Secured Transactions Flashcards
Security Interest
An interest in personal property or fixtures that secures payment or performance of an obligation
Article 9 governs transactions that
regardless of form, create a security interest in personal
property or fixtures by contract; rights to payment; agriculture liens
Treat these Rights to Payments as Secured Transactions
C-PAP Chattel paper Promissory Notes Accounts Payment Intangibles
Why? To facilitate public notice of these sales
Goods Types
Moveable; fixtures; unborn animals
- Consumer goods
- Farm Products
- Inventory
- Equipment
Rights to Payment Types
- Instruments (promissory notes, checks)
- Chattel paper (record w/ 2 parts: $ obligation AND SI or a lease)
- Accounts (rights to $ for goods sold, leased, licensed, or services rendered; accounts receivable; insurance policy payout)
- Payment Intangibles (catch-all)
Chattel Paper
Record w/ 2 parts: $ obligation AND SI or a lease
Exs:
A loan AND granting an SI = chattel paper
A lease AND granting SI = chattel paper
Other Types of SIs
Documents (docs of title; bill of lading) Investment properties (securities) Deposit Accounts Commercial Tort Claims Letter of credit rights General intangibles
Attachment
- Value Given
- Rights in Collateral
- Security Agreement (authenticated record OR possession/control)
Authenticated Record
These are RAD
- a Record (stored in TANGIBLE medium)
- Authenticated by debtor (sig or symbol; intent to be bound)
- Describe the collateral to REASONABLY IDENTIFY it (can use art 9 category; no super-generics)
Super Generic
NOT sufficient for an authenticated record
such as “all of the debtor’s assets” or “all of the debtor’s personal property” does not reasonably identify the collateral for attachment.
Note: will be sufficient for a UCC-1 filing to perfect
After acquired Property
A security interest may apply to collateral the debtor acquires in the future
! Consumer Goods: After acquired clause is NOT effective for consumer goods, UNLESS debtor acquires them within 10 days after the secured party gives value
Proceeds
A security interest in collateral AUTO attaches to identifiable proceeds from the sale, exchange, or other disposition of collateral.
Accessions
Identity of combined goods aren’t lost = attached security interest.
Purchase Money Security Agreement (PMSI)
Gives lender security interest in goods that have been purchased w/ funds borrowed from them or purchased on credit
Exists w/ goods and fixtures
Consumer Goods– AUTO perfects
Perfection
Perfection is necessary for party to have a right in the collateral that is superior to others rights.
Perfection = Attachment + compliance with a method of perfection
Methods of Perfection
Filing a financing statement Possession of collateral Control of collateral Automatic perfection Statutory perfection (like titles for cars)
Filing a Financing Statement:
Debtors name
Name of secured party
Description Collateral (can be general)
Effective for 5 years
Must file continuation statement (need to go 6 months prior to expiration)
Weird Rules re: Financing Statements
Debtors Name:
(1) if Individual- name on driver’s license or state ID (most states) or legal name (minority)
(2) if Corp: Registered organization- name on public records
Change of name: must amend within 4 months
**its OKAY to have an error in secured party name (b/c wont result in notice problem)
If name is seriously misleading — NOT perfected
Filing Location: Real Property
Real property– where the property is located
Filing Location: Collateral
Collateral– state of the DEBTOR’s location
Individual– debtor’s principal residence
Non Registered organization– maintains its place of business, if more than one, chief executive office
Registered- where it is organized
Automatic Perfection:
PMSI in consumer goods
Proceeds if covered in SI
Cash proceeds
Same Office Rule (Does NOT apply w/ cash proceeds)
Temporary Auto-Perfection
20 days from attachment – New value under an authenticated SA for a SI in certificated securities, negotiable documents, or instruments
20 days from attachment – proceeds if SI perfected
20 days – Delivery of collateral to debtor
4 months – Movement of DEBTOR to another state
1 year — Interstate movement of COLLATERAL to debtor in another state re: perfected SI
Proceeds
Temporary perfection:
If SI in original collateral perfected, SI in proceeds perfected for 20 days from attachment
Automatic perfection (indefinite)
Pursuant to financing statement- broad enough to cover proceeds then its OK
Cash proceeds
Same office (Does NOT apply w/ cash proceeds)
Statutory or common-law lien creditor
Possessory lien > SI; if the lien secured payment for the goods furnished in the ordinary course of business
Unsecured General Lien Creditor
General Creditor (unsecured)- has a claim, including judgment but no lien on or SI in collateral
SI will ALWAYS prevail over general creditor
Judicial Lien Creditors Priority
Judicial lien creditor > unsecured security interest
Judicial lien creditor < secured interest
Transferee v. secured party w/ SI
SI continues in collateral (aka buyer takes SUBJECT TO)
UNLESS: secured party authorized the transfer free of the SI
Buyers rights v. unperfected SI
Buyer takes collateral FREE OF the SI IF the buyer:
(1) gives value
(2) receives delivery and
(3) without knowledge of SI
Buyers rights v. perfected Si
Buyer generally takes collateral SUBJECT TO the SI
Buyer in the ordinary course of business
BOCB takes FREE OF any SI in the goods given by the buyers seller
(1) Buy goods in the ordinary course
(2) for value
(3) from seller in the business of selling goods of that kind
(4) in good faith
(5) without actual knowledge that the sale VIOLATES another’s rights in the goods**
Consumer Buyer:
A consumer buyer takes FREE OF any SI in consumer goods UNLESS a secured party has filed a financing statement covering the goods
(1) Buys consumer goods for his own personal use
(2) from a consumer seller,
(3) for value
(4) without knowledge or record notice of the SI
Perfected SI
v.
Perfected SI
first to file or perfect has priority
a lapse in filing or perfection restarts the clock
Perfected SI
v.
Unperfected SI
a perfected SI has priority over an unperfected interest
Unperfected SI
v.
Unperfected SI
the first to attach has priority
PMSI
v.
Non-PMSI
PMSI will have priority
PMSI in goods other than inventory or livestock
v.
Any SI
PMSI has priority IF perfected BEFORE OR WITHIN 20 days after the debtor receives possession of the collateral
PMSI in inventory or livestock
v.
Any PMSI
PMSI has priority IF:
(1) PERFECTED @ time the debtor receives possession of the collateral, and
(2) PMSI party sends an authenticated NOTICE of the PMSI to the holder of any conflicting SI BEFORE the debtor receives possession of the collateral.
Debtor receives possession of collateral + notice of PMSI to other conflicting SI
Perfected PMSI
v.
Perfected PMSI
first to file or perfect has priority
Exception: a Seller with a PMSI > lender with a PMSI
Seller with a PMSI
vs.
Lender with a PMSI
Seller with a PMSI > lender with a PMSI
Proceeds from PMSI in goods
a priority of a PMSI in goods generally extends to the proceeds of the original collateral if SI is perfected when the debtor receives possession of the collateral OR within 20 days after.
SI in fixtures
vs
Real property interest-
a SI in fixtures > real property with which the fixtures are associated IF the SI in fixtures is perfected by a fixture filing BEFORE the real property interest RECORDED
Perfected SI in fixtures
vs
Subsequent judicial lien
Perfected SI in fixtures > subsequent judicial lien
PMSI in Fixtures
vs
Prior real property interest
PMSI in fixtures > property interest; IF fixture filing BEFORE goods BECAME fixtures OR within 20 days
SI in fixtures
vs
Prior construction mortgage
construction mortgage > SI in fixtures; IF recorded BEFORE goods BECAME fixtures
Proceeds Filing Date
The filing or perfection date for the original collateral is the filing/ perfection date for the proceeds
Proceeds
Proceeds for non-filing collateral– priority of the OG collateral generally continues in the proceeds IF:
(1) the SI in the proceeds is perfected and
(2) the proceeds are either (a) cash proceeds OR (b) proceeds of same type of collateral
Solving SI Issues
A SA is a contract; contract law determines enforceability of any terms in a SA
