Secured Transactions Flashcards
Perfection of SI in Multiple States
- Generally, the law of the debtor’s location governs perfection, effect of same, and priority of SI.
- If collateral leaves debtor’s jurisdiction, the law of collateral’s location governs perfection, effect, and priority of possessory SI.
SI in Future Advances
A security agreement may provide that collateral secures future advances, whether or not advances are mandatory.
SI in After-Acquired Property
Security agreement may create or provide for SI in after-acquired collateral.
Does not apply to commercial tort claim.
Does not apply to consumer goods (other than accession (adding to collection) when given as additional security) unless debtor acquires rights in consumer goods within 10 days after security party gives value.
(This allows SP to enhance security as debtor acquires more property subject to collateralization.)
Buyer in the Ordinary Course of Business takes collateral free of what?
Security interest created by the seller.
PMSI v. Perfected or Unperfected Security Interest
PMSI in consumer goods enjoys automatic perfection and thus takes priority over another perfected or unperfected interest.
PMSI in non-consumer goods must be perfected by filing and follows regular priority rules.
Judgment Lien Creditor v. Future Advances
JLC takes priority over future advances secured more than 45 days after person becomes JLC unless advance made without knowledge of lien.
Does not apply to SI held by buyer of accounts or consignor.
Judgment Lien Creditor v. Yet Unperfected Security Interest
If SI has not yet perfected (value not yet given or debtor not yet have rights in collateral, and therefore no attachment as yet), SP still has priority over JLC if:
- SP filed financing statement;
- SI is ultimately attached and perfected; and
- One of following is present:
* authenticated security agreement;
* creditor has possession of collateral;
* certificated security in registered form has been delivered to creditor; or
* creditor has control of collateral.
Accession v. Commingling
Accession: goods are physically united with others, but retain separate identity. SI in separate goods continues in accession collateral.
(Ex: painting added to art collection; SI in painting continues)
Commingling: two goods subject to different SIs; general priority rules determine which SI continues in the accession.
(Ex: two paintings in collection subject to separate SIs; must determine which SI continues over collection)
What is the requirement for every aspect of disposition of collateral?
Must be commercially reasonable in method, manner, time, place, and other terms.
Disposition is deemed commercially reasonable if made:
- in usual manner on any recognized market;
- at current price in any recognized market at time of disposition; or
- in conformity with reasonable commercial practices among dealers in similar property.
May a Secured Party acquire collateral at sale?
Unless otherwise agreed, yes, at:
- public sale; or
- private sale only if collateral is:
* kind customarily sold on recognized market; or
* subject of widely distributed standard price quotations.
Can a Secured Party collect directly from an account debtor?
Yes, if so agreed after default.
Once account debtor receives notification of assignment, AD can no longer discharge its obligation by paying original debtor directly. It must pay the assignee (original creditor).
AD may require proof of assignment from original creditor. If not produced within reasonable time, AD may continue to pay original debtor.
When does the Debtor’s Right of Redemption exist?
At any time before secured party has
- collected collateral;
- disposed of collateral or entered into K for disposition; or
- accepted collateral in full/partial satisfaction of obligation it secures.
Besides actual damages and statutory penalty, can a debtor collect anything else on secured party’s default?
Yes, a civil penalty if collateral is consumer goods. Debtor may recover damages for loss, and either the amount not less than (1) credit service charge plus 10% of principal, or (2) time-price difference plus 10% of cash price.
What may a court do if the secured party does not proceed in accordance with applicable rules?
Restrain collection, enforcement, or proper sale of collateral.
