Top 5 Areas Flashcards
Types of Collateral
Goods (tangible collateral); Intangible or semi-intangible collateral
Types of goods
Consumer goods; equipment; farm products; inventory
Default category for goods
Equipment
Types of semi/intangible collateral
Instruments; documents; chattel paper; investment property; accounts; deposit accounts; commercial tort claims; general intangibles
Instruments
Pieces of paper representing the right to be paid money (promissory notes, checks, certificates of deposit)
Documents
A document that represents the right to reive goods
Chattel paper
A record which evidences both a monetary obligation and a security interest in or a lease of specific goods
Investment property
Stocks, bonds, mutual funds, and brokerage accounts
Accounts
Includes a right to payment for property sold or services rendered
Deposit accounts
An account maintained with a bank. Article 9 only applies to security interests in nonconsumer deposit accounts
Commercial tort claims
A tort claim where (1) the claimant is an organization or (2) the claimant is an individual, the claim arose out of the the claimant’s business or profession, and the claim does not include damages for perso injury or the death of an individual
General intangibles
Any personal property not coming within the scope of the other definitions, such as patent and trademark rights, copyrights, and goodwil
Three requirements for attachment
Parties must agree to create the security interest; Value given by the secured party; and Debtor has rights in the collateral
Form of the Security Agreement
Evidenced by a record; authenticated agreement; description of collateral
What evidence of a record is sufficient?
The creditor taking possession of the collateral; an authenticated security agreement; or the creditor taking control of nonconsumer deposit accounts, electronic chattel paper, and investment property
Description of collateral in security agreement
Must reasonably identify the collateral. No supergeneric descriptions
Methods of perfection
Attachment and one of the following:
Filing of a financing statement;
taking possession of the collateral;
taking control of the collateral;
auutomatic perfection (e.g., PMSI in consumer goods)
Temporary perfection (e.g., of a secutity interest in proceeds received from the sale of collateral)
Collateral filing is effective to perfect
All classes of collateral except deposit accounts and money
Collateral possession is effective for perfection
All classes of collateral except general intangibles, accounts, nonconsumer deposit accounts, nonnegotiable documents, and electronic chattel paper
Collateral that automatically perfects
PMSIs in consumer goods
Temporary perfection
Effective for 20 days for proceeds, when a secured party gives new value under a security agreement where collateral is a negotiable instrument, or certificated security, and where a SP makes available a negotiable document, instrument, certificated security, or goods in possession of a bailee on a temporary basis. Four moths where debtor moves from one state to another if debtor’s location governs perfection
Control effective for perfection
Only for nonconsumer deposit accounts, electronic chattel paper, and investment property
General rule for priority b/w SPs
First to either file or perfect, whichever is earlier
Priority b/w unperfected SPs
First to attach
Priority b/w unperfected and perfected SPs
Perfected interest generally prevails
PMSI superpriority in goods other than inventory and livestock
PMSI has priority over conflicting SI in the same goods or their proceeds if the interest is perfected before or w/in 20 days after debtor receives possession of the goods
PMSI in inventory and livestock
Only has priority if: perfected at the time the debtor gets possession; and any SP who has filed their SI receives authenticated notification of the PMSI before debtor receives possession
Conflicting PMSIs
SP who has PMSI as a seller prevails over a SP who has a PMSI as a lender. Otherwise first SP to file or perfect prevails
Priority rules for conflicting SI in investment property
A SI perfected by control has priority over a SI perfected by any other method
Priority in proceeds
A perfected SI in proceeds will have the same date of priority as the perfected SI in the original collateral
Special rule for certain proceeds of non-filing collateral
A SP has priority in the proceeds on non-filing collateral if (1) the SP has priority in the original collateral; (2) their SI in the proceeds is perfected and (3) the proceeds are cash proceeds or proceeds of the same type as the original collateral
BIOC Sales
Takes free of a nonpossessory SI in the goods created by the buyer’s seller
BIOC
Buys in good faith, w/o knowledge that the sale violates the rights of another person, and from a seller in the business of selling goods of the kind purchased
Buyers not in OCB
Take subject to perfected SI, and take free from unperfecteed SI
Priority for SP vs. judicial lien creditor
JLC prevails over SI if becomes creditor before SI is perfected. Prior perfected SI has priority
Priority for SP v. possessory lien holder
PLH has priority if the goods or services were provided in the ordinary course of business and the collateral remains in the lien holder’s possession
Priority for SP v. Article 2 claimant
A2 claimant has priority over A9 SP as long as A2 retains possession
