Secured Transactions Flashcards
1
Q
What is a Secured Transaction?
A
A transaction intended to create a security interest in personal property or fixtures.
2
Q
What is a Sale on Credit?
A
A sale on credit (also known as a credit sale) is a sale in which the buyer does not pay the full purchase price at the time of the sale.
3
Q
What is a Debtor?
A
The person who owes payment or performance of the obligation secured.
- The person who owes the money.
4
Q
What is a Secured Party?
A
A secured party (or secured creditor) is a party in whose favor there is a security interest. They are a creditor with special collection rights (security interest).
- The person who money is owed to.
5
Q
What is a Security Agreement?
A
An agreement between a debtor and secured party that creates the security interest.
- A contract between a debtor and creditor. However, it must have language creating a security interest.
6
Q
What is a Security Interest?
A
An interest in personal property or fixtures which secures payment or performance of an obligation. It is a contingent property interest in the debtor’s collateral that the debtor grants to the creditor.
- When the contingency (default) occurs, the interest is activated and the creditor gains rights in the debtor’s collateral.
7
Q
What is Default?
A
An event causing a security interest to spring to life.
8
Q
What is collateral?
A
Property subject to a security interest.
9
Q
What is a Purchase Money Security Interest? How is it created?
A
A purchase money security interest (“PMSI”) is a special type of security interest in goods. A PMSI can arise in two ways:
(1) The secured party (i) sells the goods to the debtor on credit AND (ii) retains a security interest in the goods sold (Seller-Financed PMSI), or
(2) The secured party (i) loans the funds to the debtor to enable the debtor to buy specific collateral, (ii) those funds are used by the debtor to acquire the specific collateral, and (iii) the creditor takes a security interest in that collateral (Financer-Financed PMSI). The PMSI secures whatever portion of the purchase price still has to be paid.
- The second type is a third party providing the funds.
- In the second type, if the debtor doesn’t use the actual loaned dollars to buy the item, a PMSI security interest can’t be established–it’s just a normal security interest.
- PMSI IS A VERY IMPORTANT CONCEPT!!! THEY FLIP A LOT OF GENERAL RULES.
10
Q
What is an After-Acquired Property Clause?
A
A grant of a security interest in property to be obtained in the future.
- A contract provision that the debtor agrees to that creates this interest in the future.
11
Q
What is a Future Advances Clause?
A
A secured party often contemplates making future loans to the debtor and wants to secure these future advances in the present security agreement. This is permissible. Security agreements typically contain a future advance clause, in which case a new security agreement is not needed when a future advance is made.
- This is a provision in the contract.
- Making something collateral for a loan that may be made in the future.
12
Q
What is Attachment in Secured Transactions?
A
This deals with the steps legally necessary to create a security interest that is effective against the debtor.
- A creditor is not a secured creditor until attachment!
- IMPORTANT!
13
Q
What is Perfection in Secured Transactions?
A
This deals with the steps legally necessary to create a security interest that is effective against the world (as opposed to just the debtor).
- This gives them rights vis a vis other creditors.
14
Q
What is a Financing Statement?
A
A document used to convey notice of a security interest.
- Filing this in the public records is the most common way to “perfect” a security interest.
15
Q
Why is classification of collateral important?
A
Classification of the collateral is important because many provisions of Article 9 (particularly those dealing with perfection and priorities) make legal distinctions based on the type of collateral.
16
Q
What are goods?
A
Tangible, movable, personal property.
17
Q
What are the ways to categorize goods?
A
Classified based on how the collateral is used (by the debtor). The categories are:
- Consumer goods
- Equipment
- Farm products
- Inventory
NOTE: these categories are mutually exclusive. Can only be one of the things.
18
Q
What are consumer goods?
A
Consumer goods: goods used OR bought primarily for personal, family, or household purposes.
19
Q
What is equipment?
A
Equipment: goods that are used or bought for use primarily in a business.
- Note: This is also the default (catch-all) category for goods (if the collateral is a good, and it doesn’t fit the definition of consumer goods, inventory, or farm products, it gets classified as equipment).
20
Q
What are farm products?
A
Farm products: crops OR livestock OR supplies used or produced in farming operations OR products of crops or livestock in their unmanufactured states (EX: ginned cotton, wool-clip, maple syrup, milk, and eggs) IF they are in the possession of a debtor engaged in farming operations (there always needs to be a farmer involved).
21
Q
What is Inventory?
A
Inventory: goods held for sale or lease, goods that are to be furnished under service contracts, and materials used or consumed in a BUSINESS in a short period of time (EX: raw materials, consumables, and rentals).
22
Q
What is Semi-Intangible and Intangible Property?
A
Intangible and semi-intangible property are assets that lack physical substance but still hold value that can be used as security. There are eight types of intangible or semi-intangible collateral. The category into which intangible or semi-intangible collateral is placed depends on the nature of the collateral (rather than its use):
- Instruments (EX: promissory note)
- Documents (EX: receipt to farmer from silo operator when farmer stored grain there)
- Chattel paper (EX: written contract where car buyer purchasing on credit promises to pay the car dealership for the car and grants the dealership a security interest in the car)
- Investment Property (EX: stock certificate)
- Accounts (EX: store sells some tires on credit)
- Deposit Accounts (EX: checking account)
- Commercial Tort Claims (EX: right to sue corp for stealing an employee)
- General Intangibles (EX: patent, trademark, security interest)
23
Q
What are Instruments?
A
Pieces of paper representing the right to be paid money, like promissory notes, drafts (EX: checks), and certificates of deposit.
24
Q
What are Documents under Article 9?
A
A document that represents the right to receive goods (EX: a bill of lading, a warehouse receipt).
25
What is Chattel paper?
A record or records which evidence both (1) a monetary obligation, AND (2) a security interest in or a lease of specific goods.
- A “record” is information that is stored in either a tangible medium (EX: written on paper), or an intangible medium (EX: electronically stored). Chattel paper that is stored in an electronic medium is also called “electronic chattel paper.”
26
What is Investment Property?
Includes items such as stocks, bonds, mutual funds, and brokerage ACCOUNTS containing such items.
- Remember the definition of accounts with this one!
27
What are Accounts under Article 9?
Includes a RIGHT TO PAYMENT (that is not evidenced by an instrument or chattel paper) for property sold or services rendered.
- Note: A contractual obligation arising from a loan of money is NOT an account—it is a general intangible. Not a bank account.
28
What is a Deposit Account?
An account maintained with a bank.
- Note: In general, Article 9 only applies to security interests in non-consumer deposit accounts and account monies that are claimed as proceeds of other collateral.
29
What is a Commercial Tort Claim under Article 9?
A tort claim where (1) the claimant is an organization (EX: a partnership or corporation), OR (2) the claimant is an individual, the claim arose out of the claimant’s business or profession, and the claim does not include damages for personal injury or the death of an individual.
- Note that Article 9 also applies to noncommercial tort claims that are claimed as proceeds of other collateral.
30
What are General Intangibles under Article 9?
Any personal property not coming within the scope of the other definitions, such as patent and trademark rights, copyrights, and goodwill. A general intangible under which the account debtor’s principal obligation is a monetary obligation is a payment intangible.
- This is the default for intangible property.
31
What are the requirements for creating Attachment under Article 9?
(1) Either the debtor must authenticate a Security Agreement granting the creditor a security interest in the collateral that describes the collateral OR the creditor must take possession or control of the collateral; (2) Value given by creditor; (3) Debtor has rights in the collateral.
- The agreement between parties to create a security interest (security agreement), must be evidenced by (1) the creditor TAKING POSSESSION of the collateral, (2) an AUTHENTICATED security agreement (in writing), or (3) the creditor taking CONTROL of non-consumer deposit accounts, electronic chattel paper, and investment property (control depends on the type of collateral).
32
When a security agreement is in writing, what are its requirements to be valid?
(1) Agreement evidenced by a record showing intent to create a security interest (specific language--though nothing specific is required); (2) Agreement must be authenticated by the debtor (usually debtor's signature, though any symbol will work); (3) Description of collateral ("reasonably identify"--allowed to use Article 9 categories; can say "all debtor's equipment").
33
What does it mean for "value" to be given in a security agreement? What is the main question in a value analysis?
Anything that would be consideration under contract law counts as value under Article 9.
- Even broader than contracts consideration because here, past consideration WILL work.
- The question is whether the creditor gave value to the debtor (the debtor always implicitly provides value by promising to repay the loan).
34
What does it mean for a debtor to have rights in collateral for security agreement purposes?
The debtor must have some ownership interest in the collateral.
35
When do a creditor's rights attach?
The instant the last of the three requirements are met (agreement, value, and debtor rights in collateral).
36
What is After-Acquired Property? What rules apply to agreements about this property?
Property acquired in the future after an agreement.
Without an explicit after-acquired property clause in the security agreement, the secured party’s security interest only reaches collateral that the debtor had rights in at the time the debtor signed the security agreement.
However, If the security agreement has an explicit after-acquired property clause, the security interest will attach to the property as soon as the debtor acquires an interest in the collateral.
- IMPORTANT EXCEPTION: Even without an after-acquired property clause, a security interest will attach automatically to collateral of a type that’s rapidly depleted and replenished (EX: accounts and inventory). A security interest will also automatically attach to identifiable proceeds of collateral, even without an after-acquired property clause
37
What are Proceeds under Article 9?
ANYTHING received from the sale, exchange, collection, or other disposition of original collateral or proceeds of the collateral. Unless otherwise agreed, a security interest automatically gives the secured creditor a right to identifiable proceeds of the collateral.
- “Identifiable” means that the proceeds can be traced back to the original collateral (secured creditor's burden to prove this). Commingling is often an issue with cash proceeds.
- VERY IMPORTANT CONCEPT!
38
How is commingled cash analyzed for purposes of identifying it as proceeds of collateral?
In the case of commingled cash proceeds (EX: in a bank account), the identifiable proceeds can be traced using the LOWEST INTERMEDIATE BALANCE RULE.
Under that rule, you will look at the bank account starting at the time the proceeds are deposited and ending at the time you are applying the rule. The lowest balance during that time period is the secured party’s identifiable proceeds (but the amount cannot exceed the value of the cash proceeds originally deposited).
39
What is a Supporting Obligation?
A guarantee or a surety (a promise to pay the debt of another).
40
How does Attachment apply to supporting obligations?
The attachment of a security interest in accounts, chattel paper, documents, general intangibles, instruments, and investment property automatically extends to a supporting obligation (EX: a surety) for that collateral.
41
What does it mean if an interest in unperfected?
- Doesn't mean that the interest is unsecured!
42
What is required for Perfecting a security interest?
(1) Attachment AND (2) one of the following methods:
- Notice: Filing (in the proper place) of a financing statement describing the collateral (most tested)
- Taking possession of the collateral (impossible w/ intangibles)
- Taking control of the collateral
- Automatic perfection (e.g., of a PMSI in consumer goods)
- Temporary perfection (e.g., of a security interest in proceeds received from the sale of collateral).
43
What is Automatic Perfection?
A security interest being automatically perfected upon attachment.
- Most common such situation is a PMSI in consumer goods. A PMSI in consumer goods is perfected as soon as it attaches.
- Another important situation is a security interest in a small-scale assignment of an account or payment intangible that does not alone, or in conjunction with other assignments to the same assignee, transfer a significant part of the assignor's outstanding accounts or payment intangibles to the creditor (if transferring too much, then automatic perfection won't apply).
44
How can a security interest in money/cash be perfected?
ONLY by possession.
45
What is the way to perfect a security interest in a deposit account?
IMPORTANT TOPIC
The only way is by Control. There are three ways to perfect by control:
- Automatic control by bank maintaining the account.
- Putting account in secured party's (creditor's) name
- Control agreement (contract between debtor, creditor, and bank where the account is)
46
How are security interests in motor vehicles perfected?
Under the state’s certificate of title law, security interests in motor vehicles required to be titled can only be perfected by notation on the certificate of title issued by the state.
- EXCEPTION: Security interests created by dealers in vehicles held in inventory for sale or lease are perfected by filing a financing statement under the ordinary Code rules (for Automatic Perfection). Now, they need to file a financing statement when the cars/trucks are being held as inventory.
47
How can a secured party obtain perfection through filing? What must the document contain?
A secured party may obtain perfection by filing (either in writing or electronically) a financing statement. The financing statement must contain: (1) The debtor’s name and mailing address, (2) The secured party’s name and mailing address, and (3) A description of the collateral covered by the financing statement.
- A security interest may be perfected by filing as to all kinds of collateral except deposit accounts and money.
48
What is a debtor's name on a Financing Statement?
In most states, if the debtor is an individual with an unexpired driver’s license issued by the state where the financing statement is to be filed, the debtor’s name on the financing statement must match the license. If the debtor doesn’t have such a license, then the financing statement may include the debtor’s individual name (which Article 9 does not define) or the debtor’s personal name and surname. If the debtor is a registered organization (for example, a corporation or limited partnership), the debtor’s name must match its most recent public organic record (that is, the publicly available record that forms or organizes the organization--trade names aren't sufficient).
49
What effect do mistakes in the Debtor's name have on a Financing Statement?
Minor errors in the debtor’s name won’t invalidate a financing statement, but seriously misleading errors will.
TEST: A financing statement is not seriously misleading if it would be discovered in a filing office search under the debtor’s correct name, using the filing office’s standard search logic.
- What matters here is the logic of the system. Note that there is no search logic that corrects for spelling errors.
50
What effect when the filing office fails to correctly index a financing statement?
The failure of the filing office to correctly index a financing statement does not impact its effectiveness (even though no one will find it).
51
What effect for a filed financing statement when a debtor changes their name?
If the debtor’s name as indicated on a filed financing statement becomes insufficient and thus seriously misleading (EX: because the debtor changed their name), the financing statement is effective only against collateral acquired by the debtor before the name became insufficient and within 4 months after. For collateral acquired after the 4-month period, the secured party must refile using the debtor’s correct name.
52
What description is needed for collateral in a financing statement?
Same as with the security agreement except for, unlike with the security agreement, super generic descriptions (EX: all the debtor's property) are valid for financing statements.
53
What needs to be done to perfect a security interest in After-Acquired property?
Nothing. The financing statement need not mention after-acquired property to perfect a security interest in such property if the description in the financing statement is broad enough to cover the after-acquired property.
54
Is a signature required on a Financing Statement?
No, but the debtor must authorize the filing. The authorization may be in any signed writing.
- The debtor automatically authorizes the financing statement if she authenticates a security agreement covering the same collateral (authentication ipso facto).
55
Where are financing statements filed?
Generally, with the secretary of state (SOS of whichever state with the applicable law). If it relates to real property, then it's with the relevant county.
- If the debtor is an individual, they are located in the state of their principal residence.
- If the debtor is a registered organization (EX: a corporation, limited liability company, or limited partnership), the debtor is located in the state under whose laws it is organized (that is, where its articles of incorporation are filed).
- If the debtor is an unregistered organization (EX: a general partnership), it is located at its place of business if it only has one place of business or at its chief executive office if it has more than one place of business.
56
What result for Perfection if collateral is transferred across state lines?
If collateral is transferred to a new owner who is located in a different state, the security interest will become unperfected one year after the collateral moves unless the secured creditor files a financing statement in the new jurisdiction before that one-year period is up.
57
How long is a financing statement effective for?
5 years. Can be extended by filing a CONTINUATION STATEMENT (not another financing statement) in the six-month window/period before the financing statement is set to terminate (4.5-5 years).
58
How long after a security agreement is entered into can you enter into a financing statement?
It can be entered into BEFORE the security agreement!
59
What Perfection rules apply for Proceeds?
If a secured party has a perfected security interest in collateral, the secured party automatically has a perfected security interest in any proceeds of the collateral for 20 days after receipt of the proceeds. The security interest in proceeds will continue to be perfected beyond the 20 days if:
- The proceeds are IDENTIFIABLE CASH PROCEEDS (this is sometimes called the “cash proceeds” rule),
- The security interest in the original collateral WAS PERFECTED by filing a Financing Statement, a Security Interest in the type of collateral constituting the proceeds WOULD BE FILED IN THE SAME PLACE as the financing statement for the original collateral (S.O.S. or county?), and the PROCEEDS WERE NOT PURCHASED WITH CASH PROCEEDS of the collateral (this is sometimes called the “same office” rule), or
- The security interest in the proceeds is perfected within the 20-day period.
60
As to two perfected secured creditors in a priority dispute, who will prevail?
The first to file OR the first to perfect (whichever is earlier) has priority.
- NOTE: can file without having attached or perfected.
- NOTE: can't perfect until you've attached and done one of the methods of perfection.
61
As to two unperfected secured creditors in a priority dispute, who will prevail?
The first creditor to attach wins.
62
As to a perfected secured creditor against an unperfected secured creditor in a priority dispute, who will prevail?
The perfected creditor wins.
63
How does PMSI in goods other than inventory or livestock affect conflicting security interests?
PMSIs enjoy a superpriority—they’re superior to prior perfected security interests in the same collateral if certain conditions are met.
A PMSI in goods other than inventory and livestock (EX: equipment) has priority over conflicting security interests in the same goods or their identifiable proceeds if the interest is perfected before or within 20 days after the debtor receives possession of the goods.
64
How does PMSI in goods of inventory or livestock affect conflicting security interests?
A PMSI in inventory collateral has priority over a conflicting security interest in the same inventory or proceeds of the inventory that are chattel paper, instruments, or cash if:
(1) It is PERFECTED at the time the DEBTOR GETS POSSESSION of the inventory (filing must take place before the inventory is delivered to the debtor), and
(2) Any secured party who has filed their security interest in the same inventory receives authenticated NOTIFICATION of the PMSI before the debtor receives possession of the inventory, and the notification states that the purchase money party has or expects to take a PMSI in inventory of the debtor described by kind or type. The notification is effective for deliveries of the same type of collateral for 5 years.
65
What are the special priority rules for conflicting security interests in deposit accounts?
A security interest in a deposit account that is perfected by control has priority over a conflicting security interest that is perfected by another method (namely, as proceeds of other collateral, since other methods don’t work(?)). If there are conflicting security interests that are perfected by control, they rank according to the time of obtaining control, subject to the following exceptions:
- BEST: A secured party who has obtained control by putting the deposit account in the party’s name has priority over all other secured parties with control, and
- A bank that has control because it maintains the deposit account has priority over all secured parties with control (the account is at the creditor bank), other than the party who has obtained control by putting the account in their name.
- NOTE: control agreement is the worst way.
66
When there is a contest of priority between a perfected secured party and a buyer, who prevails?
The secured party wins, unless there is:
- An Authorized Sale: If the sale or lease of the collateral is authorized by the secured party free of the security interest, the transferee takes free of the security interest. The authorization may be express, or it may be implied from the type of sale or from the seller’s conduct (EX: sale of inventory to an ordinary consumer).
- Buyer in the Ordinary Course (BIOC): A buyer in the ordinary course of business takes free of a nonpossessory security interest in the goods created by the BUYER'S SELLER (watch out for multiple sales), even though the security interest is perfected and even though the buyer knows of the security interest.
67
When there is a contest of priority between an unperfected secured party and a buyer, who prevails?
The buyer.
68
Who is a Buyer in the Ordinary Course of business?
A “buyer in the ordinary course” is one who buys goods:
(1) in good faith, (2) without knowledge that the sale violates the rights of another person in the goods, and (3) in the ordinary course of business from (4) a seller in the business of selling goods of the kind purchased.
- The typical case of the buyer knowing that the sale violates the rights of another is where the buyer knows that the sale violates the security agreement.
69
What is the Garage Sale Rule?
Consumer-to-Consumer Sale. In the case of consumer goods, a buyer takes free of a security interest even though it is perfected if (1) he buys without knowledge of the security interest, (2) for value, (3) for the buyer's own personal, family, or household purposes, and (4) before a financing statement covering the goods has been filed.
- NOTE: The goods must be consumer goods in the hands of both the buyer AND the seller.
70
When there is a contest of priority between a perfected secured party and a judgment lien creditor, who prevails?
A judicial lien creditor (a person who has acquired a lien on the collateral through judicial attachment, levy (sheriff seizing property), or the like, or a bankruptcy trustee) prevails over the holder of a security interest in collateral if the lien creditor becomes such before the security interest is perfected.
On the other hand, a prior perfected security interest has priority over a judicial lien.
71
When there is a contest of priority between a PMSI and a judgment lien creditor, who prevails?
If the secured party files a financing statement with respect to a PMSI within 20 days after the debtor receives the collateral, the secured party will have priority over a judicial lien arising between the time the security interest attaches and the time of filing.
- EXCEPTION: For a perfected future advance to gain priority over a subsequent judicial lien, the future advance must be made (1) without knowledge of the lien, (2) within 45 days of the lien arising, or (3) pursuant to a commitment entered into without knowledge of the lien.
72
When there is a contest of priority between a secured party and a statutory lien claimant, who prevails?
A possessory lien imposed by other (non-Code) state law in favor of those who supply goods or services (EX: an artisan’s lien or a materialman’s lien) has priority over a security interest (even if perfected) as long as the goods or services were provided in the ordinary course of business and the collateral remains in the lien holder’s possession.
73
What is Default?
An event causing a security interest to spring to life. It is specified in the security agreement (contract).
74
What is Self-Help Repossession?
It is when a creditor takes collateral without going to court first.
75
What is Breach of the Peace?
Any conduct by the secured party that has the potential to lead to violence is a breach of the peace.
- Generally, physical presence by the debtor (or a representative of the debtor) plus a verbal objection by the debtor over the repossession is enough to create a breach of the peace.
- Breaking and entering of a residence is probably a breach of the peace. The breaking and entering of a commercial property is less likely to be a breach of the peace. Further, simple trespass is not a breach of the peace (a repossessor may hot-wire a car sitting on a driveway, or perhaps one in a commercial garage, but not one sitting in someone’s closed garage).
76
What is Replevin?
A replevin action is a court proceeding to repossess collateral.
77
What is Strict Foreclosure? What are its requirements?
A creditor keeping the collateral itself (not reselling) to satisfy a debt. To do this, the secured party must do the following:
- The secured party must send its proposal to retain the collateral to (1) any other secured party from whom the foreclosing party has received notice of a claim to the collateral, and (2) any other secured party who has perfected a security interest in the collateral by filing a financing statement or noting its security interest on a certificate of title. If a notified party objects within 20 days after the secured party sends the notice, the collateral must be disposed of by sale. (NOTIFY OTHER CREDITORS WITH A LIEN ON THE COLLATERAL--IF THEY OBJECT, CAN'T KEEP IT, MUST SELL)
- The secured party must also obtain the debtor’s consent. The debtor consents by either: (1) agreeing in an authenticated record after default, or (2) in the case of a full strict foreclosure, failing to make an authenticated objection within 20 days after the secured party sends notice (a debtor can’t consent to a partial strict foreclosure in this manner). (NOTIFY THE DEBTOR--IF THEY OBJECT, CAN'T KEEP IT, MUST SELL)
78
What degree of partial strict foreclosure is permitted?
In a consumer transaction, a secured party may not keep the collateral in partial satisfaction of the debt and seek a deficiency judgment. The secured party may keep the collateral only in full satisfaction of the debt.
79
What are the requirements of a Foreclosure Sale?
(1) Needs reasonable notice (written, timely (10+ days before always reasonable), time and place)
(2) "every aspect of the sale must be commercially reasonable" [exam] (advertising/contacting, cleaning/repair, convenience/time and place). "If it's not, the creditor is penalized" (they're liable for any damages that result) (there's a 10% statutory penalty for consumer goods).
80
What is a Deficiency Judgment?
The amount a creditor can collect from a debtor beyond the value of the collateral (it's a court order--only worth something if the debtor is solvent).
- This is what people receive if their debt owed isn't paid off at the foreclosure sale.
81
What result when a secured party fails to follow the UCC's rules on default?
Generally, if the secured party fails to follow the Code’s rules on default, there is a rebuttable presumption that the sale proceeds equal the amount of the debt. In other words, the secured party presumptively loses any deficiency (and if the debtor is solvent, that deficiency is worth something, so it's a bummer to lose it.
82
What is the Right to Redeem? When must it be exercised?
A debtor's ability to recover collateral by paying everything owed to the creditor (paying all obligations secured by the collateral). This must be done before the foreclosure sale.
83
What is a Fixture?
Fixtures are goods that have become so related to real property that an interest in them arises under real property law. In general, personal property attached to real estate with the intent that it become a permanent part of the real estate is a fixture (EX: central air conditioning, built-in appliances, elevators, etc.). The distinctive aspect of a fixture is that interests in it may arise under both the Code and under the law of real estate.
- It's something that started as personal property but then was attached to real estate, such that it's now treated as part of the real estate.
- NOTE: No security interest can exist in ordinary building materials (EX: bricks, lumber, shingles, etc.) that are incorporated into an improvement on land.
84
How is a security interest in fixtures perfected?
To perfect a security interest in fixtures, a fixture filing must be made in the office where a mortgage on the real estate would be filed. In addition to the usual requirements for a financing statement, a fixture filing financing statement must reasonably identify the real estate and must show the name of the owner (if the debtor does not have an interest of record in the real estate).
85
In a contest between a real estate interest and a fixture, who wins?
First in time wins, unless the security interest is PMSI (then PMSI wins).
- A security interest in fixtures has priority over any real estate interest that is recorded subsequent to the perfection of the security interest by fixture filing.
- A prior real estate interest that is properly recorded has priority over a security interest that subsequently arises, however, a PMSI takes priority over an earlier in time realty interest if it’s perfected by a fixture filing before the goods become fixtures or within 20 days thereafter.
86
What are Accessions?
Accessions are goods that are physically united with other goods in such a manner that the identity of the original goods is not lost (EX: tires on a car).
- If a security interest is perfected when the collateral becomes an accession, the security interest remains perfected in the collateral.
87
What priority rules apply to Accessions?
The general priority rules apply to Accessions, except for the following: a security interest in an accession is subordinate to a security interest in a whole (EX: a car) which is perfected by compliance with the requirements of a certificate-of-title statute.
88
What rules apply to removal and reimbursement for damages when removing Accessions? What rights does the debtor have?
A secured party may remove an accession from other goods if the security interest in the accession has priority over the claims of every person having an interest in the whole. The secured party removing the accession is responsible for the cost of repair of any physical injury to the whole or the other goods. A person entitled to reimbursement may refuse permission to remove until the secured party gives adequate assurance for the performance of the obligation to reimburse.
89
What are the most important areas of secured transactions?
- Categories of collateral.
- The 3 attachment requirements (and the sub-requirements).
- Perfections methods.
- Priority rules.
- PMSI rules.
