Secured Transactions Flashcards
UCC Art. 9A / Creditor's rights
After-acquired collateral clause
extends a security interest to all current and future inventory.
Generally valid.
Ineffective as to consumer goods acquired more than 10 days after the creditor has given value. [F22]
When a debtor is a corporation organized under VA law, the usual means of perfecting a security interest is…
filling a financing statement with the State Corporation Commission. [F22]
[J20] Debtor need not sign (purpose of perfection is to put OTHERS on notice)
When two parties with perfected security interests are competing for the same collateral, priority normally goes to the one who was…
…either first to perfect or first to file a valid financing statement. [F22]
In some circumstances, a ___ will have super priority even if it is not first to file or perfect.
A purchase money security interest.
Where collateral is inventory, a PMSI will have super priority if, before handing over possession of the inventory to the debtor, the creditor (1) sends a special written notice to the other security interest holders and (2) takes steps to assure that its PMSI will be perfected at the time the debtor receives possession.
A PMSI is perfected automatically upon attachment where the collateral is a consumer good. [F22]
A ___ takes free of a security interest created by its seller.
Buyer in the ordinary course of business (buying from a merchant of goods of the kind).
Knowledge of an existing financing statement does not defeat such a buyer unless they know their purchase violates the terms of the original financing agreement.
Does not include mere donees who give no consideration or buyers outside the normal course of business. Such donees become debtors subject to Article 9 remedies, including repossession. [F22]
Entrusting goods to a merchant who deals in goods of the kind gives the merchant…
…power to transfer all rights of the entruster to a buyer in the ordinary course of business.
A buyer in the ordinary course of business is one who buys in good faith and without knowledge of the violation of ownership rights of a third party.
[F20]
A debtor whose collateral has been repossessed may redeem it only by…
…tendering the entire balance due on the loan plus expenses of repossession. [F15]
When a creditor-debtor itself defaults to another creditor, the creditor may…
…notify the debtor (a letter about the default is sufficient) and demand payment be made to it rather than to the creditor-debtor. The debtor should comply. [J15]
A purchaser from a thief…
…cannot be a bona fide purchaser. [J15]
Where a seller of chattels did not have title, he has…
…breached his warranty as to title and the right to transfer it and if the chattels server as collateral for a security interest the collateral fails and the debtor is no longer liable. Further, the debtor can sue for breach of title warranty to recover payments made and incidental and consequential damages. [J15]
Choice of law
A federal court sitting in diversity will apply the choice of law rules of the state in which it is sitting. Where the parties have chosen what law to apply, that law will govern in Virginia.
Under the UCC, when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or such other state or nation shall govern their rights and duties. [F16]
Contractual ambiguities are construed…
…against the drafter. [J16]
Upon default of a security interest, the secured party has the right to…
…repossess, provided it proceeds without breach of the peace (conduct that has the potential to lead to violence).
However, a secured party that disposes of collateral must send reasonable authenticated notification to the (10 days’ notice before disposition of collateral is considered reasonable).
A secured party is liable for the actual damages caused by failure to follow any of the Code’s rules.
If the collateral is consumer goods, the debtor is entitled to a minimum of 10% of the cash price of the goods plus an amount equal to all the interest charges to be paid over the life of the loan. [J16]
When an insured party makes a claim that is paid by the insurer, the insurer becomes…
Subrogated.
If the insurer has paid the entire claim, it is the real party in interest and must sue in its own name. If no money or enforceable promise to pay money has been advanced, then there has not been any subrogation and the insured remains the real party in interest. [J16]
When a bank charges an account for a forged check…
A bank may charge its customer’s account only for “properly payable” items. A forged check is not properly payable.
If the account holder reports the forgery promptly and did not substantially contribute to the forgery, the bank must re-credit the account. [J16]
A presentment warranty on a forged check is breached only if the warrantor…
…has actual knowledge that the signature is unauthorized. [J16]
A bank may recover on a fraudulent check from the check casher under mistaken payment unless…
…the casher took the instrument in good faith and for value or in good faith changed position in reliance on the payment or acceptance. [J16]
A preference among creditors is…
…permitted and does not violate insolvent transfer rules, so long as it’s a bona fide payment for full value.
When a stockholder of an insolvent corporation, which was also a debtor of the stockholder, had corporate assets transferred to the stockholder to satisfy his claim against the corporation, it was held to be a voidable fraudulent preference. [J17]
Fraudulent transfer
Any gift, conveyance, assignment, or transfer made with the actual intent to hinder, delay, or defraud creditors is considered fraudulent and is void. Does not affect title of purchaser for valuable consideration with no notice of fraudulent intent.
Clear and convincing evidence standard. [J23, J18]
Gift by debtor
Every gift, conveyance, assignment, or transfer not for valuable consideration by an insolvent transferor shall be void as to existing creditors. [J18]
liens on motor vehicles are perfected by…
having the lien noted on the title to the vehicle by registering the security interest with DMV, NOT by filing a financing statement. [F18]
An abstract of judgment from a Virginia court in one jurisdiction, docketed in a Virginia circuit court of another jurisdiction, will create…
…a judgment lien on any real estate owned by the judgment debtor[s] in the jurisdiction where the judgement was recorded. [F18]
Questions for security interests:
Is the interest properly created, the collateral properly attached, and the interest perfected? [J20]
A mechanic’s lien requires:
Alteration or repair of any article of personal property at the request of the owner of such property.
Amount of just and reasonable charges therefor and may retain possession of such property until such charges are paid. Limit of $1000 against the secured party where the property is attached to a security interest. [J20]
To create a security interest…
…the secured party must [i] give value;
[ii] the debtor must have sufficient rights in the collateral; and
the secured party must [iii] either possess the collateral pursuant to agreement (pledge) or the debtor must have authenticated a security agreement. [F20]
Where an account is in joint tenancy with the right of survivorship, a creditor of one of the owners who is a judgement debtor ___ reach the debtor’s share of the account.
Can.
This results in a lien on the debtor’s right to receive the money in the bank account.
There is a presumption that when an account is owned by a husband and wife, they own it equally. [F21]
