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Utah Essay Bar Studies > Secured Transactions > Flashcards

Secured Transactions Flashcards

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1
Q

Scope of Article 9

A 
Governs transactions that
Create security interest in personal property or fixtures May include agricultural liens
Goods or services for farming operation
Rent OR certain rights to payments:
Chattel paper
Promissory notes
Accounts
Intangibles
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2
Q

Secured Transaction

A

Consensual agreement between
Debtor and creditor that
Debtor’s personal property will serve
As collateral for loan

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3
Q

Leases under Article 9

A

When transaction in economic reality or
Substance a secured transaction determined on
Case-by-case basis

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4
Q

Test for Article 9 covering Leases

A

Lessee is obligated to pay
Full obligation regardless if
Lease terminated early AND
One of following present:
Original term of lease equal to or
Greater than remaining life of goods,
Lessee bound to lease for remaining economic
Life of goods,
Lessee has option to renew lease for remaining
Economic life of goods for no additional OR
Nominal additional consideration, or
Lessee has option to become owner for no or
Nominal additional consideration

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5
Q

Circumstantial Test if Lease Test Fails

A

Facts of case

When in doubt, FILE financing statement

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6
Q

Test for Article 9 covering Consignments

A

Owner delivers goods to merchant for
Merchant to sell,
Merchant deals in goods of kind
Not operate under name of consignor
Not be generally known by creditors to
Be substantially engaged in selling goods of others
Not be an auctioneer,
Each delivery must be valued at least $1,000
At time of delivery, and
Not be consumer goods immediately before delivery

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7
Q

Consignment

A

When party has ownership of goods but
Gives possession of goods to another
Party for purpose of allowing consignee to sell goods

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8
Q

Security Interest

A

Interest in personal property or fixtures that

Secures payment or performance of obligation

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9
Q

Secured Party

A

Creditor who obtains security interest in
Debtor’s property
Usually person who loaned money or
Extended credit to obligor

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10
Q

Obligor

A

Party that must pay or perform on

Obligation secured by collateral

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11
Q

Debtor

A

Person who has interest, other than
Security interest or other lien, in collateral
Usually also obligor (but not required)

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12
Q

Collateral

A

Property subject to security interest,
Characterization of which can affect validity of
Security interest, and way it can be perfected, and
Rights of third parties in collateral

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13
Q

Tangible Goods

A 
Movable at time secured interest attaches 
Determined by debtor’s principal use at 
Time security interest attaches:
Consumer goods
Farm products
Inventory
Equipment
PMSI
Software
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14
Q

PMSI Tangible Goods

A

Only exists in goods

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15
Q

Consumer Goods Tangible Goods

A

Goods acquired primarily for

Personal, family, or household purposes

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16
Q

Farm Products Tangible Goods

A 
Crops
Livestock
Supplies used
Things produced (i.e. eggs) in farming operations 
BUT NOT farm equipment
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17
Q

Inventory Tangible Goods

A 
Goods held for sale or lease
But not farm products, including:
Goods furnished under service contract
Raw materials
Works in progress
Materials used or consumed in business
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18
Q

Equipment Tangible Goods

A

Not consumer goods, farm products, or inventory
Usually goods used primarily in business
I.e. machinery, delivery vans, office equipment

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19
Q

Fixtures Tangible Goods

A

Attached to real property in such way that

Interest arises in them under real property law

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20
Q

Software Tangible Goods

A

Software embedded in goods
Diagnostic computer program
Treated as part of goods in which embedded

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21
Q

Intangible Collateral

A 
Chattel paper
Document
Instruments
Investment property
Accounts
Commercial tort claims
Deposit account
Letter of credit right
General intangibles
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22
Q

Accounts Intangible Collateral

A 
Right to payment for goods sold
Property licensed, or 
Services rendered, OR 
Issuance of insurance policy, 
Use of credit or charge back, or 
Winning lottery
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23
Q

Deposit Account Intangible Collateral

A

Savings, passbook, time, or demand account

Maintained with bank

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24
Q

Commercial Tort Claims Intangible Collateral

A

Claims possessed by org or an individual that
Arose in course of org or individual’s business but
Does not personal injury or death

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25
Q

Investment Properties Intangible Collateral

A

Certified and uncertified securities

Stocks and bonds.

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26
Q

Chattel Paper Intangible Collateral

A 
Obligations for goods sold on credit, 
Rental payments from lease agreement
Requires:
Monetary obligation
Security interest or lease
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27
Q

Letter of Credit Intangible Collateral

A

Right to payment or performance under letter of credit

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28
Q

Payment Intangibles Collateral

A

Catch-all for rights to payment, where
One party under obligation to another (debtor) but
No promissory note

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29
Q

General Intangibles Collateral

A

Residual category and includes anything

Not fit in any other category

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30
Q

Change in Classification Collateral

A

As collateral passes from debtor to debtor or the principal use changes, the classification may also change.

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31
Q

Attachment

A

Required for security interest to be enforceable
Value given by secured party
Debtor has rights in collateral
Debtor has authenticated security agreement that
Describes collateral or secured party has
Possession or control of collateral

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32
Q

Value Attachment

A

Consideration sufficient to form contract,
Extending credit, accepting delivery under
Pre-existing contract, or in satisfaction of
Pre-existing claim
No new value needs to be given and no
Money needs to exchange hands
May provide collateral that secures future advances

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33
Q

Rights in Collateral Attachment

A

ONLY attaches to rights debtor has
Including limited rights
Thieves cannot grant security interests in stolen
Goods because no rights in collateral

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34
Q

After Acquired Property Attachment

A

Attachment does not occur until

Debtor obtains rights in collateral

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35
Q

Security Agreement

A

Must satisfy Statute of Frauds

Required to attach

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36
Q

Authentication Record Security Agreement

A

Be in a record
Contain description of collateral
Be authenticated by debtor

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37
Q

Record Security Agreement

A

Tangible medium but
No need of writing
Includes electronic records

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38
Q

Description Security Agreement

A

Described in sufficient detail to make
Possible to reasonably identify
Generic description “debtor’s entire inventory” sufficient

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39
Q

Exception to Description Security Agreement

A

Consumer goods or commercial tort claims

Identified with particularity

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40
Q

Super Generic Description Security Agreement

A

Descriptions such as “all the debtor’s assets” or

All the debtor’s personal property not sufficient

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41
Q

Authenticated by Debtor Security Agreement

A

Authenticated by party against whom enforced

Signature of debtor or execution of record

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42
Q

Possession of Collateral Security Agreement

A 
Possession satisfy authentication: 
Consumer goods
Equipment
Farm products
Chattel paper
Tangible documents
Certified securities
Instruments
Money
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43
Q

Control of Collateral Security Agreement

A 
Control satisfies authentication:
Electronic chattel paper
Investment property
Letter of credit rights
Deposit accounts
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44
Q

After-Acquired Collateral Security Agreement

A

If original agreement states applies to
After-acquired property i.e.
All of debtor’s existing and after-acquired collateral

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45
Q

Exception to After-Acquired Collateral Security Agreement

A

Not effective if consumer goods, UNLESS
Debtor acquires within 10 days after value, or
Commercial tort claim

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46
Q

Proceeds Security Agreement

A

Automatically attaches to identifiable proceeds

When sold, leased, exchanged, etc.

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47
Q

Duties of Secured Party in Possession

A

Duty of Care
Duty to Keep Collateral Identifiable
Duty to Relinquish Possession

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48
Q

Duty of Care Secured Party in Possession

A

Act with reasonable care with respect to collateral

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49
Q

Duty to Relinquish Possession Secured Party in Possession

A

Once satisfied, must relinquish control

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50
Q

Charge for Expenses Rights of Secured Party in Possession

A

Right to charge debtor reasonable expenses

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51
Q

Purchase Money Security Interest (PMSI) Attachment

A

Secured party retains interest in goods sold

Only collateral in goods or software

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52
Q

Components of Purchase Money Security Interest (PMSI) Attachment

A

Value given by secured party to debtor and
Debtor incurred obligation to enable debtor to
Acquire rights in goods or
Secured party sold goods to debtor, and
Debtor incurs obligation to pay secured party
All or part of purchase price

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53
Q

Dual Status Purchase Money Security Interest (PMSI) Attachment

A

Secured interest taken in goods as PMSI
Then later, secured party extends more credit
Non-PMSI interest in later extended credit

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54
Q

Accessions Attachment

A

Physically united with other goods in such
Manner identity of OG goods not lost
I.e. tires installed on car.
Security interest in accession not lost

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55
Q

Commingled Goods Attachment

A

Physically united with other goods to
Point identity lost in product or mass
No security interest in commingled goods

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56
Q

Perfection Secured Transactions

A 
Gives rights in collateral superior to 
Any rights claimed by third parties
Filing finance statement
Possession
Control
Automatic perfection
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57
Q

Financing Statement Perfection

A

Debtor’s name
Name of secured party or rep
Collateral covered by financing statement

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58
Q

Application of Financing Statement Perfection

A 
Filing statements perfect for all collateral 
EXCEPT:
Deposit accounts
Money
Letters of credit
Collateral subject to other methods 
(i.e. certificate of title laws).
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59
Q

Filing of Financing Statement Perfection

A

Filed in central filing office/secretary of state

Where Debtor located

60
Q

Exception to Financing Statement Perfection

A

Real property related collateral must file in
County where real property located including
Fixtures, extracted collateral, oil/gas, and timber

61
Q

Debtor Name Financing Statement

A

Full debtor’s correct legal name

62
Q

Individual Debtor Name Financing Statement

A

Maj: driver’s license or state issued ID

If no current ID, only correct legal name

63
Q

Minority of Individual Debtor Name Financing Statement

A

Min: safe harbor for using “individual’s name,”
Driver’s license name, or
Surname and first personal name

64
Q

Name Change Debtor Name Financing Statement

A

If changed by debtor, then secured party has

Four months to file amended financing statement

65
Q

Errors Financing Statement

A

If seriously misleading, then fails

66
Q

Description of Collateral Financing Statement

A

Use description in security agreement or

Use generic description

67
Q

Errors of Description of Collateral Financing Statement

A 
Debtor may demand secured party 
Prepare termination statement with 
Respect to erroneous collateral to file
Consumer goods: 
Secured party must file termination statement
68
Q

Duration of Collateral Financing Statement

A

Effective for five years and effective upon

Delivery to filing office and tender of filing fee

69
Q

Possession Perfection

A

Taking possession of collateral
Only remains secure while retains possession
Casual or isolated assignments that
Don’t transfer significant part of accounts
Receivables does not count

70
Q

Money Possession Perfection

A

ONLY way to perfect in money

71
Q

Control Perfection

A

Taking control of collateral
Only remains secure while secure party retains control
Casual or isolated assignments that
Don’t transfer significant part of accounts
Receivables does not count

72
Q

Deposit Account Control Perfection

A

ONLY way to perfect by:
Secured party bank where deposit account maintained Agreed writing with instructions of secured party, or
Secured party becomes bank’s customer with
Respect to deposit account

73
Q

Automatic Perfection

A

Under certain circumstances, security interest

Automatically perfected

74
Q

PMSI Automatic Perfection

A

PMSI in consumer goods automatically

Perfected upon attachment

75
Q

Other Automatic Perfection

A

Casual or isolated assignment of accounts or
Payment intangibles that does not transfer
Significant part of assignor’s outstanding
Accounts or payment intangibles AND
Sale of payment intangible or promissory note

76
Q

Temporary Automatic Perfection

A

When change to collateral or debtor

77
Q

Name Change Temporary Automatic Perfection

A

Name change, secured party has

4 months to file amended financial statement

78
Q

Moves out of State Temporary Automatic Perfection

A

Remains perfected for 4 months unless

Financing statement lapses earlier

79
Q

Collateral Move out of State Temporary Automatic Perfection

A

Debtor still owns collateral, no refiling necessary
Collateral transferred to new debtor out of state,
Secured party one year to file listing new debtor

80
Q

Proceeds Perfection

A

Interest in proceeds granted temporary
Perfection status for 20 days BUT
Must amend financing statement to retain priority

81
Q

Automatic Perfection Proceeds

A

Proceeds used to purchase same
Type of identifiable collateral,
Same office rules, or
Cash proceeds

82
Q

Cash Automatic Perfection Proceeds

A

Perfection continues indefinitely so long as

Cash proceeds identifiable

83
Q

Same Office Rules Automatic Perfection Proceeds

A

Financing statement covers original collateral
Proceeds can be perfected in same central filing office
Proceeds not acquired with cash proceeds

84
Q

Vehicles Perfection

A

Covered under certificate of title statutes and
Follow appropriate state statute for attachment and
Perfection, NOT PMSI

85
Q

Failure to Perfect

A

If buyer of accounts does not perfect its interest,
Seller continues rights in those accounts
I.e. can perfect in already attached collateral

86
Q

Priorities Secured Transactions

A

Article 9 prioritizes claims and pays them in order
Identify status of each claimant, and
Apply appropriate priority rule

87
Q

Secured Creditors

A 
Hold security interest in collateral
Determine:
Whether and when interest attached, 
Whether and when interest perfected, and 
Whether it is PMSI
88
Q

Unsecured Creditors

A 
No security interest in collateral
No rights against property but 
Contract rights against creditor and
Can obtain rights in collateral by 
Getting security interest or lien
89
Q

Lien Creditors

A

Judicial

Statutory

90
Q

Other Secured Creditors

A 
Purchasers of chattel paper, 
Promissory notes, accounts, or 
Payment intangibles treated as secured 
Transactions with attached interest
Determine if perfected
91
Q

Perfected Secured vs. Perfected Secured (neither PMSI)

A

First in time to file or perfect takes priority

92
Q

Perfected Secured vs. Unperfected Secured

A

Perfected wins

93
Q

Unperfected Secured vs. Unperfected Secured

A

First to attach or become effective takes priority

94
Q

PMSI for Goods Other than inventory vs. Secured (not PMSI)

A

PMSI if secured party perfects within
20 days of debtor receiving goods
Otherwise, first in time to file or perfect takes priority

95
Q

Proceeds PMSI for Goods Other than inventory vs. Secured (not PMSI)

A

Priority will extend to proceeds

96
Q

PMSI for Inventory vs. Secured (not PMSI) or Lien

A

PMSI takes priority if:
Perfected before inventory delivered to debtor
Secured party sends authentication notice to
Conflicting security interests before
Debtor receives good
Otherwise, first in time to file or perfect takes priority

97
Q

Proceeds PMSI for Inventory vs. Secured (not PMSI) or Lien

A

Priority only extend to identifiable cash
Proceeds received on or before
Delivery of inventory

98
Q

PMSI vs. PMSI

A 
If one PMSI secures price of collateral 
For seller while other secures loans 
Enabling purchase (buyer), then 
Seller’s PMSI takes priority
Otherwise, first in time to file or 
Perfect takes priority
99
Q

Perfected Secured vs. Lien

A

Perfected security takes priority

100
Q

Unperfected Secured vs. lien

A

Lien creditor priority UNLESS
Secured interest filed financing statement
But not yet given value, then
Secured interest will take priority

101
Q

Secured vs. Statutory Lien

A 
Statutory lien priority over 
Security interest so long as: 
Effectiveness of lien depends on 
Lien holder’s possession of goods and 
Lien secured payment or performance of
Obligation for services/materials furnished in
Ordinary course of person’s business 
I.e. mechanic’s liens
102
Q

Secured Party vs. Secured Party of Future Advances

A

First in time to file or perfect has priority

103
Q

Secured Party of Future Advances vs. Lien Creditor

A 
If advance made within 45 days of 
Lien creditor’s interest arising, 
Secured party has priority
If advance made MORE than 45 
Days after lien arises, advances
Subject to lien creditor UNLESS
Advance or commitment made without 
Knowledge of lien
104
Q

Fixtures Secured Interest vs. Real Property

A

Security interest priority if security interest
Perfected by fixture filing before
Real property interest recorded

105
Q

Fixture Filing

A

Provides description of real property related to fixture

106
Q

Fixtures PMSI vs. Real Property

A

PMSI has priority if perfected if:
Debtor has interest of record in real property and
Fixture filing before goods become fixtures or
Within 20 days thereafter

107
Q

Exception Fixtures PMSI vs. Real Property

A 
Construction mortgage priority over 
Subsequent security interest if recorded BEFORE
Goods become fixtures AND only covers 
Goods became fixtures before 
Completion of construction
108
Q

Transferee (not Buyer) vs. Secured Interest

A

Security interest continues unless

Secured party authorized transfer free

109
Q

Buyer vs. Unperfected Security Interest

A 
Buyer of goods, tangible chattel paper, 
Tangible docs, takes free of 
Security interest if buyer: 
Gives value,
Receives delivery of collateral, and 
No knowledge of existing security interest
110
Q

Buyer vs. Perfected Security Interest

A

Buyer generally takes subject to interest
UNLESS secured party authorized
Sale free of security interest

111
Q

BOCB Exception Buyer vs. Perfected Security Interest

A

Buyer in ordinary course of business takes free if:
Buys goods,
In ordinary course,
From seller in the business of selling goods of kind
Does not include pawn broker or farming products
In good faith, and
No knowledge sale violates rights of another

112
Q

Consumer Buyer Exception (“Garage Sale”) Buyer vs. Perfected Security Interest

A 
Consumer buyer takes free if buyer: 
Buys consumer goods for value, 
For own personal, family, or household use,
From consumer seller, and 
No knowledge of security interest
113
Q

Exception Consumer Buyer Exception (“Garage Sale”) Buyer vs. Perfected Security Interest

A

Secured party filed financing statement
Covering goods prior to purchase,
Consumer buyer takes subject to security interest

114
Q

Chattel Paper Purchaser vs. Security in Proceeds of Inventory

A 
Purchaser has priority if:
Purchaser gives new value and takes control 
Purchase made in good faith, and 
Does not indicate has been 
Assigned to other than purchaser
For all other security interests 
Changed to without knowledge
115
Q

Negotiable Instrument or Document Priority

A 
Purchaser has priority if:
They give value
Take possession, and 
With good faith and no knowledge it 
Violates rights of secured party
116
Q

Buyer and Future Advances Priority

A

If buyer takes subject to security interest AND
After sale secured party makes future advance
Buyer takes free of that advance if:
Secured party has knowledge of buyer’s
Purchase at time of advance OR
Future advance made at least 45 days after purchase

117
Q

Default Secured Transaction

A

Not defined in Article 9
Look to security agreement and k law
All remedies cumulative meaning
Exercised simultaneously

118
Q

Enforcement Rights Default

A

Seek possession of collateral and either (a) sell or (b) Retain in full or partial satisfaction
Initiate judicial action
Subject to statutory limitations, pursue any
Course of action agreed upon

119
Q

Repossession Default

A

Take possession by judicial process or
By self-help BUT ONLY if secured party can
Do so without breaching peace

120
Q

Breach of Peace Repossession Default

A 
Bringing officer to repossession
Breaking into debtor’s home or garage
Committing criminal act
Some physical confrontations
Some forms of deception or trickery
121
Q

Not Breach of Peace Repossession Default

A

Trespass or repossession without confrontation

Not constitute breach of peace

122
Q

Oral Protest Repossession Default

A

Split: some breaches peace, some not

123
Q

Large Equipment Repossesion

A

If hard to repossess, secured party may
Render it unusable, allowing disposal of
Collateral at debtor’s premises

124
Q

Disposition Secured Transactions

A

Sell, lease, license, or otherwise dispose of

Collateral so long as commercially reasonable

125
Q

Commercially Reasonable Disposition Secured Transactions

A

Sold in usual manner recognized in market
At price recognized by market at time of disposition
Otherwise in conformity with reasonable commercial
Practices among dealers in type of collateral

126
Q

Type of Disposition Secured Transactions

A

Public or private
Secured party can only purchase collateral
At public sale
Can only purchase at private sale if price
Fixed (i.e. stock exchange) or set by
Standard price quotes in recognized market

127
Q

Notice Disposition Secured Transactions

A

Send authenticated notification of disposition
UNLESS:
Collateral perishable or threatens to decline speedily value
Type customarily sold on recognized market
Persons entitled to notification waive right

128
Q

Who Notice Disposition Secured Transactions

A

Debtor
Secondary obligors (co-signers)
Other secured parties
Anyone else whom secured party has received
Notice of claim or interest in collateral

129
Q

What Notice Disposition Secured Transactions

A

Description of debtor and secured party
Description of collateral
Method of disposition
Statement debtor entitled to accounting of unpaid indebtedness
Time and place of public disposition or time after which
Private disposition made

130
Q

When Notice Disposition Secured Transactions

A

Reasonably timely i.e.
10 days prior to earliest time for disposition set
Forth in notification

131
Q

Cash Application of Proceeds

A

Reasonable expenses for collection and enforcement
Pay off debt to foreclosing secured party
Subordinate interests provided make formal demand prior to distribution
Any surplus to debtor

132
Q

Senior Interests Cash Application of Proceeds

A

Survive sale

133
Q

Deficiency Cash Application of Proceeds

A

If funds not enough to satisfy debt foreclosed

Can seek deficiency judgment against debtor/obligor

134
Q

Non-Cash Application of Proceeds

A

Apply or pay for application non-cash proceeds
Only if failure would be commercially unreasonable. After all required payments and applications made
Remainder goes to debtor

135
Q

Acceptance of Collateral (Strict Foreclosure)

A

Accepts the collateral in full or partial satisfaction

136
Q

Full Acceptance of Collateral (Strict Foreclosure)

A

Debtor consents, after default, to acceptance
In authenticated record OR
Debtor does not object to proposal within 20 days
After proposal SENT

137
Q

Exception to Full Acceptance of Collateral (Strict Foreclosure)

A

Debtor has paid back 60% of debt or value
Goods MUST be sold
Debtor can waive after default in authenticated record

138
Q

Partial Acceptance of Collateral (Strict Foreclosure)

A

Debtor consents, after default, in authenticated record

Consent by silence not permitted

139
Q

Redemption Default

A

Paying entire secured interest and expenses
Prior to sale
Debtor CANNOT waive right

140
Q

Fixtures Default

A

If secured party has priority over fixture
May be removed from real estate BUT
Will be liable for cost of any damages resulting
But NOT diminution in value by removing

141
Q

Accessions Default

A

Secured party with priority allowed to remove

Accession from other goods

142
Q

Injunctive Relief Remedies for Non-Compliance

A

If failure to comply ongoing, debtor or

Another secured party may ask court for injunction

143
Q

Remedies for Non-Compliance Default

A

Injunctive Relief
Actual Damages
Deficiency Judgments
Improper Repossession

144
Q

Commercial Transactions (Rebuttable Presumption) Deficiency Judgment Default

A

Secured party did not sell goods in commercially
Reasonable manner, not entitled to deficiency
Unless prove sale that complied with Article 9
Would have created deficiency

145
Q

Consumer Transactions Default

A

Some courts follow rebuttable presumption rule but
Others treat as conversion barring
Recovery to deficiency

146
Q

Improper Repossession Default

A

May result in liability under tort action

Utah Essay Bar Studies (16 decks)

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