Security Interest Flashcards
When is a SI perfected?
A security interest is perfected if it has attached and if the applicable additional requirements for perfection are met. UCC § 9-308(a). A security interest attaches when the security interest becomes enforceable unless an agreement expressly postpones the time of attachment. UCC § 9-203(a). Here, there was no agreement postponing the time of attachment, so the State X furniture store’s security interest attached when (and if) it became enforceable
When is a SI enforceable?
A security interest becomes enforceable when each of three requirements has been satisfied. First, “value” must be given. UCC § 9-203(b)(1). Here, the furniture store’s transfer of the couch to the lawyer constituted value. See UCC § 1-204. Second, the debtor must have rights in the collateral (or the power to transfer rights). UCC § 9-203(b)(2). Here, the debtor (the lawyer) bought the couch and thus had rights in it. Third, either the debtor must have authenticated a security agreement containing a description of the collateral or the collateral must be in possession of the secured party. UCC § 9-203(b)(3)(A)–(B). (There are two other substitutes for an authenticated security agreement in UCC § 9-203(b)(3), but they are not germane here.) In this case, the Credit Sales Agreement constitutes an authenticated (i.e., signed or its electronic equivalent; see UCC § 9-102(a)(7)) security agreement (i.e., an agreement creating or providing for a security interest; see UCC § 9-102(a)(74)), and it contains a description of the collateral. Therefore, the security interest of the State X furniture store is enforceable and has attached
Financing statement
An attached security interest is perfected only if a financing statement has been filed with respect to it or an exception applies. UCC § 9-310(a). Here, no financing statement has been filed. The only relevant exception would apply if the secured party (the State X furniture store) had possession of the couch, but it does not have possession of it; rather, the couch is in the possession of the lawyer. Accordingly, the security interest of the State X furniture store in the couch used by the lawyer in her State X waiting room is not perfected.
SI in the table
A “security interest” is “an interest in personal property . . . which secures payment or performance of an obligation.” UCC § 1-201(b)(35). Inasmuch as the retained interest of the State X furniture store in the table used by the lawyer in her dining room serves to secure her obligation to pay the purchase price, that interest qualifies as a security interest. Moreover, the UCC explicitly provides that “[a]ny retention or reservation by the seller of the title (property) in goods shipped or delivered to the buyer is limited in effect to a reservation of a security interest.” UCC § 2-401(1). See also UCC § 1-201(b)(35) (stating that “The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under Section 2-401 is limited in effect to a reservation of a ‘security interest.’”). These UCC provisions describe the facts in this case—the State X furniture store entered into a transaction under which it delivered the table to the lawyer while purporting to retain title in itself until payment was made. Accordingly, the State X furniture store has a security interest in the table used by the lawyer in her dining room.
The security interest of the State X furniture store in the table
An attached security interest is perfected only if a financing statement has been filed with respect to it or an exception applies. UCC § 9-308. Here, no financing statement has been filed, but an exception applies. UCC § 9-309(1) provides that a purchase-money security interest in consumer goods perfects when it attaches, without the need for the filing of a financing statement. See also UCC §§ 9-308(a) and 9-310(b)(2). The security interest of the State X furniture store in the table used by the lawyer in her dining room is a purchase-money security interest because the lawyer’s obligation was incurred as part of the price of the table (a “purchase-money obligation”; see UCC §9-103(a)(2)) and the table secures that obligation (and thus is “purchase-money collateral”; see UCC § 9-103(a)(1)). UCC § 9-103(b). The dining room table constitutes “consumer goods” because that table, unlike the waiting room couch (and the office desk), is used for personal, family, or household purposes. UCC § 9-102(a)(23). Thus, the State X furniture store’s security interest is a purchase-money security interest in consumer goods and is perfected even though no financing statement was filed.
State Y - desk used by the lawyer
An attached security interest is perfected only if a financing statement has been filed with respect to it or an exception applies. UCC § 9-310(a). Here, a financing statement was filed in the State Y central filing office for financing statements. However, the law governing perfection of this security interest is the law of State X. This is because the law governing a non-possessory security interest in goods is the law of the jurisdiction in which the debtor is located. UCC § 9-301(1). Although the desk is located in State Y, the debtor (the lawyer) is located in State X because the statute provides that a debtor who is an individual is located at the individual’s principal residence. UCC § 9-307(b)(1). The lawyer’s principal residence is in State X so, for purposes of the rule in UCC § 9-301, the lawyer is located in State X and therefore State X law applies to perfection of the security interest in the desk. Thus, for the security interest to be perfected, the financing statement would have to have been filed in the State X filing office under State X law rather than in the State Y filing office under State Y law. Accordingly, the security interest of the State Y furniture store will be perfected only if an exception to the filing requirement is applicable. No exception is applicable under these facts.
