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Secured Transactions > Secured Transactions > Flashcards

Secured Transactions Flashcards

1
Q

Security Interest

A
  1. Transaction, regardless of form that creates a security interest in personal property of fixtures by contract
  2. Security interest is an interest in personal prop. or fixtures to secure payment or to secure performance of an obligation
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2
Q

Secured Party

A

Person in whose favor a ssecurity interes is created

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3
Q

Debtor

A

Person whith the interest in teh collateral

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4
Q

Obligor

A

Person who owes payment or performance, usually the debtor

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5
Q

Agricultural Liens

A
  1. Interest in farm products (not sec. int)
  2. Secures payment for goods, services, or real estate lease in connection with debtor’s farming operation
  3. created by statute
  4. creditor furnished goods/services or leased real property in the ordinary course of debtor’s business and
  5. statute does not require possession to effectuate the lien
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6
Q

Sale of Intangibles

A
  1. accounts
  2. Chattel Paper
  3. Payment Intangibles
  4. Promissary Notes
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7
Q

Consignments

A
  1. A consignment is a bailment for the purpose of sale. Article 9 applies if:
    a. Merchant receiving goods is
    - not an acutioneer
    - does not do business under name of consignor
    - is not generally known by creditors to be a consignee
    b. each delivery is 1k or more at the time of delivery
    c. goods are not consumer goods immediately before delivery and
    d. the transaction is not a security interst
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8
Q

Conditional Sales

A

Any attempt by a seller to retain title in goods shipped or delivered is limited to a security interest

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9
Q

Leases intended as security

A

Article 9 applies if:
1. Lease is not subject to termination by the lessee and one of the following:
a. term of the lease and economic life are eual.
b. lessee is bound to buy
c. Renewal or buyout at end of term for nominal consideration
-nominal consideration is determined by comparing the buyout/renewa
l price to the “reasonably predictable fmv”
-if only reasonable thing to do is pay the buyout price, the price is nominal
2. security interests are not created in the following situations
a. clause requiring the lessee to pay insurance, taxes tec.
b. lessor files a financing statement
c. present value of the property is substantially greater than or equal to the fair market value at the time the lease was entered into
d. full payout leases where lessee pays the full price at the end of the term.
e. renewals for consideration (not nominal)

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10
Q

Collateral

A

Determined by the debtor’s use of property

Tangibles: Consumer Goods, Inventory, Equipment, Farm Products, Fixtures

Intangibles: Money, Investment Property, Commercial Tort Claim, Chattel Paper, Instrument, Deposit Account, Account, Document, General Intangibles

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11
Q

Tangibles

A

Goods (movable at the time of the interest attaches) including fixtures

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12
Q

Goods Generally

A

a. classification of gooods is mutually exclusive, goods must be one of the four classifications
b. the classifications of goods is determined by their principal use
c. if you can’t determine their principal use, then the good is equipment

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13
Q

Consumer Goods

A

a. primarily for personal, family or household use

b. businesses cannot have consumer goods, only indiiduals

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14
Q

Equipment

A

a. goods other than inventory, consumer goods, or farm products
b. rule out all other goods before picking equipment
c. animals can be equipment (if not on the farm as farm product)
d. Principal use doctrine = equipment

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15
Q

Inventory

A

Goods other than farm products where debtor

a. holds the goods for sale or lease or
b. uses up or consumes the goods in business

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16
Q

Farm Products

A
  1. goods held by debtor (farmer) engaged in farming operation
    a. farming operation is raising, cultivating, fattening, etc on the farm AND
  2. Goods are either
    a. crops
    b. livestock (animals raised on the farm)
    c. supplies (seed, fertilizer, feed, not fixed assets)
    d. products of crops or livestock in unmanufactured state
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17
Q

Fixtures

A
  1. Personal property that is so related to real property that an interest arises under real property law
  2. fixtures will either be.
    a. equipment
    b. consumer goods, if the debtor is an individual
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18
Q

Money

A

medium of exchange adopted by gov.

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19
Q

Investment Property

A

Security (directly or indirectly held), commodity contract or commodity account

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20
Q

Commercial Tort Claims

A

a. individuals tort claim arising out of business and not involving personal injury or
b. an organizations tort claim

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21
Q

Chattel Paper

A

a. the records constututing a securec transaction in, or a lease of, specific goods, but not the charter of a vessel
b. record that evidences both a debt and a security interest in specific goods

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22
Q

Instrument

A

a. right to payment of a monetary oblication represented by a negotiable instrucment or a writing commonly transferred by delivery and any necessary endorsement or assignment unless it is a lease or security agreement, investment property, letter of credity or writing evidencing a credit card or recievable
b. Types:
- promissory Notes
- checks
- negotiable certificates of deposit, drafts

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23
Q

Deposit account

A

Demand, time, savings, or passbook account maintained within a bank but not investment property or an instrument

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24
Q

Account

A

right to payment of a monetary obligation that arises from

  1. the dispositio of propety by sale, lease, license or otherwise
  2. the rendering of services
  3. the issuing of insurance
  4. the incurring of a secondary obligation
  5. the providing of energy
  6. the chartering of a vessel
  7. the use of a credit card or
  8. legal lottery winnings

unless the right to payment results from the money advanced or comes within one of the other catagories of intangible property

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25
Q

Document

A

warehouse reciepts, bills of lading, similar documents embodying rights to goods possessed by a bailee

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26
Q

General intangibles

A

any personal property not fitting into one of the other cat. (ie software, copyrights, patents, payment intangibles_

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27
Q

Transactions Excluded from Art. 9

A
  1. statutory liens other than ag liens
  2. assignments of deposit accounts (bank accounts) in consumer transactions.
  3. Insurance policies Except health care insurance rec.
  4. Transfer of accounts, chattel paper, payment intangibles, or promissory notes where
    a. sale is part of a going out of business sale
    b. . assignment is for collection purposes only
  5. assigment of a single acc., payment intangible or promissory note (not chattel paper) to satisfy a preexisting debt
  6. assignment of a right to payment under contract to assignee who is also obligated to perform under the contract
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28
Q

Collateral excluded from Art. 9

A
  1. non-commercial tort claims

2. real estate other than fixtures

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29
Q

General Attachment Rule

A

A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral

a. attachment is all that is necessary when the dispute is between the creditor and debtor only
b. where there is a dispute involving a third party, the security interest is enforceable against 3rd partties but perfection will be necessary to determin priority

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30
Q

Requirements for attachemnt

A

(1) agreement
2. debtor has rights to the collateral
3. creditor gives value

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31
Q

Agreement and authenticated Record

A

Debtor authenticates a security agreement that describes the collateral

  1. Security agreement is agreement that creates or provides for a security interest
    a. this is the intent req.
    b. the parties, particularly the debtor, must have intended to create a security interst and intend to do so, must be evidenced by some kind of record
    c. no magic words req.
  2. Authenticated record:
    a. the debtor signed the agreement
    b. the debtor executed or adopted a symbol with the present intent to adopt or accept a record.
    c. record is information inscribed on a tangible medium or stored in an electronic medium and is retrievable in percievable form
    d. emails can be records.
    e. bundle of documents theory: all the correspondences by the parties can be used to meet the authenticated record requirement
32
Q

Description of the Collateral

A

Reasonable ID’s what is described:

a. exact description
a. catagory of collateral
c. an article 9 description
d. quantity
5. computational or allocational formul aor procedure
6. any other method if the collateral is objectively determinable

exceptions:
1. supergeneric descriptions such as “all debtor’s assets” or “all debtor’s property” are not sufficient for the security agreement
2. an article 9 description is insufficient if the collateral is
a. a commercial tort claim
b. consumer goods in a consumer transaction

33
Q

After-acquired collateral

A

a. security agreement may create or provide for a security interest in after acq. collateral (collateral acquired after initial secint is created)
b. aac must be provided for in secag
c. secag must contain sufficient description of the aac
- description of aac is question of k interp
- the standard is whether the agreement contains future language
d. secint does not attach in the aac until the debtor obtains rights in tha aac
e. Exception: a security interest does not attach to aac if the proeprty is
- consumer goods unless debtor acq. rights within 10 days after the creditor gives value or
- commercial tort claims.

34
Q

Future Advances

A

a. a secag may provide for future adances
b. the secag must provide for future advances
c. whether secag provides for advances is a matter of contract interpretation
d. agreement must provide some sort of future language

35
Q

Agreement and Possession

A
  1. collateral must be subject to possession. Collateral that is subject to possession include:
    a. negotiable documents
    b. goods.
    c. instruments
    d. money
    e. tangible chattel paper
  2. Creidtory must have possession under 9
    a. creditor has actual possession or
    b. creditor’s agent takes possession and
    - possession follows by ack in authenticated record or
    - ack in auth recordd followed by possession
    c. creditor’s agent cannot be the debtor
  3. perfection begins at the time of possession and continues until no longer in possession
36
Q

Agreement and Control

A
  1. collateral must be subject to control. Collateral that is subject to control include:
    a. deposit accts
    b. e. chattel paper
    c. investment prop
    d. letter of credit rights
  2. control of deposit accounts : a secured party has control over deposit accts if: a
    a. secured party is the bank
    b. the debtor, secured party, and the bank all agree in an authenticated record that bank will comply with secored party or
    c. secured party becomes a customer of bank (name on debtor’s acct)

Note: sec party still has control regardless if the debtor can freely access bank acct

  1. Control of e. Chattel Paper: a secured party has control over e chattel paper if:
    a. single authoritative copy (unique, identifyable, generally unalterable)
    b. single authoritative copy identifies the sec party as the assignee
    c. single autho copy is sent and mantained by the sec party
    d. changes to the single auth copy can only be made by the secured party
    e. copies of the sing auth copy must be readily id’d as a copy
    f. revisions of the single auth copy must be readily id’d as auth or unauth
  2. Control of Investment Party: Has control if
    a. Certificated security is delivered to sec. party and
    -cert is endorced to the sec party or
    -registered in sec party’s name
    b. Uncertified sec.
    -delivered to sec party or
    -the issuer of sec has agreed to comply with sec party’s instructions without the consent of debtor
    c Security entitlement
    -secured party becomes holder of entitlment
    -intermediary has agreed to comply with the secured party’s instructions without the consent of debtor or
    -third party controls the entitlement on behalf of the sec party or ack that he is controlling t
    d. no auth record is req
    e. agreemnt can be oral
37
Q

Debtor Has rights in collateral

A
  1. debtor must have rights or the power to transfer rights in the coll
  2. if debtor is the owner of the collateral, debtor has rights unquestionably
  3. Gifts: d has rights in a givft if
    a. Donor intendes to give D a gift
    b. debtor accepts the gift and
    c. gift is delivered to debtor
  4. Leases:
    a. debtor has leasehold interest
    b. debtor has rights to possession and use of leasehold prop.
  5. sale of goods:
    a. general rule: transferee gets all that the transferor had to transfer
    b. good title: rights in coll
    c. void title: no rights in coll
    d. voidable title:
38
Q

Perfection Analysis

A
  1. classify the collateral
  2. what are the permissible methods of perfection for this type of collateral?
  3. did the creditor attempt to use the permissible method
  4. was the attempted method done sufficiently
39
Q

Farm Products Perfection

A

Filing: Yes 9-310
Possession: Yes 9-313a
Control: No
Automatic: No

40
Q

Consumer Goods Perfection

A

Filing: Yes
Possession: Yes
Control: No
Automatic: Yes PMSI 9-309

41
Q

Equipment Perfection

A

Filing: Yes
Possession: yes
Control: No
Automatic: No

42
Q

Inventory Perfection

A

Filing: Yes
Possession: Yes
Control: No
Automatic: No

43
Q

Fixtures (equipment) Perfection

A

Filing: Yes
Possession: Legally(yes) Practically (no)
Control: no
Automatic: No unles PMSI fixture is consumer good

44
Q

Document Perfection

A

Filing: Yes
Possession: Yes
Control: No
Automatic: Temperary Perfection for 20 days

45
Q

Certified Security Perfection

A

Filing: Yes
Possession: Yes if possession by delivery
Control: yes if control under delivery
Auto: Temp perfection for 20 days

46
Q

Investment Property Perfection

A

Filing: Yes
Possession: No unless certified security
Control: Yes
Auto: Yes

47
Q

Deposit Account Perfection

A

Filing: No
Possession: No
Control: Yes
Auto: No

48
Q

Commercial Tort Claim Perfection

A

Filing: Yes
Possession: No
Control: No
Auto: no

49
Q

Instrument Perfection

A

Filing: Yes
Possession: Yes
Control: No
Auto: No, unless sold under 9-309

50
Q

Chattel Paper Perfection

A

Filing: Yes
Possession: yes
Control: Yes (ecp)
Auto: No

51
Q

Accounts Perfection

A

Filing: Yes
Possession: No
Control: No
Auto: No unless assignment of small portion or sale of lottery winnings

52
Q

Agricultural lien Perfection

A

File: Yes
Possession: no
Control: No
Auto: NO

53
Q

General Intangibles Perfection

A

Filing: Yes
Possession: No
Control: NO
Auto: no

54
Q

Payment Intangibles Perfection

A

Filing: Yes
Possession: No
Control: No
Auto: Yes if true sale

55
Q

Perfection by filing purpose

A

UCC basic notice system, give notice to other creditors

56
Q

General Perfection Analysis

A
  1. is filing permissible for perfection
  2. did the creditor choose the correct state
  3. did the creditor choose the correct office
  4. did the financing statment meet the requirements of the code

(filing is appropriate for everything except deposit accounts)

57
Q

Where to File

A
  1. General rule: place for filing is debtor’s location
    a. Debtor’s location:
    - corperation: State of incorp
    - individual: residence
    - unincorp business: debtor’s ppb or ceo
    b. place of collateral if:
    - possessory sec. interest
    - fixtures
    - timber to be cut
    - wells or mines
  2. choosing the office:
    a. generally sec of state’s office
    b. for real estate and fixtures, recorder of deeds of the state where real estate is located
    c. for fixtures that are also equipment, cridtor has choice
58
Q

What to File MUSTS

A

a. debtor’s name
b. secured party’s name
c. indication of collateral

59
Q

What to File SHOULDS

A

a. debtor’s address
b. individual or org
c. registration numbers
d. sec party’s add.
e. last name of debtor if individual

60
Q

Errors or Omissions on FS

A
  1. General Rule: Errors not seriously misleading do not invalidate the finstate
    a. an error is seriously misleading if it:
    - finstate fails to sufficiently provide the name of the dtor
    - errors are presumed to be seriously misleading
  2. exception: if a standard search using the debtor’s correct name would reveal the filing, it saves it
    - standard search logic
  3. trade names are not sufficient as debtos name unless revealed by search logic
  4. individual debtors: creditor must have actual name of debtor
    - use dl
    - social sec card
    - passport
61
Q

changes to Fin Statment: Name

A

a. new name after initial filing is seriously misleading
b. collateral filed before and up to four months after name change is still perfected.
c. collateral filed after four months is still perfected if:
- amendment filed within the four months

62
Q

changes to fin statemtn: State of incorp

A

a. determine original jurisdiction
b. when debtor relocates, NEW juris. determines filing
c. if security interst is perfected in another juris (old JD_ the security interest remains perfected in new for 4 months
d. secured party must file in the new juris within four months of relocating
e. after four months it is unperfected AND
- will lose to a purchaser for value no matter when the purchaser acquired the interst
- will defeat non-purchasers for value in interests that arose before relacaction but not after 4mont period

IN SHORT: IF YOU RELOCATE:

  1. a secured creditor is absolutely perfected within four months of relocation against non purchases
  2. a secured creditor is absolutely perfected within four months after relocation against purchasers if sec. cred. files new location
63
Q

Fin Statment Who can file and how

A

A person can file a finstat if:

a. debtor authorizes the filing in an authenticated record.
b. debtor authorizes the filing if secag is executed

64
Q

Duration, Continuation and Termination

A

Duration: a financing statement is effective for 5 years

Continuation: file during 6 month period before 5 years expires (if not, it’s as if it was never filed)

Termination: if the 5 year period ends, it lapses,

65
Q

Fixture Filings

A
  1. financing statement covering goods that are or are to become fixtures
  2. must have UCC req
    - dbtors name
    - sec party’s name
    - id of collateral
  3. type of collateral (fixture)
  4. smt that fs will be in real estate records
  5. description of real property
  6. name of record owner of real estate
66
Q

Perfection by Possession Generally

A

Perfection by possession of Goods, negotiable instruments, documents, money or tangible chattel paper is sufficent
1. does not req. intent ot possess

67
Q

PbP: Ag liens

A
  1. filing is only method of perfection for agliens unless authorized by the agline statute
68
Q

PbP Instruments and chattel paper

A

Possession is the preferred method

69
Q

Perfection by Control Generally

A

Security interest in investment property, deposit accounts, letter of credit rights or electronic chattel paper
1. last only while secp obtains and retains control

70
Q

Automatic Perfection Generally

A

A purchase money security interest in consumer goods is automatically perfected

Consumer goods:
-Personal, household, family

Purchase money sec interest:
1. seller finances purchase
2creditor gives value sos that the debtor can obtain the goods and the value is actually used to obtain the goods
3. sec party has burden to proe the PMSI:
a. have creditor pay seller directly or
b. make chek payable to seller and debtor

71
Q

Default Priority Rules

A
  1. Between Secured Creditors: First to file or perfect
  2. Perfected security interests beat unperfected security interests
  3. Between unsecured creditors: First to attach has priority
  4. Priority in Proceeds:
    - creditor must be continuously perfected int eh proceed
    - date is related back to the date of filing/perfection of original collateral
    - thuse, first in file/perfect
  5. Future Advances:
    - advance dates to original loan
72
Q

Exceptions: PMSI

A
  1. PMSI in Equipment
    a. between PMSI and non-PMSI, PMSI wins if perfected within 20 days of debtor’s possession
  2. PMSI in inventory
    PMSI v. PMSI
    -perfect in 20 days of possession
    -seller beats non-seller
    -if neither party is a seller, first to perfect wins
  3. PMSI in Livestock
    -pmsi perfected before debtor takes possession and must give notice to creditors

if nothing fits, apply default rules

73
Q

Exceptions: Priority in Deposit accts

A
  1. between conflicting security intersts, control beats non-control
  2. betweend secpty and secptybank, bank wins
  3. if secparty is customer of bank, they beat everyone
74
Q

Exceptions in priority: acessions

A
  1. good attached to another good where identity is not lost
  2. secinterst continues in accession and continues even when they become accessions
  3. perfection continues
  4. general priority rules apply
75
Q

Lien Creditors Generally

A

Defined as:

a. one who obtains jmt against debtor and debtor’s propety is attached to satisfy deb
b. one who acquires a lien by attachment, levy or the like
c. an assignee for the benefit of creditors
d. the trustee on the date of bankruptcy
e. rec. in equity

76
Q

Priority of Lien Creditor

A

a. Lien Creds beat unsecured creds
b. sec interst beats lean cred if
- perected before lien attaches

Secured Transactions (1 decks)

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