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MEET Topics > Secured Transactions > Flashcards

Secured Transactions Flashcards

1
Q

Secured transaction

A

Transaction intended to create security interest in personal property or fixtures

Generally, involves sale on credit or loan in which seller obtains lien on some or all of debtor’s property as security for payment

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2
Q

What law governs

A

Art 9 of Uniform Code

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3
Q

Scope of Art 9

A

Even without express words, seller’s retention of title, agricultural liens, sales of accounts, chattel paper, payment intangibles, and notes, commercial consignment of goods, and secured sale disguised as lease

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4
Q

Debtor

A

Person who owes payment or performance of obligation secured

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5
Q

Creditor

A

Secured party: lender, seller, or other person in whose favor there is SI

Unsecured creditor: person who money is owed to where no SI

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6
Q

Security agreement

A

K b/w debtor and secured party that creates SI

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7
Q

SI

A

Interest in personal property or fixtures that secures payment or performance

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8
Q

Default

A

Event causing SI to spring to life

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9
Q

Collateral

A

Property subject to SI

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10
Q

PMSI and types

A

Special subtype of SI in goods
1. Seller-financed: (a) secured party sells collateral on credit, and (b) retains SI in collateral
2. Financer-financed: (a) loan to purchase specific collateral, (b) loan used to acquire, and (c) creditor takes SI in collateral

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11
Q

After-acquired

A

Grant of SI in property obtained in future

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12
Q

Future advance

A

Grant of security agreement securing future loans with same collateral

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13
Q

Attachment (define)

A

Steps necessary to create SI effective against debtor

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14
Q

Perfection (define)

A

Steps necessary and legally required to create SI effective against world (generally, means notice)

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15
Q

Financing statement

A

Document used to convey notice of SI

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16
Q

Types of collateral

A

Classification is important b/c many Art. 9 provisions make legal distinctions based on type

Either goods, or intangible OR semi-intangible

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17
Q

Goods categories

A

Tangible, movable personal property based on how collateral used by debtor

Consumer goods, equipment, farm products, or inventory

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18
Q

Consumer goods

A

Used or bought for use for primarily personal, family, or household purposes

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19
Q

Equipment

A

Good used or bought for use in business

Catch-all category if nothing else works

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20
Q

Farm products

A

Crops, livestocks, or supplies used or produced in farming operations, OR products of crops or livestock in unmanufactured states if in possession of debtor engaged in farming operations

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21
Q

Inventory

A

Goods held for sale or lease, goods to be furnished under service contracts, and materials used or consumed in business in short time

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22
Q

Intangible or semi-intangible category

A

Category depends on nature of collateral rather than its use

Types include instruments, documents, chattel paper, investment property, accounts, deposit accounts, commercial tort claims, general intangibles

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23
Q

Instrument

A

Checks, promissory notes, or drafts

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24
Q

Documents

A

Represent rights to receive goods

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25
Q

Chattel paper

A

Record(s) which evidence both monetary obligation, and security interest in lease of specific goods

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26
Q

Investment property

A

Stocks or bonds

27
Q

Accounts

A

Rights to payment for property sold or services rendered

28
Q

Deposit accounts

A

Non-consumer bank deposit accounts and accounts that are claimed as proceeds of other collateral

29
Q

Commercial tort claims

A

Type of tort lawsuit

30
Q

General intangibles

A

Any personal property not coming w/i scope of other definitions such as patent and trademark rights, copyrights, and goodwill

Default category, best example is intellectual rights

31
Q

Attachment reqs

A

To create SI
1. Security agreement
2. Value given, and
3. Debtor has rights in collateral

32
Q

Security agreement

A
  1. Record showing intent to create SI,
  2. Agreement authenticated by debtor, usually meaning signed with any intent to sign, and
  3. Description of collateral that reasonably identifies it
33
Q

Agreement evidenced by

A
  1. Creditor taking possession of collateral
  2. Authenticated document, or
  3. Creditor taking control of non-consumer deposit accounts, chattel paper, and investment property
34
Q

Value

A

Must be given and any consideration sufficient to support simple K = value

Every debtor gives through promise to pay, so real Q is whether creditor gives

35
Q

Rights in collateral

A

Debtor must have rights in collateral which requires ownership or possessory rights

36
Q

Scope of SI

A

Includes future advances and after-acquired property

W/O express intent for after-acquired, SI only reaches collateral that debtor had rights to at time of signing unless interest in inventory and/or accounts

37
Q

Methods of perfection

A

Secured party must perfect; this is done by attachment PLUS
1. Filing
2. Taking possession
3. Automatic perfection for PMSI
4. Control
5. Temporary perfection

38
Q

Automatic perfection

A

PMSI in consumer goods, not otherwise covered by title statute, like car/trucks, is perfected once it attaches

Note, fixtures require fixture filing to obtain priority over interest in real property to which affixed

39
Q

Possession

A

SI in most types of collateral can be perfected simply by taking possession but this only applies to items that can be possessed (tangibles)

Perfection only occurs during time of possession

40
Q

Control

A

SIs in investment property, non-consumer deposit accounts, and chattel paper

Can only be perfected via control includes non-consumer deposit accounts, electronic chattel paper, and money

To control: (a) maintaining account by bank, (b) account in secured’s name, (c) account from bank to creditor if fails

41
Q

Notation on car’s certificate of title

A

Only way to perfect car is notation on certificate of title issued by state

Exception: SIs created by car dealers held in inventory are perfected by filing

42
Q

Filing

A

Secured party may obtain by filing financial statement, which must contain debtor’s name and address, secured’s name and address, and description of collateral

43
Q

Contents of financing statement

A

Debtor’s name, description of collateral, after-acquired property, real property-related statements, authorization of filing statement, and authenticated security agreement

Debtor’s name is driver’s license name and how indexed; effect of error is fine if not seriously misleading

44
Q

Place of security agreement filing

A

With Secretary of State unless real estate, timber, minerals, and fixtures then county where mortgage is

45
Q

Temporary perfection

A

SIs in proceeds from original collateral is perfected automatically for 20 days

If past 20 days, imperfect unless filing statement covers original, identifiable cash proceeds, SIs that would be perfected in same place; proceeds not purchased with cash

46
Q

Priorities

A

Determines which creditor is first in line to get paid of multiple for same collateral

This depends on type of collateral involved and types of parties involved

47
Q

Perfected vs perfected

A

First to file or perfect; knowledge of prior unperfected does not matter

48
Q

Perfected vs unperfected

A

Perfected SI prevails

49
Q

Unperfected vs unperfected

A

First to attach has priority

50
Q

Secured creditor vs unsecured

A

Secured wins

Be on look out for agreement that has given no value or rights in collateral

51
Q

Priority in PMSIs

A

Give superpriority subject to conditions

  1. PMSI in inventory
  2. PMSI in goods other than livestock or inventory
  3. Conflicting PMSIs
52
Q

PMSI in inventory and livestock

A

If
1. Instruments, chattel paper, IDed cash, inventory or cash proceeds
2. Perfected at time debtor gets possession
3. Authenticated notice to other holders, and
4. Notice received within 5 years of debtor getting possession

53
Q

PMSI in goods other than inventory and livestock

A

If perfected w/i 20 days after debtor receives possession of collateral

54
Q

B/W conflicting PMSIs

A

Secured party who has PMSI as seller of collateral, OR first secured party to file or perfect

55
Q

Investment property

A

Control beats other methods of perfection and earlier beats later

56
Q

Deposit accounts

A

If control, takes super priority

Best: co-owner
Second: maintain account
Worst: control agreement

57
Q

Secured party against buyer or other transferee

A

When buyer/lessee buys or leases something with SI on it, security stays UNLESS
1. Authorized sale
2. Buyer in ordinary course (good faith, no notice) from seller of those goods
3. Buyers not in ordinary course if unperfected
4. Consumer-to-consumer (no knowledge, without financing statement)

58
Q

Secured party vs judicial lien creditor or holder of possessory lien

A

Judgment lien holder wins IF arose before perfected

59
Q

PMSI exception

A

For PMSI, if secured party files w/i 20 days after debtor receives collateral, secured party has priority over judicial lien arising b/w attachment and filing

60
Q

Fixtures and its perfection

A

Goods permanently attached to real property

Requires separate filing

When SI has priority over all interests in real property, holder can remove upon default but if debtor not owner, must reimburse for cost to repair

61
Q

Priority of fixtures

A
  1. Secured party vs subsequent real estate interest: SI in fixtures over real estate interest
  2. Secured party vs prior real estate: first in time unless SI is in PMSI
  3. Construction mortgage vs everyone else: construction wins
62
Q

Accessions

A

Collateral that does not lose identity when physically united with other goods

E.g., hard drive, GPS, tires

63
Q

Accession priorities

A

General priority rules apply UNLESS SI in accession is subordinate to SI interest in whole and perfected by compliance with title statute

MEET Topics (7 decks)

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