Secured Transactions ME

Question 1

Does Article 9 apply?

Answer 1

Article 9 of the Uniform Commercial Code governs secured transactions. Specificially, it applies to:

all transactions that create security interests in personal propert or fixtures by contract.

agricultural liens

sales of accounts recieveable, chattel paper, negotiable instruments, promissory notes, and payment intangibles

consignments

lease agreements that are not true leases.

Question 2

Classification of Goods

Answer 2

Goods are all things moveable at the time the security interest attaches.

Consumers goods are those used or bought for primarily personal, family or household purposes.

Inventory are goods other than farm products that are (1) leased by a person as lessor (2) are held for sale or lease to be to be furnished under a contract of service (3) are furnished under a contract of service or (4) consist of raw materials , work in process or materials used or consumed in a business.

Farm products are goods other than standing timber, with respect to which the debtor is engaged in a farming operation , including crops, livestock, products of crop or livestock in their unmanufactured state, aquatic goods produced in aquacultural operations and supplies used or produced in a farming operation.

Equipment are goods other than inventory, farm products or consumer goods.

Question 3

Attachment

Answer 3

A security interest arises when it is attached.

Attachment occurs when: a secured party gives value to the debtor, the debtor has rights in the collateral and the debtor has authenticated a security agreement that sufficiently describes the collateral.

A security agreement sufficiently describes collateral where the description reasonably identifies what is described by UCC type, unless the collateral is a consumer good. Specific descriptions are required for consumer goods. A super-generic description is insufficient in security agreement.

Attachment and After-Acquired Collateral
A security interest attaches to after-acquired collateral if the agreement contains an express after-acquired collateral clause. Inventory items and account receivables automatically create security interests in after-acquired collateral and thus do not need this clause. Security agreements may not cover after-acquired consumer goods unless the debtor acquires rights in the consumer goods within 10 days of the secured party giving value.

Attachment and Future Advances
A security agreement may provide that collateral will serve as security for a present obligation and for advances the creditor makes to the debtor in the future.

Attachment and Proceeds
A security interest automatically extends to identifiable proceeds of the collateral.

Legal Effect of Attachment
A secured party has all the enforcement rights provided by Article 9 including the right to reposes collateral upon default, once a security interest has attached.

Question 4

Perfection

Answer 4

A security interest is perfected if it has attached and the requirements for perfection have been met.

If the perfection requirements are met before attachment, then the security interest is perfected upon attachment.

A security interest may perfect via filing a financing statemement, posession or control or automatically.

Question 5

Perfection by Filing

Answer 5

A security interest perfects via filing where a financing statement is filed in either the secretary of state;(2) for fixtures, in the office of the county clerk in the county where the land to which the collateral is attached is located or (3) if the secured party is perfecting by filing a financing statement, the security interest is perfected only if the financing statement is fled in the correct office in the correct state. Filing is not effective for deposit accounts, letter of credit rights and money.

Financing Statement
iA financing statement must include (1) the name of the debtor (2) the name of the secured party or the secured party’s representative (3) and a description of the collateral covered by the financing statement. A financing statement sufficiently describes the collateral it covers if it provides (1) a description of the collateral that reasonably identifies what is described OR an indication that financing statement covers all assets or all personal property. A supergeneric description in a financing statement is sufficient. If the financing statement includes collateral related to real property such as minerals, timber to be cut or fixtures, the real property related to the collateral must also be described.

Financing Statement + After-Acquired
A financing statement will perfect interests in after-acquired property and future advances as long as the indication of collateral in the statement is sufficiently broad to cover the after acquired property or future advances even if they are not mentioned specifically.

Question 6

Fixtures

Answer 6

i
In order to be a fixture, an item must be attached to the real estate, adapted to the use of the real estate and intended to be a permanent attachment to the real estate.
ii
A fixture filing must contain : 1)all of the information required in a financing statement 2) indicate that it covers fixtures 3) indicate that it is to be filed in the real property records (4) provide a description of the real property to which the fixture is related and (5) if the debtor does not have an intersest of record in the real property, provide the name of the record owner.

Question 7

a

Answer 7

s

Question 8

d

Answer 8

f

Question 9

Perfection by possesion

Answer 9

A secured party may perfect a security interest by taking possession of the collateral.

Perfection by possession ONLY applies to negotiable documents, goods, instruments, money or tangible chattel paper.

A security interest in money may only be perfected by the secured party’s possession.

A secured party who has taken possesion of collateral must use reasonable care in its custody and preservation.

Question 10

Perfection by Control

Answer 10

A security interest may be perfected by taking control of the collateral. This applies to investment securities, letter of credit rights, deposit accounts. and electronic chattel paper.

Question 11

Automatic Perfection

Answer 11

For purchase money security Interest in consumer goods , perfection is automatic as soon as the security interest attaches and remains permanently.

Motor vehicles and fixtures must be filed in order to perfect. The secured party is not required to file or have possession to have a perfcted PMSI in consumer goods. Automatic perfection of a PMSI in consumer goods does NOT apply to property subject to a certificate of title statute or fixture, even if they are consumer goods.

Question 12

Priority

Answer 12

The general rule reagarding priority under Article 9 is first in time first in right.

Among unperfected security interests, the first security interest to attach has priority.

A perfected security interest will prevail over an unperfected security interest.

Where both security interests are perfected, the first security interest to either file or perfect, without interruption, has priority.

Where a security interest is in either an insrtuemnt or chattel paper, the secured party that perfects by possession has priority over the secured party that perfects by filing.

Conflicting PMSIs

• PMSI securing the price of the collateral prevails over PMSI that secures a loan
• first, in time first in right.

Order of Priority

1. Buyer in the Ordinary Course
2. PMSI securing price of the collateral
3. PMSI securing a loan
4. Perfected Security Interest
5. Lien Creditor
6. Unperfected Security

Question 13

Continuation of Security Interest After Debtor Sells.

Answer 13

A security interest usually survives the sale of the collateral.

However, a security interest will not continue when the secured party authorizes the sale free of the security interest and the buyer meets one of the exceptions.

Question 14

A buyer in the ordinary course of business

Answer 14

A security interest will not survive a sale if the buyer is in the ordinary course of business.

A buyer in the ordinary course of business (1) buys in good faith (2) buys without knowledge that the sale violates the rights of another person in the goods and (3) buys in the ordinary course from a person in the business of selling goods of the kind.

Question 15

A buyer NOT in the ordinary course of business

Answer 15

A security interest usually survives the sale of the collateral. A buyer not in the ordinary course of business takes collateral subject to a perfected interest.

A buyer of consumer goods takes free of a perfected security interest when they purchase goods from a person who used or bought goods for primarily personal, family or household use. (1) without knowledge of the security interest (2) foe value (3) primarily for the buyers personal, family or household purposes unless prior to the purchase the secured party filed a financing statement covering the goods

Goods must be consumer goods when the seller has them and when the buyer has them .

Question 16

Lien Creditors

Answer 16

A lien creditor is a creditor that has acquired an interest in the property by attachment, levy, or the like; an assignee for the benefit of creditors; a trustee in bankruptcy or a receiver in equity.

A secured party will have priority over a lien creditor if the secured party

• perfects before the lien creditors interest arises
• files a financing statement and evidences a security agreement before the lien creditors interest arises.

Question 17

Accessions

Answer 17

Goods that are physically united with other goods in such a manner that the identity of the original good is not lost.

A security interest created in collateral that becomes an accession will continue.

A security interest in an accession. is subordinate to a security interest in the whole that is perfected by compliance with the requirements of a certificate of title statute. (car)

Question 18

Commingled Goods

Answer 18

A security interest attaches to the product that results when goods become commingled.

Question 19

Default

Answer 19

Upon default by the debtor, a secured party may claim judgment or repossess the tangible collateral to which it had a security interest.

The secured party does not have to seek an order from the court in order to repossess collateral if it can do so without a breach of the peace. Article 9 does not define breach of the peace, but the following scenarios are : acts likely to lead to violence, entry into home without permission to repossess, repossessions made over any protests even without violence

Debtor has a right to redeem collateral after a default by redemption. Debtor tenders the amount of the obligation + interest + reasonable expenses and attorneys fees caused by default.

Debtor can only waive the right to redeem after default. A waiver in a security agreement is invalid.

If secured party fails to follow rules in Article 9, they will be prohibited from collecting any deficiency and will be liable for any damages caused.

Question 20

Sale after Repossession

Answer 20

A secured party may sell,license or dispose of collateral after reposession. Disposal may occur by public or private sale , but all aspects of it must be commercially reasonable.

Question 21

Sale after Repossession

Answer 21

A secured party may sell, license or dispose of collateral after repossession. Disposal may occur by public or private sale , but all aspects of it must be commercially reasonable.

Question 22

Debtor Rights : Commercially Reasonable

Answer 22

usual manner, current price, conformity with rcp

A sale is considered commercially reasonable if it is made in the usual manner on any recognized market (2) at the price current in any recognized market at the time of the sale or (3) otherwise in conformity with reasonable commercial practices among dealers in the type of property that was sold.

The fact that a greater amount could have been obtained or acceptance at a different time or method is not enough for violation

Question 23

Debtors Rights: Notice

Answer 23

Secured party required to send debtor and secondary obligors a reasonable authenticated notification of disposition.

This requirement does not apply to collateral that is perishable, that may decline quickly or of a type customarily sold on the market.

Timeliness: notice 10 days or more before sale = reasonable for non consumers.

Content:
- notice describes debtor, secured party and collateral
- states method of disposition
- state that debtor is liable for unpaid debtedness
-
consumer transaction
- description of any liability for deficiency
- phone number consumer can call to discover amount owed

Question 24

Proceeds from Enforcement/Sale

Answer 24

1. reasonable expense from cost of sale
2. satisfaction of obligation
3. satisfaction of subordinate obligaitons

Question 25

Proceeds from Enforcement/Sale

Answer 25

1. reasonable expense from cost of sale
2. satisfaction of obligation
3. satisfaction of subordinate obligations