Secured Transactions

Question 1

When will a fixed financier defeat a pre-existing realty interest? (priority 4)

Answer 1

1. fixture see interest is BMSI
2. S.I. is perfected by filing
3. filing made before OR w/in 20 days of goods becoming fixtures (ex. furnance)
4. debtor has a recorded interest or possession of the realty

Question 2

What are the 3 ways a secured party may excerize their repossession right?

Answer 2

1. self-help repossession
2. repossession by judicial action (sheriff will obtain)
3. strict foreclosure (creditor retains collateral in satisfaction of debt)

Question 3

For self-help repossession, what must a secured party avoid? (2)

Answer 3

1. breach of peace (violence, protest by debtor)

2. cannot enter debtors home to repossess w/o voluntary & contemporaneous consent of debtor

Question 4

What is required to accomplish strict-foreclosure repossession?

Answer 4

written proposal to retain collateral to designated parties

Question 5

For strict foreclosure of non-consumer goods, what 3 ppl/ entities must recieve notice of foreclosure?

Answer 5

1. parties who told foreclosing creditor of SI
2. perfected secured parties
3. secondary obligors

Question 6

For strict foreclosure of consumer goods, what 2 ppl/ entities must be notified of foreclosure?

Answer 6

1. debtor

2. secondary obligors

Question 7

Upon default, what 2 rights does a secured party have?

Answer 7

1. collection (payment)

2. possession

Question 8

What is an accession?

Answer 8

goods physically united with other goods in a way that the ID of the original good is not lost (SI in accession is subordinate to SI in whole good)

Question 9

What are co-mingled goods?

Answer 9

good physically united w/ other goods where the ID of original good is lost in a mass (no SI)

Question 10

Who wins AACF v. PMSI when collateral is inventory?

Answer 10

PMSI that acquries interest after AACF must

1. file properly
2. notify AACF b4 debtor takes possession (ex Macys)

Question 11

Who wins AACF v. PMSI when collateral is equipment?

Answer 11

PMSI holder acquiring interest after AACF must properly file w/ in 20 days of debtor taking possession

Question 12

What does UCC9 apply to?

Answer 12

consensual security interests in personalty & fixtures (not real estate)

Question 13

What is a consensual security interest?

Answer 13

voluntary collateralization (UCC9 doesnt apply to statutory of mechanic liens)

Question 14

What is the only way to perfect a security interest (SI) in a deposit account & a letter of credit?

Answer 14

by control, filing not sufficient

Question 15

What is a purchase money SI?

Answer 15

SI that enables debtor to purchase goods

Question 16

What are consumer goods?

Answer 16

items used for personal/ familial purposes (ex blender,oven)

Question 17

What is equipment?

Answer 17

items used in business (ex cash registers, sewing machines)

Question 18

What is inventory?

Answer 18

goods held for sale/ lease

Question 19

What are farm products?

Answer 19

supplies used in farming operations (ex crops, livestock, eggs, corn, cows)

Question 20

What are fixtures?

Answer 20

items annexed to real estate (furnance, light fixtures)

Question 21

What is the standard for sufficiency of description?

Answer 21

collateral is objectively determinable by specific listing, type of collateral, quantitiy, formula, or procedure

Question 22

When does a security interest attach to collateral?

Answer 22

when it becomes enforceable against debtor

Question 23

What are the 4 requirements for attachemnt?

Answer 23

1. value must be given by creditor
2. written agreement (record) needed that must be authenticated
3. agreement must reasonably ID collateral – cannot be generic like “all collateral” but “all inventory/equipment” OK
4. debtor must have rights in collateral

Question 24

What are the 2 rights/ duties of a secured party in possession of collateral?

Answer 24

1. duty of reasonable care

2. duty to keep collateral identifiable

Question 25

What is an after-acquired collateral financier (AACF)?

Answer 25

secured creditor who takes security interest as collateral in all of debtors assets, whether now held or hereafter acquired

Question 26

What is significance of proper perfection?

Answer 26

gives secured party priority over competing unperfected creditors

Question 27

What are the 3 methods of achieving proper perfection?

Answer 27

1. Possession: secured party takes possession, applies to promissory notes, checks, CD's, negotiable instruments 2. automatic perfection of PMSI in CONSUMER goods 3. Filing: secured party files notice of security interest in public records -- applies for most tangible collateral like inventory and equipment 4. Control: applies to intangible assets i.e. deposit accounts, electronic chattel paper, investment property etc.

Question 28

What are the 2 types of filing docs?

Answer 28

1. security agreement (rarely used) | 2. fianacing statement (sinple doc)

Question 29

What are the 3 contents of filing statements?

Answer 29

1. debtors name and address 2. creditors name and address 3. description of collateral (supergeneric description are permissible)

Question 30

Where are filing docs typically filed?

Answer 30

in debtors state with state secretary of state (principal place of residence) -organized debtor files in state under whose laws it is organized

Question 31

What 3 categories of ppl/ entities are always given priority over security interests?

Answer 31

1. buyer of goods in ordinary course of business 2. HDCs 3. holders of possesory liens (created by law)

Question 32

What is the order of priority among conflicting security interests? (6)

Answer 32

1. buyer in ordinary course 2. perfected attached creditor (PMSI/AACF) 3. Lien creditor (court ordered) 4. non-ordinary course buyer (bill gates buys pc for pilot) 5. attached unperfected creditor (SI enforceable ->perfection error) 6. general unsecured creditor (didnt take collateral)