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Bar Exam Study > Secured Transactions > Flashcards

Secured Transactions Flashcards

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1
Q

Seller Financed PMSI

A

secured party sells debtor collateral on credit

AND retains security interest in item sold

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2
Q

Financer Financed PMSI

A

party loans money to debtor for the specific purchase of collateral and debtor does purchase the collateral and creditor takes security interest

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3
Q

Goods Definition

A

tangible moveable personal property

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4
Q

Consumer Goods

A

goods used or bought for use primarily for personal or family use

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5
Q

Equipment

A

catch-all
goods used or bought for use in business

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6
Q

Farm Product

A

crops or livestock used or produced in farming
OR
products in their unmanufactured state if they are in debtor’s possession engaged in farming operations

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7
Q

Inventory

A

goods held by the debtor for ssale or lease

OR material used or consumed in a business in short period of time such as raw materials or consumables

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8
Q

Accounts

A

right to payment for property sold or services rendered

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9
Q

Deposit Account

A

account maintained with a bank

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10
Q

Consignments

A

wholesaler maintains title to the goods and delivers them to retailer. if goods not sold then can return them to the wholesaler

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11
Q

Secured Sale Disguised as Lease

A

Leases are outside the scope of article 9
Lease = at time of transaction, anticipate the collateral will still have economic value

Sale = Buyer is the owner and will drain all economic value from it

test: at the time was it reasoanbly likley the lessor would get the item back when it still had meaningful economic value

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12
Q

Overview: Attachment Requirements

A
  1. Security Agreement (See sub factors)
  2. Value Given (any consideration sufficient to support K, including past consideration)
  3. Right in Collateral
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13
Q

Security Agreement General Rule

A

unless the collateral is in possession or control of creditor, we need written security agreement

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14
Q

Security Agreement Writing Requirement

A
  1. Intent to create security interest and language generally expressing intent
  2. Authenticate (Signature)
  3. Describe - reasonably identify
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15
Q

Future Advances

A

no need for new security agreement; future advancement based in same collateral

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16
Q

After Acquired Property

A

without an explicit after-acquired property clause in the security agreement, it only reaches the collateral debtor had rights in at the time of entering into the transaction

EXCEPT if inventory or accouts

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17
Q

Proceeds

A

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

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18
Q

Rights to Proceeds

A

unless otherwise agreed, security interest auto gives secured party a right to identifiable proceeds.

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19
Q

Identifiable Proceeds

A

identifiable means the secured creditor can prove that proceeds can be traced back tot he creditor’s original collateral

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20
Q

Lowest Intermediate Balance Test

A

(1) starting at time the initial proceeds are deposited
(2) end at time of test application
the lowest balance during the time period is secured party’s identifiable proceeds, but CAN’T exceed the value of the cash proceeds originally deposited

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21
Q

List the Methods of Perfection

A
  1. Automatic Perfection
  2. Possession
  3. Control
  4. Notation on Certificate of Title
  5. Financing Statement
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22
Q

Automatic Perfection

A

PMSIs in consumer goods are automatically perfected upon attachment

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23
Q

Possession

A

Perfected when creditor obtains possession as long as they retain possession.
* cash can only be perfected by possession
* cannot perfect an intangible with this

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24
Q

Control

A

consumer deposit accounts only perfected upon control
1. Bank account with secured party’s name on it
2. Bank account in control (automatic)
3. Control Agreement - K with creditor debtor and bank

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25
Q

Notation of Lien on Certificate of Title

A

only way to perfect cars and trucks.
get the right government authority to note the secured party’s lien on the certificate
UNLESS it’s a car dealership exception, then it must be financiang sttatements

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26
Q

Financing Statement (where)

A

File notice with secretary of state (unless real estate, then file in real estate records) where debtor is located (principal residence or if corporation then place of business or chief executive office)

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27
Q

Contents of the Filing Statement

A
  1. Debtor Name
  2. Description of Collateral
  3. Creditor’s Name
  4. Authorization
  5. If real property then: filed in real property records, description of the land, and property owner name

Note: No signature requirement but need authorization to file by the debtor
if real property then 3 factors (filed in real property records, description of the land, and property owner name)

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28
Q

Filing Statement: Debtor Name Rule

A

for individual, name if debtor has unexpired drivers license, financing statement must indicate name as indicated on license

trade names by themselves not sufficient

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29
Q

Financing Statement: Debtor Name Test

A

financing statement error is effective it it’s not seriously misleading

30
Q

Seriously Misleading Test

A

mistakes in debtors name are seriously misleading if (1) search under debtor correct name using office standard search logic would retrieve erroneous financing statement. if it does, then not seriously misleading; if it doesn’t then it is seriously misleading

31
Q

Debtor Name Change

A

if debtor changes their name such that the financing statement becomes misleading, then financing statement still effective to perfect security interst in collateral acquired before/within 4 months after the change

old financing statement still works to perfect any collateral owned as of time of name change and for another 4 months. but if worried about after acquired property then need to amend

32
Q

Description of Collateral in Financing Statement

A

must reasonably identify, but super generic agreements are totally fine
don’t need to mention after acquired property to perfect security interest as long as the description is broad enough to cover

33
Q

Financing Statement: Creditor’s Name

A

error here is irrelevant

34
Q

Financing statement: Real property

A

financing statement must indicate that (1) it’s to be filed in real property records (2) provide description re property related (3) name record property owner if someone other than debtor signed

35
Q

Perfecting Proceeds

A

if identifiable, automatic perfection for 20 days, but will be unperfected on day 21 unless (1) identifiable cash OR (2) same office rule

36
Q

Identifiable Cash Rule

A

proceeds not cash

37
Q

same office rule

A

if collateral was perfected by filing, proceeds can be perfected by filing in the same place as original inventory AND not purchased with cash

38
Q

Priority: perfected secured vs. perfected secured

A

First to file or first to perfect, whichever happens first — NOTE: PMSIs in consumer goods perfect automatically so pretty unbeatable

39
Q

Perfected Secured vs. Unperfected secured

A

Perfected Wins

40
Q

Unperfected Secured v. Unperfected Secured

A

first to attach wins

41
Q

PMSI in goods other than inventory or livestock

A

Jump to the front of the line if the PMSI was perfected immediately or within 20 days after debtor received possession

42
Q

PMSI in goods in Inventory or livestock

A

Jump to the front of the line if you perfect and send authenticated notice to other holder previously holding interest. Notice received within 5 years before debtor gets possession [NOTE: consignment is a PMSI in inventory]

43
Q

Seller Financed vs. Financer Financed

A

Seller wins

44
Q

Investment Property

A

Perfected by control beats all the others — debtor intermediary beats others — otherwise first to file win

45
Q

Deposit Accounts

A

Secured party obtain control by account name wins over all other secured parties with control (transferee takes free the funds unless acting in collusion with debtor)

46
Q

Secured Creditor vs. Buyer

A

The secured party wins unless: authorized sale exception (inventory sold to ordinary consumer or acquiescence) or BIOC Exception (takes free of security interest created by his seller)

47
Q

Authorized Sale Exception

A

Express (consumers)
Implied: if (1) inventory sold to an ordinary consumer (consumer buys inventory, not a liquidation sale buying inventory) (2) acquiescence

48
Q

Buyer in the Ordinary Course of Business

A

takes free of security interest created by his seller
BIOC buys in good faith without knowledge it vioaltes the rights of another (but allowed to know of the encumbrance generally)
BIOC if the seller is in the business of selling goods of the kind
if the person selling you the thing isn’t the same person who was the original debtor you do not take free

49
Q

Buyers not in the ordinary course

A

take the property subject to the perfected security interest BUT take free of unperfected security interests unless they know of the security interest

50
Q

Consumer to Consumer Sale (Garage Sale Rule)

A

buyer takes free of a security intersts if:
(1) no knowledge of existing security interest
(2) for value
(3) for personal/family household purposes
(4) unless prior to the purchase, the secured party has filed the financing statement

51
Q

PMSI v. Lien

A

if secured party files PMSI within 20 days of receiving possession, he takes priority over lien creditor arising between attachment and filing

52
Q

secured party vs. statutory lien claimant

A

statutory lien holder wins if they maintain possession of the collateral - even over a perfected security interest

53
Q

Default

A

rights of creditor to proceed against collateral triggered by default

generally construed as a failure to pay or as a failure to maintain insurance.

54
Q

Upon default, creditor is

A

entitlted to self-help and may take possession if it can be done without a breach of the peace

55
Q

breach of the peace

A

any conduct with potential to lead to violence (physical presence and a verbal objection amounts to breach)

56
Q

Effect of Breaching the Peace

A

creditor loses authorizatio to reposesses and can be liable for conversion (actual and punitive damages)

57
Q

Default - Equipment Rule

A

secured party can make equipment unusable and leave it on debtor property without breaching the peace (psychopath pulling out ignition wires ok)

58
Q

Default - Account Rule

A

credit can notify persons owing money to original debtor to make payment to original creditor instead. upon this notice, paying the debtor will not satisfy the obligation - MUST pay the original creditor

59
Q

Strict Foreclosure

A

allowed to keep the property instead of foreclosing it as long as you:
(1) notify anyone else w a lien in it
(2) get all their consent
(3) get debtor consent
and if anyone objects within 20 days, you can’t keep it

60
Q

Partial strict Foreclosure

A

keeping the collateral and taking some money off your debt instead of it being completely satisfied

61
Q

Fixtures Defined

A

goods permanently attached to real property
so related to real property that interest in them arises

62
Q

Perfect a Fixture

A

file a fixture filing with the mortgage on real estate would be filed

63
Q

Don’t need a fixture filing if

A

readily removeable collateral (1) office or factory machines (2) equipment not primarily uesd or leased for use in oepration of real esatate (3) replacvement of domestic appliances

any method of perfection okay

64
Q

don’t need to perfect fixtures if

A

(1) owner or real esttate has consented to interest or disclaimed intereset in proeprty as fixtures through authenticated record
OR
(2) the debtor has a right to remove the goods as against real estate claimant

65
Q

Upon Default re fixtures

A

the holder can remove the fixtures from the property but if debtor doesn’t own the property then the creditor must reimburse the owners for cost to repair damage due to removal, but not any diminution in value

66
Q

Accessions definition

A

goods physically united with other goods in such a manner that the identity of the original goods are not lost (i.e. tires on the car)

67
Q

Accession Special Priority Rule

A

security interest in accession is subordinate to security interest in the whole, i.e. like the car, which is perfected by comliance with certificate of titlte statute

68
Q

Accession removal

A

can remove is security interest in the accession has priority over the claim of EVERY SINGLE PERSON having an interest in the whole

69
Q

Financing Statement Timing (effective date and movements)

A
  • 4 months after debtor moves before it becomes unperfected
  • if collateral moved across state lines to a new owner, then unperfected for a year

financing statement is effective for 5 years and can file a continuation statement in the last 6 months of the statement’s life

70
Q

Financing Statement Termination

A

after paying off the loan, demand creditor files a termination statement within 20 days of demand OR 1 month of the lien ending

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