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Secured Transactions Flashcards

1
Q

Debtor

A

person who owes payment or performance

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1
Q

Secured transaction

A

transaction intended to create a security interest in personal property or fixtures

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2
Q

Secured Party

A

also called creditor

lender, seller, or other person in whose favor there is a security interest

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3
Q

Security agreement

A

agreement between debtor and secured party that creates the security interest

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4
Q

Security interest

A

interest in personal property or fixtures that secures payment or performance of an obligation

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5
Q

Collateral

A

property subject to a security interest

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6
Q

Purchase money security interest

A

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

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7
Q

Goods

A

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

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8
Q

Intangible collateral

A

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

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9
Q

Attachment

A

SI not enforceable until attached - rights against debtor

  • security agreement - contract, possession, or control
  • value given by SP
  • Debtor has rights in the collateral
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10
Q

Security agreemetn

A

Signed by debtor

Description of collateral
- reasonably identify
- no supergeneric

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11
Q

After acquired property clause exception

A

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

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12
Q

Proceeds

A

whatever is received upon sale, exchange, collection, or other disposition of collateral or proceeds

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13
Q

commingled proceeds

A

lowest intermediate balance rule

lowest balance during the time period is SP’s identifiable proceeds - but cannot exceed value of original deposit

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14
Q

Perfection

A

rights against third parties
- cannot be perfected until attached

5 methods
- filing
- possession
- control
- automatic
- temporary

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15
Q

Automative perfection

A

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

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16
Q

Perfection by possession

A

Money can only be perfected by possession

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17
Q

Perfection by control

A

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

18
Q

Certificate of title

A

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

19
Q

Perfection by filing

A

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

20
Q

Debtor’s name

A

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

21
Q

Financing statements for real propert

A

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

22
Q

Place of filing

A

Generally - secretary of state
- centrally

Timber to be cut, minerals, fixtures - county where a mortgage on the RP is filed
- locally

23
Q

State law governing perfection

A

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

24
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
25
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
26
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
27
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
28
Priority: PMSI v PMSI
Seller pmsi wins against lender pmsi if both seller or both lender - first to file or perfect
29
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
30
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
31
Priority: SP v Possessory lien
Possessory lienholder always wins if they are still in possession
32
Self help
Is allowed but cannot breach the peace - otherwise can be liable for conversion and actual damages
33
Breach of the peace
Any conduct that has the potential to lead to violence physical presence plus verbal objection breaking and entering
34
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
35
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
36
Right to redeem
any time before the collateral is sold or obligation discharged - missed payment or if acceleration clause, the entire debt
37
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
38
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
39
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
40
Construction mortgage
Always wins even over pmsi
41
Accessions
Goods that are physically united with other goods in such a manner that the identity of the original goods is not lost
42
Accession perfection
If perfected when the collateral becomes an accession, remains perfected
43
Accession special rule for vehicles
A si in an accession is subordinate to an SI in the whole if meet certificate of title requirements

Bar Exam (18 decks)

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