Secured Transactions Flashcards
Debtor
person who owes payment or performance
Secured transaction
transaction intended to create a security interest in personal property or fixtures
Secured Party
also called creditor
lender, seller, or other person in whose favor there is a security interest
Security agreement
agreement between debtor and secured party that creates the security interest
Security interest
interest in personal property or fixtures that secures payment or performance of an obligation
Collateral
property subject to a security interest
Purchase money security interest
A secured party sells the goods to the debtor on credit and retains an SI in the goods sold
A creditor loans the funds to debtor to enable to debtor to buy specific collateral and those funds are used to by the collateral
Goods
all movable things
consumer goods
- goods used or bought primarily for household, personal, or family purposes
equipment
- goods bought or used in business
- catchall
farm products
- crops or livestock or supplies used or produced in farming operations
- products of crops or livestock in their unmanufactured states if they are in possession of a debtor engaged in farming operations
inventory
- goods held for sale or lease or goods used or consumed in a business in a short period of time
Intangible collateral
Instruments
- paper representing right to be paid money
documents
- doc that represents right to receive goods
chattel paper
- monetary obligation plus security interest
investment property
- stocks, bonds, mutual funds
accounts
- right to payment for property sold or services rendered - account receivable
deposit accounts
- nonconsumer account with bank
commercial tort claims
- business claim for damages
general intangibles
- any other personal property
payment intangible
- general intangible that is a monetary obligation
Attachment
SI not enforceable until attached - rights against debtor
- security agreement - contract, possession, or control
- value given by SP
- Debtor has rights in the collateral
Security agreemetn
Signed by debtor
Description of collateral
- reasonably identify
- no supergeneric
After acquired property clause exception
Attaches automatically to accounts and inventory
- rapidly depleted and replenished collateral
automatically attaches to identifiable proceeds
does not apply to consumer goods unless acquired within 10 days of giving value
does not apply to any commercial tort claims
Proceeds
whatever is received upon sale, exchange, collection, or other disposition of collateral or proceeds
commingled proceeds
lowest intermediate balance rule
lowest balance during the time period is SP’s identifiable proceeds - but cannot exceed value of original deposit
Perfection
rights against third parties
- cannot be perfected until attached
5 methods
- filing
- possession
- control
- automatic
- temporary
Automative perfection
PMSI in consumer goods
unless it is covered by a certificate of title statute - then can only be perfected by certificate of title
fixtures - only if file fixture filing
Perfection by possession
Money can only be perfected by possession
Perfection by control
deposit accounts can only be perfected by control
3 methods
- if SP a bank - have the account at the bank
- put account in SP name
- Signed contract with debtor and bank where account is that bank will comply with SP orders
Certificate of title
If have certificate of title statute, can only perfect by notation on the certificate of title - no perfection by any other method
- cars and trucks
Exception - dealers
- if a dealer holds vehicles as inventory for sale or lease - must file a financing statement instead of certificate of title
Perfection by filing
Financing statement
- debtor’s name and address
- SP name and address
- description of collateral - can be super generic and does not need after acquired property clause if description is broad enough to cover after acquired property
Debtor’s name
Name on unexpired drivers license
an error in name in presumptively seriously misleading - so FS will not be valid unless the filing offices search logic would still show the FS
if mistake is filing offices fault - valid FS
Name change - seriously misleading
- FS only valid for collateral before name change and 4 months after
- to perfect collateral after the 4 months, must correct debtor’s name on FS
Financing statements for real propert
Must also contain
- description of the property
- name of record owner if not debtor
- indication that it is to be filed in real property records
Place of filing
Generally - secretary of state
- centrally
Timber to be cut, minerals, fixtures - county where a mortgage on the RP is filed
- locally
State law governing perfection
Law of state where debtor is located
- individual - principal residence
- registered org - where organized
- unregistered org - place of business or chief executive office
if perfection by possession
- where the collateral is located
if debtor moves locations
- unperfected after 4 months unless reperfect
if collateral transferred to new owner in different state
- becomes unperfected after 1 year unless reperfected
Timing of financing statements
Last 5 years
can file a continuation statement within the last 6 months of the lapse of 5 years to remain perfected for another 5 years
termination statement
- if debtor demands - SP must file termination statement or give one to debtor within 20 days
- if consumer goods, must file without demand within 1 month of no obligation, or 20 days on demand
Temporary perfection
Proceeds
- temporarily automatically perfected for 20 days
Will remain automatically permanently perfected if
- proceeds are identifiable cash proceeds
- original collateral perfected by filing, proceeds would be filed in same office, and proceeds were not purchased with cash proceeds - swap
If not automatically permanently perfected, must perfect by filing or another method within the 20 day period
Priority: SP v SP
if both perfected
- first to file or perfect wins
if one perfected
- perfected wins
if neither perfected
- first to attach wins
Priority: special PMSI Rules
PMSI in non-inventory
- priority over all other SI if perfected within 20 days of debtor receiving possession
PMSI in inventory
- priority of all other SI if
1. perfected at time debtor takes possession
2. SP sends a signed notification to all other SP that they have a psmi
3. the other sp receive the notification before debtor receives the goods
- the notification is good for 5 years
Priority: PMSI v PMSI
Seller pmsi wins against lender pmsi
if both seller or both lender
- first to file or perfect
Priority: SP v Buyer
Authorized sale
- Buyer wins and takes free
Buyer in ordinary course of business
- always takes free unless have knowledge that the sale violates the rights of another
- only takes free of SI created by their seller
Buyer not in the ordinary course
- take subject to perfect SI
-exception - takes free of perfected future advances or promises to make future advance if make by SP after learning of purchase or more than 45 days after purse
o Max is 45 days, can be cut short with knowledge
- exception - pmsi wins if file within 20 days of debtor receiving collateral
- Takes free from unperfected SI unless they know of the SI when they give value or take deliver - whichever is later
Garage sale - consumer to consumer
- takes free of SI even if perfected it
- without knowledge, for value, for consumer purposes
- unless perfected by filing a financings statement
- consumer goods in hand of seller and buyer
Priority: SP v Lien creditor
perfected SP wins - perfected at time LC rights accrue (at time of levy)
Unperfect SP loses
PMSI grace period applies - perfect within 20 days of receiving delivery
Exception - future advances
- only have priority if
- made without knowledge of the lien
- within 45 days of lien
- or pursuant to a commitment entered into without knowledge
o Minimum is 45 days and can extent if SP lacks knowledge
o Knowledge of lien creditor does not shorten the 45 day period
Priority: SP v Possessory lien
Possessory lienholder always wins if they are still in possession
Self help
Is allowed but cannot breach the peace
- otherwise can be liable for conversion and actual damages
Breach of the peace
Any conduct that has the potential to lead to violence
physical presence plus verbal objection
breaking and entering
Strict foreclosure
SP retains the property to discharge the debt instead of selling it in foreclosure sale
must have consent of other SPs and debtor
- if any sp objects within 20 days of notice, must sell
- debtor - if full or partial - signed writing to consent
- if full strict foreclosure - must object within 20 days, otherwise presumed consent from debtor
exceptions
- no partial strict in consumer transaction - only full allowed
- if debtor has paid of 60% of consumer good, SP must sell within 90 days, cannot keep
Resale
must send reasonable signed notice to debtor, any sureties, and other SP
- within a reasonable time before sale - 10 days at least
- public sale 0 time and place
-private sale - time
after default - debtor and surety can wave right to notice
Sale must be commercially reasonable in all aspects
sp can buy at sale only if the collateral is of the type that is recognized in the market - has market price
if rules violated
- statutory penalty for consumer goods
- rebuttable presumption that sale price equals debt
Right to redeem
any time before the collateral is sold or obligation discharged
- missed payment or if acceleration clause, the entire debt
Fixture
Goods that have become so related to real property that an interest in them arises under real property law
- pp attached to rp with intent that it become permanent
Fixture perfection
Fixture filing in office where a mortgage on the real estate would be filed
all FS requirements plus must reasonably identify the real estate and name of owner
Fixture priority
Fixture filing has perfection over any real estate interest subsequently recorded
pmsi exception
- PSMI take priority over earlier real interest if it is perfected by fixture filing before the goods become fixtures ow within 20 days after
Construction mortgage
Always wins even over pmsi
Accessions
Goods that are physically united with other goods in such a manner that the identity of the original goods is not lost
Accession perfection
If perfected when the collateral becomes an accession, remains perfected
Accession special rule for vehicles
A si in an accession is subordinate to an SI in the whole if meet certificate of title requirements
