Secured Transactions - UCC Article 9 Flashcards
A security interest may be perfected by filing as to most kinds of collateral. Which kinds of collateral are the exceptions?
A Interests in forests to be cut as timber.
B Equipment used in hospitals and other healthcare settings.
C Personal property.
D Deposit accounts and money.
D Deposit accounts and money.
A security interest may be perfected by filing as to all kinds of collateral, except deposit accounts and money. The filing must contain (i) the name and mailing address of the debtor; (ii) the name and mailing address of the secured party; (iii) an indication of the collateral. If the collateral is real-property-related (e.g., minerals, timber to be cut, or fixtures), the filing must also (i) indicate that it is to be filed in the real property records, (ii) provide a description of the real property to which the collateral relates, and (iii) name the record owner if the property belongs to someone other than the debtor.
A security interest in which of the following items of collateral may be perfected by possession? (Select all that apply)
A Equipment.
B Accounts receivable.
C Promissory notes.
D Negotiable warehouse receipts.
A, C, & D: Equipment, Promissory Notes, & Negotiable warehouse receipts
A security interest in accounts, certificates of title goods, deposit accounts, nonnegotiable documents, electronic chattel paper, or general intangibles cannot be perfected by possession, even if tangibly represented. Security interests in all other types of collateral may be perfected by possession.
A buyer in the ordinary course of business generally takes free of any nonpossessory perfected security interest created by the seller _____________________________.
A Only if the buyer does not know of the perfected security interest.
B Only if the buyer does not know that the sale is in violation of the terms of that security agreement.
C Only if the seller informs the buyer of the existence of the perfected security interest.
D Only if the security interest is not a PMSI.
B Only if the buyer does not know that the sale is in violation of the terms of that security agreement.
Generally, a perfected security interest in goods will defeat a subsequent sale of those goods. However, a buyer in the ordinary course of business – that is, one who buys goods in the ordinary course of business from one whose business is selling goods of the kind purchased – will take free of any nonpossessory perfected security interest created by the seller in the goods sold, even if the buyer knows of the security interest, unless the buyer also knows that the sale is in violation of the terms of the agreement creating that security interest.
Each of the following is a category of intangible collateral under Article 9 except:
(A) Instruments
(B) Documents
(C) Investment property
(D) Inventory
(D) Inventory
Tangible collateral, or “goods,” includes fixtures and all thins movable at the time the security interest attaches, except money. There are 4 types of tangible collateral under Art. 9; consumer goods, equipment, inventory, and farm products. In contrast, intangible or semi-intangible collateral includes items such as instruments (i.e., pieces of paper that represent the right to be paid money), documents (i.e., pieces of paper that represent the right to receive goods), and investment property (e.g., stocks, bonds, mutual funds, and brokerage accounts).
How may a security interest in equipment be perfected?
Either by filing a financing statement or by the creditor’s possession of the collateral.
Security interests in every kind of collateral except deposit accounts and money (unless either is claimed as proceeds of other collateral) may be perfected by filing. Security interests in tangible collateral, such as equipment, also may be perfected by the secured party taking possession (i.e., by pledge). However, only security interests in investment property, nonconsumer deposit accounts, and electronic chattel paper may be perfected by the creditor’s control of that collateral.
Tami lives in Hillsborough County. Tami grants Mia a security interest in taxi’s necklace in exchange for $200.
To perfect her security interest, where must Mia file a financing statement?
(A) With the clerk of the circuit court of Hillsborough county.
(B) With the clerk of the court of any Florida county.
(C) With the Florida Secured Transaction Registry.
(D) With the office of the Florida Secretary of State.
(C) With the Florida Secured Transaction Registry.
Security interests in goods may be perfected by filing a financing statement that contains the names and addresses of the debtor and secured party as well as an indication of the collateral. In FL, generally (i.e., for items other than minerals, timber, fixtures, and utility poles), filing is done with the Florida Secured Transaction Registry - not with the secretary of state’s office, as in most states.
Tami lives in Hillsborough County. Tami grants Mia a security interest in taxi’s necklace in exchange for $200.
If Mia also takes a security interest in fixtures owned by Deb, where must Mia file the fixture filing?
(A) With the clerk of the circuit court of the county where the land sits.
(B) With the office of the Florida Secretary of State.
(C) With the Florida Secured Transaction Registry.
(D) Any of the above.
(A) With the clerk of the circuit court of the county where the land sits.
A fixture filing is required in order to perfect a security interest in fixtures. This is accomplished by filing a financing statement in the office where a mortgage on the real property would be recorded. In FL, this means with the clerk of the circuit court of the county where the land sits. In addition to the usual requirements off a financing statement, a fixture filing must provide description of the real property to which the fixture is attached.
Which of the following types of collateral cannot be described by type alone?
I. Commercial tort claims.
II. Consumer goods.
III. Consumer securities accounts.
(A) I and II only
(B) I and III only
(C) II and III only
(D) I, II, and III
(D) I, II, and III
An authenticated security agreement is sufficient if it reasonably identifies the collateral. Collateral generally may be described by category, type, quantity, formula, or any other method by which its identity is objectively determinable. However, the 3 types of collateral listed here cannot be described by type alone. Commercial tort claims, consumer goods, and consumer security accounts must be described more specifically in a security agreement (e.g., “all the debtor’s commercial tort claims” is insufficient).
On 9/15, Ella applies for a $4,000 loan from Bank to buy furniture and signs a security agreement granting Bank a security interest in the furniture. On 9/20, Bank properly files a financing statement covering the furniture to be purchased. On 9/25, the loan is approved, and Ella receives the funds. On 9/28, Ella buys the furniture.
When did the security interest attach?
(A) 9/15
(B) 9/20
(C) 9/25
(D) 9/28
(D) 9/28
There are 3 requirements for attachment of a security interest: (1) the parties must agree to create a security interest, which may be evidenced through an authenticated security agreement or the creditor’s possession or control of the collateral; (2) the secured party must give value; and (3) the debtor must have rights in the collateral. The 3 requirements may occur in any order but attachment does not occur until all 3 coexist.
On 9/15, Ella applies for a $4,000 loan from Bank to buy furniture and signs a security agreement granting Bank a security interest in the furniture. On 9/20, Bank properly files a financing statement covering the furniture to be purchased. On 9/25, the loan is approved, and Ella receives the funds. On 9/28, Ella buys the furniture.
When was the security interest perfected?
(A) 9/15
(B) 9/20
(C) 9/25
(D) 9/28
(D) 9/28
A security interest is not enforceable against any party until it has attached to the collateral. Thus, a security interest cannot be perfected until it has attached. If a party completes all steps necessary for perfection (e.g., filing) before the security interest has attached,the security interest will be perfected on attachment. although Bank filed on 9/20, its security interest was perfected by filing on 9/28 because that is when attachment was complete.
On 9/15, Ella applies for a $4,000 loan from Bank to buy furniture and signs a security agreement granting Bank a security interest in the furniture. On 9/20, Bank properly files a financing statement covering the furniture to be purchased. On 9/25, the loan is approved, and Ella receives the funds. On 9/28, Ella buys the furniture.
Which of the following was not required for Bank’s financing statement to be effective?
(A) A specific description of the furniture.
(B) Bank’s name and address.
(C) Ella’s name and address.
(D) Ella’s written authorization.
(A) A specific description of the furniture.
Security interests in goods may be perfected by filing a financing statement hat contains the names and addresses of the debtor and secured party as well as an indication of the collateral. This indication need not be specific, so long as the identity of the collateral is objectively determinable. Furthermore, unlike descriptions of collateral in authenticated security agreements, the financing statement may include supergeneric descriptions such as “all assets” or “all personal property.” For a financing statement to be effective, the debtor must authorized it in an authenticated record. This record may be the financing statement itself, or a security agreement covering the same collateral as the financing statement.
On 5/15, Lupe applies for a $10,000 loan from First Bank. Lupe signs a financing statement and a security agreement granting First Bank a security interest in Lupe’s office equipment. On 5/18, First Bank files the financing statement. On 5/20, Lupe receives $5,000 from Second Bank, signing a security agreement granting Second Bank a security interest in the same office equipment. That day, Second Bank files an authorized financing statement covering the equipment. On 5/25, First Bank gives Lupe the $10,000 she applied for on 5/15. On 6/1, Lupe sells all her office equipment to Jan. Who has a superior interest in the office equipment?
(A) First Bank
(B) Second Bank
(C) Lupe
(D) Jan
(A) First Bank
As between conflicting security interest that were perfected by filing, priority goes to the first party to either file or perfect. Perfection does not occur until a security interest has attached to collateral, which happens when the last of the following occurs: (1) the parties agree to create a security interest; (2) the secured party gives value; and (3) the debtor has rights in the collateral. Although Second Bank perfected its security interest after First Bank perfected, First Bank has priority because First Bank filed its financing statement before Second Bank filed or perfected. This security interest is good as against both Lupe and Jan. A perfected security interest in goods is good against subsequent buyers unless (1) the secured party consents, (2) consumer goods are sold to a consumer, or (3) the goods are sold in the ordinary course of burins from a seller engaged in the business of selling goods of that kind and the buyer lacks knowledge that the sale violates the security agreement.
How may a security interest in a non consumer deposit account be perfected?
(A) By filing a financing statement indicating the deposit account as collateral.
(B) By the secured party taking possession of the deposit account.
(C) By the secured party exercising control of the deposit account.
(D) All of the above.
(C) By the secured party exercising control of the deposit account.
Security interests in intangible collateral such as investment property, non consumer deposit accounts, and electronic chattel paper may be perfected by control. The bank where a nonconsumer deposit account is maintained automatically has control over the deposit account. Alternatively, the secured party may obtain control by either: (i) putting the deposit account in the secured party’s name, or (ii) agreeing in an authenticated record with the debtor an the bank in which the deposit account is maintained that the bank will comply with the secured party’s orders regarding the deposit account. Security interests in deposit accounts and money may not be perfected by filing a financing statement covering these items. Note, however, that if a deposit account is claimed as proceeds of other collateral, a filed security interest in the original collateral automatically perfects a security interest in the proceeds. Only security interests in tangible collateral, such as equipment may be perfected by the secured party taking possession.
If a secured party violates Art. 9’s rules regarding default in FL, when will the value of the collateral be presumed to equal the amount of debt?
(A) In consumer transactions only.
(B) In nonconsumer transactions only.
(C) In both consumer and nonconsumer transactions.
(D) Never.
(C) In both consumer and nonconsumer transactions.
In FL, the rebuttable presumption rule applies to both consumer and nonconsumer transactions. Thus, if a secured party violates Art. 9’s default rules, the value of the collateral is presumed to equal the amount of the debt unless she proves otherwise.
Who has greater priority to collateral than the holder of an unperfected security interest?
I. A buyer in the ordinary course of business who does not know that the sale violates a security interest.
II. A party who perfected its security interest after the unperfected security interest arose.
III. The holder of a possessory lien.
IV. The debtor.
(A) I and II only
(B) I, II, and III only
(C) I, III, and IV only
(D) I, II, III, and IV
(B) I, II, and III only
When the debtor defaults and a number of persons have an interest in the same item of collateral, the person with the highest priority has first rights in the collateral; if any part of the collateral or its proceeds is left, the next person can recover. With the exception of the debtor, the holder of an unperfected security interest has the lowest priority of any claimant. If 2 competing security interests are unperfected, the first to attach has priority.
