Secured Transactions MEE

Question 1

Security interests that come under Art 9 rules

Answer 1

Article 9 applies to a (1) transaction, (2) regardless of form, (3) that creates a security interest in (4) personal property or (5) fixtures by (6) contract.

The rules look at substance over form- all functional sale devices are generally included

There are 4 types of financial assets covered by contract: Accounts, chattel paper, promissory notes, payment intangibles

and agricultural liens, which are created by statute, as an added exception

Leases are included if:

• Lessor cannot walk away, not subject to terminate
• and there is an option to buy for nominal fee

Consignments are included if:
non-consumer goods, more than 1k in value, financed by a merchant for sale

Question 2

Default and Repossession

Answer 2

Default is defined by contract. Generally a material breach.

After default, creditor has rights to foreclose/enforce/proceed or anything agreed by contract as long as can be waived

Debtors defenses to default- waiver (consent, by estoppel, modification of terms)

Repo can be done through judicial process or through self-help. Must first be reviewed by judge, give D opportunity to get hearing.

Then, can take as long as no breach of peace (foreseeable violence, asked to leave, destructive trespass, police assistance). Cannot define Breach of Peace by contract.

If collateral is intangible, can collect accounts if there is notification to customers.

Question 3

Sale of tangible collateral

Answer 3

Debtor has option to redeem, C has option to keep.

Otherwise, sale must be:
1-commercially reasonable on every front
2-with reasonable notice to D (>10 days)- unless it’s sold in its own market or subject to immediate perishing or price fluctuation

Question 4

Steps to create a valid secured transaction

Answer 4

Attachment:
1-value
2-rights to transfer collateral
3-authenticated agreement (unless possessed by C)

Agreement requires:
authentication, record, words of creating a security interest, sufficient description (include UCC type/after-acquired language/proceeds)

Question 5

UCC categories

Answer 5

Goods:

consumer goods
inventory
farm products
equipment

Intangibles:

instruments
commercial tort claims
money
accounts
general/quasi intangibles

Question 6

How to perfect a secured transaction

Answer 6

Perfection:

• complete steps of creating a SI
• file a financing statement (unless exception applies)- lasts 5 years, should be amended upon acquisition of new collateral or change of location after 4 months

financing statement requirements:

• D’s proper name- strict, according to search engine logic
• C’s name- not that strict
• collateral- super generics allowed
• authorization from D

financing statement is not needed when:

• other filing system (federal, cars)
• possession (money)
• control (deposit accounts)
• automatic (PMSI for consumer goods)
• real estate and fixtures- may be filed through RE system

Question 7

Priority line-up

Answer 7

Secured creditor wins against unsecured

Secured creditor wins against lien creditor (judicial) or trustee in bankruptcy- only if first in time

Secured wins against secured- if perfected first

Buyer wins if there was authorization to get rid of the lien on the collateral (unless ordinary course of business, then always takes free of lien)

Exceptions for all:

PMSI holder- perfected for 20 days without filing, unless consumer/automatic, inventory perfected upon possession

Accession- anyone who perfects the whole first will win

Deposit accounts- whoever took interest in the account goes before the proceeds