Secured Transactions Flashcards
Tangible security interests
“Goods” have five mutually exclusive categories: FIFE C:
F – FIXTURES which are goods attached to realty.
I – INVENTORY held for sale or lease as well as the raw materials used to make inventory.
F – FARM PRODUCTS
E – EQUIPMENT used in a business
C – CONSUMER GOODS used for personal, family, or household purposes.
attachment of security agreement:
CAR for attachment of security agreement: collateral (value), authenticate (writing with description of collateral+signature), rights (ownership)
Perfection can occur by:
PFACTA – Possession, Filing Financing statement, automatic perfection, control, Temporary Perfection and Attachment to all.
Intangible security interest - ACIDIC
Accounts- An account is the debtor’s right to receive payment.
Chattel Paper- A record which evidence a monetary obligation, and security interest in or a lease of good
Investment Property- Includes items such as stocks, bonds, mutual funds, and brokerage accounts.
Deposit accounts- An nonconsumer acc with a bank.
Instruments- Pieces of paper representing the right to be paid money, like promissory notes
Commercial tort claims
PMSI
explain
Purchase money security interest, 2 ways- (vendedor de carro e parcelamento) – finance-financed PMSI - the secured party sells the goods on credit and retain interests in the goods or Purchase-money PMSI loan funds to party to buy specific collateral.
Automatic perfection for PMSI in consumer goodsfor 20 days
need to perfect after 21 days to maintain priority
Future advance clause
After-acquired propety - must include a Future advance clause- A secured party often contemplates making future loans to the debtor and wants to secure these future advances in the present security agreement. A financing statement need not mention it.
add the “all future advances” in the financing statement to keep your priority for future advances you give.
Perfection for vehicles - extra rule
Vehicle: security interests in motor vehicles required to be titled can only be perfected by notation on the certificate of title issued by the state.
What is perfection?
In general, perfection is the process of giving public notice of the security interest to the world. Only after attachment.
Financing statement - information required
Must contain debtor’s name, mailing address, secured party’s name and address and description of the collateral in the correct filing office. Name error: Minor errors in the debtor’s name won’t invalidate a financing statement, but seriously misleading errors will. 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.
here you can say all assets - not in the attachment agreement
Debtor name change
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.
who has the highest priority in the collateral?
Michael BIOCOB - 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 a seller in the business of selling goods of the kind purchased.
shelter rules - next that gets from BIOCOB is protected
it’s ok if aware that there is a SI
Accessions
explain
Accessions are goods that are physically united with other goods in such a manner that the identity of the original goods is not lost (for example, tires on a car). If the accession becomes part of a whole that is subject to a security interest that is perfected in compliance with the requirements of a certificate-of-title statute, the security interest in the whole has priority over the security interest in the accession.
Mortgage priority
A prior real estate interest that is properly recorded has priority over a security interest that subsequently arises. Exception: 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. However, a construction mortgage takes priority over a subsequent PMSI in fixtures.
o Mortgage interest vs. security interest in fixture?
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.
Remedies when the debtor defaults?
- may take possession of collateral
- may dispose collateral (sell, foreclosure) the sale must be reasonble, provide notice.
repossession - self help rule
allowed self help but watch for the Breach of the peace? Any conduct by the secured party that has the potential to lead to violence is a breach of the peace. When a secured party breaches the peace, the secured party loses the authorization to repossess.
What happens if the sale was not commercially reasonable?
If foreclosure is not made in a commercially reasonable manner there is a rebuttable presumption that the sale proceeds is the equal amount of the debt, then secured party loses any deficiency.
Debtor’s right to redeem?
explain
Any time before the secured party has resold the collateral or has entered into a contract for its disposition, or the obligation has been discharged by the secured party’s retention of the collateral, the debtor (as well as any surety or other secured party or lienholder) may redeem the collateral. To do so, the debtor must tender fulfillment of all obligations secured by the collateral, plus additional reasonable expenses.
Secured transactions
what is it?
Article 9 of the Uniform Commercial Code (UCC) sets forth the law of secured transactions, which governs any transaction, regardless of form, creating a security interest in personal property or fixtures by contract.
Proceeds?
explain
If the debtor sells the collateral or transforms it somehow you get automatic perfection for 20 days in whatever he transformed it into!! But it becomes unperfected on the 21st day unless you file a financing statement. It’s called proceeds (the money from the sale).
Lien creditors vs. Perfected
The lien creditor has the same priority rules as the perfected security interest AKA first to file, first to perfect. If a party becomes a lien creditor before a secured party perfects or files, the lien creditor wins.
What is the lease trick?
You are looking for things such as nominal consideration and the debtor basically paying you the FULL value of the goods in installments. The security agreement will say like “you get this huge tractor that I am leasing to you! The tractor is worth $120,000… pay me $10,000 every month for a year. Then on the last day just pay me $1. This is a lease and not a secured transaction =)” Newsflash: The UCC is not impressed by your idiotic attempt to trick them with this fake ass lease. It can and WILL be considered a secured transaction and fall under the purview of Article 9.
