Secured Transactions

Question 1

Attached

Answer 1

A security interest that is enforceable against a debtor is said to be “attached”. Attachment requires (1) value given to the secured party (2) debtor has rights in the collateral (3) debtor has authenticated a security agreement or the debtor has control of the collateral.

Question 2

Perfection

Answer 2

Perfection of a security interest is generally needed for the secured party to have rights in the collateral that are superior to any rights claimed by others.

Question 3

BOCB

Answer 3

A buyer in the ordinary course of business takes free of a security interest even if their interest is perfected and the buyer knows of its existence. A BOCB is a person who buys goods in the ordinary course of business from a merchant and the merchant regularly deals in this business in good faith and without knowledge that the sell violates the rights.

Question 4

What article of the UCC governs secured transactions?

Answer 4

9

Question 5

PMSI

Answer 5

A PMSI in goods exist when a secured party sold goods to the debtor and the debtor incurs an obligation to pay the secured party all or part of the purchase price.

Question 6

6 part test to determine priority

Answer 6

1. Determine if this is a secured transaction problem
2. Identify and Classify the Property at Issue
3. Determine which parties have or claim an interest in the collateral
4. At least one will be a secuired party with a security Interest
5. Use this information to find the appropriate priority Rule
6. Apply the priority rule to the facts

Question 7

Security Interest

Answer 7

A security interest is interest in personal property or fixtures that secures payment or performance of an obligation.

Question 8

Scope of Article 9

Answer 8

• Must be consensual
• Must involve personal property or fixtures
• regardless of form means that courts will look at the substance of the transaction and not the name of the form

Question 9

4 Mutually Exclusive Categories for Classifying Collateral

Answer 9

Champion Gecko facing poodies Iguana Escape,

C G- Consumer goods

F P- Farm Products

I- Inventory

E- equipment

Question 10

4 types of rights to payment

Answer 10

Impatiant Cow pushes Adorable Pony inside.

I- Instrument
C- Chattel Paper
A- Accounts
P- Payment Intangible

Question 11

Security Agreement

Answer 11

RAD

R- Recorded: doesnt have to be written on paper, but must be recorded in a record.
A- Authenticated: need signataure of debtor
D- Described - must describe the collateral, can’t be super generic

Question 12

Possession or control of collateral

Answer 12

Alternative to an authenticated record.

Question 13

After Acquired Property

Answer 13

If there is no reference to after acquired property, the security interest only attach to the collateral that existed at the time that the security agreement was executed

Unless inventory or account, there is a rebutable presumption.

Question 14

Accessions v Commingled Goods

Answer 14

Accessions- goods that are physically unique and can be identified from other goods so that the goods and its security interest is not lost.

Commingled- Security interst in commingled goods do not continue because their individual identity is lost.

Question 15

Proceeds

Answer 15

If a security interest attaches to the collateral, it also attaches to the proceeds automatically.

It automatocally perfects for 20 days, then 1. the secured party must amend the financing statement unless its already broad enough 2. cash proceeds stay perfected, 3. same office rule.

Question 16

Financing Statement

Answer 16

1. Need legal correct name of the debtor (almost always errors in the name will make invalid)
2. Name of secured party
3. Desciption of Colleteral (can be super generic)

Must be filed where the debtor is located.

Question 17

Duration of Financial Statement

Answer 17

Lapse 5 years after filing, can be continued by filing a statement within 6 months of lapse.

Question 18

What security interest can ONLY be perfected by control?

Answer 18

Deposit accounts and letter of credit rights

Question 19

Time period to correct state of filing and name changes

Answer 19

4 months

Question 20

Perfected v. Perfected

Answer 20

first to file or perfect take priority

Question 21

Perfected v. Unperfected

Answer 21

perfected beats unperfected

Question 22

Unperfected v. unperfected

Answer 22

first to become attached or become effective

Question 23

Perfected v. Judicial Lien

Answer 23

perfected takes priority over a lien

Question 24

unperfected v. Judicial lien

Answer 24

lien takes priority over unperfected

Question 25

perfected v. statutory lien

Answer 25

statutory takes priority

Question 26

Buyer v. perfected security Interest

Answer 26

In general, a buyer takes subject to a perfected security interest

Question 27

2 exceptions to buyer taking subject to a perfected security interest

Answer 27

1. BIOCB- Buys goos from merchant, ordinary course of merchant business, buyer acts in good faith and without knowledge that the sale violates the rights of others in the same goods.
2. garage sale- Buyer takes free of security interst if the buyer buys goods for value, for the own personal use, from a consumer seller, and without knowledge of the security interest unless the secured party filed a financing statement prior to the sale.

Question 28

Bright line Test

Answer 28

The leasee of the property is obligated to pay the full obligation under the lease whether or not they terminate the lease early AND the remaining term of the lease is equal to or greater than the economic life or the leasee is required to renew, or the leasee has the option to renew for the remaiing life of the goods, or option to become the owner

Question 29

2 ways to repossess goods

Answer 29

1. judicial process
2. self help (can’t breach the peace)

Question 30

Distribution of cash proceeds

Answer 30

1. reasonable expenses for the collection and enforcement
2. pay the debt to the foreclosing party
3. pay junior debtors
4. any surplus to the debtor

Question 31

Judicial Lien Creditor

Answer 31

A creditor who acquires a lien on the collateral by a judicial process.

Question 32

How can a secured party perfect its security interest

Answer 32

1. filing a financial statement
2. possession
3. control
4. automatic

Question 33

BOCB

Answer 33

A buyer in the ordinary course of business takes free of a security interst created by seller. A BOCB is one who buys goods in the ordinary course of business from a merchant who is in the business of selling goods of that kind in good faith and without actual knowledge of violating a the rights of another.

Question 34

Equipment

Answer 34

a catchall class for goods that are not consumer goods, farm equipment, or inventory

Question 35

Inventory

Answer 35

Goods that are held for sale or lease

Question 36

Accounts

Answer 36

Rights to payment fro goods sold, property licensed, or services rendered