Secured Transactions Flashcards
A negotiable instrument cannot be perfected by
Control
Who is exempted from Florida’s certificate-of-title law?
A licensed car dealer selling motor-vehicle “floor-plan stock.”
How and when does tangible collateral (goods) get classified, and does this method apply to other types of collateral?
To properly classify tangible collateral (goods), look to the debtor’s principal use when the security interest attaches.
Unlike tangible goods, classification of other types of collateral does not turn on the manner in which the debtor uses the property.
What is the buyer in the ordinary course of business (BOCB) exception and who qualifies as a BOCB?
A BOCB takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
A BOCB is a person who:
i) Buys goods (other than farm products);
ii) In the ordinary course;
iii) From a seller who is in the business of selling goods of that kind;
iv) In good faith; and
v) Without knowledge that the sale violates the rights of another in the same goods.
For a security interest to be enforceable against a debtor (i.e., attachment), what three conditions must be met?
(1) Value has been given by the secured party;
(2) The debtor has rights in the collateral; and
(3) The debtor has authenticated a security agreement describing the collateral, or the secured party has possession or control of the collateral.
When these conditions coexist, the security interest has attached, unless there is an agreement to postpone the time of attachment.
What remedy is available to a secured party of large equipment that makes repossession difficult?
Equipment that is hard to repossess can be rendered unusable in lieu of repossession. This is usually followed by disposal (e.g., sale) on the debtor’s premises.
When can a PMSI exist in goods?
(1) The value given (e.g., a loan) allows the debtor to acquire the goods or software; or
(2) The goods or software acquired is the collateral that secures the loan (e.g., goods bought on credit)
Under what circumstances does a buyer of goods take free of an unperfected security interest?
A buyer, other than a secured party, of collateral that is goods, takes free of an unperfected security interest in the same collateral if the buyer:
i) Gives value; and
ii) Receives delivery of the collateral;
iii) Without knowledge of the existing security interest
What is the rule regarding construction mortgages and subsequent security interests in fixtures?
A construction mortgage has priority over any subsequent security interest in fixtures, including PMSIs in fixtures, if it is recorded before the goods become fixtures, and it covers only those goods that become fixtures before completion of the construction.
When distinguishing between types of collateral, what is the difference between “accounts” and “deposit accounts”?
Accounts include the right to payment for property sold, leased, licensed, or for services rendered. Also included are rights to payment under insurance policies, amounts owing on credit cards, as well as a company’s accounts receivable.
Deposit accounts include savings, passbook, time, or demand accounts maintained with a bank.
“Goods” encompasses anything that is moveable at the time that a security interest attaches. Also included in “goods” that are technically not moveable. Give 5 examples of these non-moveable goods.
(1) Fixtures
(2) Standing timber
(3) Unborn animals
(4) Growing or unharvested crops (including crops grown on trees, vines, or bushes)
(5) Manufactured homes
As between a secured party and a judicial lien creditor, who has priority?
The SP bc judicial lien creditor takes the collateral subject to an existing perfected security interest but Judicial lien creditor generally has priority over an unperfected security interest.
What is the priority rule for a PMSI in goods (other than inventory or livestock)?
This PMSI will prevail over all other security interests in the same collateral, even if those other security interests were previously perfected (e.g., an existing after-acquired equipment clause by a lender), so long as the security interest perfects within 20 days after the debtor receives possession of the collateral.
