  2. self help
33
Q

what is the general rule for a SI in fixtures versus a real property interest to which it is associated?

A

security interest in fixtures is subordinate to conflicting interest of an owner of the related real property

34
Q

in order for a SI in a fixture to have priority over an interest in the real property, what must happen?

A

SP must file a fixture filing before the property interest is recorded. must be filed in the office where the mortgage will be

35
Q

rule for priority when you have unperfected SP v. unperfected SP

A

first to attach wins

36
Q

what self help measures are generally okay

A

trespass to the collateral (getting in car) or debtor’s land (but not the garage or house)

37
Q

priority rule for PMSI in goods other than inventory or livestock

A

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

38
Q

priority rule for a lender with a PMSI versus a seller with a PMSI

A

seller wins

39
Q

rule for construction mortgages and subsequent security interests in fixtures

A

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

40
Q

upon default what happens when SP has priority in an accession

A

can remove the accession from the other goods but will have to pay for damage

41
Q

priority rule for PMSI in inventory or livestock

A

PMSI will have priority over all other security interests in the same inventory or livestock if the SP

  1. perfects before the inventory or livestock is delivered to debtor and
  2. sends an authenticated notification of the PMSI to other SPs
42
Q

SP’s options upon default

A
  1. repossess and sell or retain in satisfaction
  2. initiate a judicial action to get a judgement
  3. pursue other courses of action to which debtor and SP have agreed
43
Q

when is a disposition commercially reasonable

A
  1. sold in usual manner in recognized market that has standardized prices for fungible goods
  2. sold at price current in recognized market or
  3. disposed of in conformity with reasonable commercial practices long dealers in that type of collateral
44
Q

if SP sells collateral, cash proceeds are paid out in what order

A
  1. reasonable costs of the sale
  2. debt of foreclosing party
  3. debt of junior interests
  4. surplus goes to debtor
45
Q

what is the PMSI grace period for collateral besides consumer goods

A

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

46
Q

what are the kinds of intangible goods

A
  1. instruments
  2. chattel paper
  3. investment property
  4. accounts receivable
  5. deposit accounts
47
Q

rule for if after acquired property will be included

A

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

48
Q

priority rule for unperfected sp v. unperfected sp

A

first to attach wins

49
Q

what do you need for perfection

A

attachment AND one of five ways:

  1. file financing statement
  2. certificate of title
  3. possession
  4. control
  5. automatic PMSI in consumer goods
50
Q

how do you maintain perfection through expiration

A

 Financing statement is good for 5 years, just file continuation statement within 6 months of ending to get 5 more years

51
Q

how to maintain perfection through name change

A

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

52
Q

how to maintain perfection through collateral use change

A

don’t need to do anything

53
Q

how to maintain perfection through debtor moving out of state

A

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

54
Q

how to maintain perfection through collateral moving out of state

A

SP has one year to file a new financing statement in the new jurisdiction

55
Q

how to maintain perfection in proceeds

A

if perfected in original, automatically perfect in proceeds for 20 days. Then must AMEND financing statement (or re perfect another way) unless

  1. proceeds are identifiable cash
  2. same office rule applies
56
Q

how do you analyze choice of law if debtor is an individual, registered org, or unregistered org

A

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

57
Q

special PMSI rule for lien creditor v. sp

A

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)

58
Q

special rule for lien creditor v. sp with future advance

A

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

59
Q

Special PMSI rule for PMSI in goods other than inventory and livestock

A

 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

60
Q

special PMSI rule for PMSI in inventory

A

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

61
Q

what if you have two conflicting PMSIs?

A

if it’s seller v. lender, seller wins

if both lenders, FTFOP

62
Q

what happens to buyer if there’s an unperfected secured party

A

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

63
Q

what if buyer bought and there was a mistake on f/s

A

buyer takes free if reasonably relied on the bad info

64
Q

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?

A

o As long as secured party gets the financing statement in on time, SP will take priority over B

65
Q

three exceptions when a buyer won’t take subject to a security interst

A
  1. authorized sale
  2. BIOCOB
  3. Garage sale rule
66
Q

what is the shelter princicple

A

 If the buyer’s seller did not create the security interest but was a BIOCOB himself, then the buyer is also protected

67
Q

definition of BIOCOB

A

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

68
Q

rules for non BIOCOBS

A

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

69
Q

does a transferee take free if it is funds from a deposit account?

A

yes, doesn’t matter if it was perfected or not

70
Q

general rule for future advances

A

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

71
Q

what is an example of breaching the peace

A

verbal objection + act

72
Q

rules around strict foreclosure for consumer goods

A

no partial

can’t do it if debtor has already paid 60% or more

73
Q

Perfect SP v. Perfect SP

A

FTFOP

74
Q

Perfect Sp v. Unperfect Sp

A

perfect wins

75
Q

Unperfected Sp v. Unperfeced Sp

A

first to attach

76
Q

Sp v. Judicial Lien

A

whichever arose first (perfection or lien)

77
Q

Sp v. Buyer

A

buyer with interest attached unless exception applies

78
Q
A

Bar Exam (7 decks)

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