Virginia Secured Transactions

Question 1

Qualifications for a buyer in the ordinary course of business to take goods free of security interests

Answer 1

To qualify, a buyer must: 1) purchase goods; 2) from a merchant; 3) in the business of selling goods of that kind; 4) in good faith; 5) without knowledge that the sale violates creditor’s security interest

Question 2

Treatment of buyer of purchased goods with a security interest held by creditor on seller’s inventory

Answer 2

Even if perfected, a buyer of goods in the ordinary course of business generally takes free of this

Question 3

What is the order of payment from a public auction proceeds?

Answer 3

For a repossession action where this occurs, proceeds go to 1) payment and collection of enforcement expenses, then to 2) the secured party to satisfy the outstanding obligation

Question 4

To whom should surplus proceeds from a public auction be distributed?

Answer 4

The debtor is entitled to these proceeds from public auction

Question 5

Who is liable for a deficiency from a public auction?

Answer 5

A debtor remains liable for this result of a public auction

Question 6

How long is a judgement obtained by a creditor enforceable?

Answer 6

This is valid and may be enforced by the circuit court for a term of 20 years from the date received, and if unpaid, may be extended an additional 20 years by Motion upon good cause shown

Question 7

When a creditor has a security interest in a deposit account, a creditor may perfect its security interest by doing this:

Answer 7

Only by taking control of the account may a creditor be able to do this to a deposit account

Question 8

When a creditor has a security interest in stocks, a creditor may perfect its security interest by doing either of these:

Answer 8

Either by filing a financing statement with the VA State Corporation Commission or by taking control of the stock may a creditor be able to do this to stocks

Question 9

A preferential transfer made by a debtor to a creditor for an antecedent debt owed may not be what?

Answer 9

This type of transfer made by a debtor to a creditor for an antecedent debt owed may be what?

Question 10

A gift, conveyance, assignment, or transfer of real or personal property that is intended to defraud creditors may be what?

Answer 10

These transfers made with the intent to defraud creditors may be set aside

Question 11

A creditor bears the burden of establishing the transferor’s intent to defraud by what standard?

Answer 11

This person bears the burden of establishing the creditor’s intent to defraud by clear and convincing evidence

Question 12

An insolvent debtor may still do this to one creditor over another

Answer 12

This person may still favor one creditor over another

Question 13

If a perfected PMSI is held by the seller and a perfected PMSI is held by the lender, whose security interest has first priority?

Answer 13

A perfected PMSI in collateral held by the seller holds this versus a perfected PMSI held by a lender

Question 14

Generally, if there are conflicting PMSIs, this one holds first priority:

Answer 14

Generally, the first to file (perfect) a PMSI holds this:

Question 15

If an employer entrusted an employee with responsibility with respect to a check, then this is treated as an effective indorsement

Answer 15

If a fraudulent indorsement of a check is made by an employee, it is effective if:

Question 16

A materialman does this:

Answer 16

This person supplies material for the construction of a building

Question 17

To perfect a mechanic’s lien, a materialman must do what?

Answer 17

To do this, a material man must 1) file a memorandum of lien no later than 90 days from the last day of the month when labor last performed/materials furnished, and 2) not later than 90 days from time structure is to be completed

Question 18

Mechanic’s lien memorandum must be timely filed (w/in the 90 day windows) and:

Answer 18

This must both be timely and: 1)filed with the clerk’s office where the structure is located, 2)mailed to the owner (and general contractor if claimant is not, 3) verified by oath, 4) and have a certification filed with a copy mailed

Question 19

To enforce a statutory mechanic’s lien, a mechanic may sell property at auction when?

Answer 19

If less than $10,000, this person enforcing this can sell w/out court petition if following statutory requirements. Over $25,000, this person must petition the circuit court where property is located

Question 20

A security interest attaches to collateral when this occurs:

Answer 20

This attaches when 1) secured party gives value; 2) debtor has rights in collateral; and 3) debtor has authenticated security agreement describing the collateral

Question 21

If a debtor transfers property to defraud creditors (fraudulent or constructively fraudulent), a creditor may do what?

Answer 21

If this occurs, then a creditor may set aside the transfer (only if creditor’s claim is liquidated)

Question 22

UCC Article 9 generally governs what kind of transactions?

Answer 22

This governs transactions creating secured interests in personal property/fixutre

Question 23

For a security interest to attach to collateral (enforceable vs. debtor), it must be:

Answer 23

For this to be enforceable, it requires: 1) value given by secured party, 2) debtor has rights in collateral, and 3) debtor has authenticated a security agreement that describes the collateral OR secured party has possession/control of collateral

Question 24

Value given by the secured party for attachment of SI may be:

Answer 24

This can be consideration sufficient to form contract, extending credit, accepting delivery under preexisting contract, or in satisfaction of preeexisting claim

Question 25

Tangible collateral subject to SI:

Answer 25

This may include goods - consumer goods, farm products, inventory, equipment, or software

Question 26

Other collateral (classification determined w/out reference to how debtor will use):

Answer 26

This may include chattel paper, document of title, instruments, investment property, accounts, commercial tort claims, deposit accounts, letters of credit, and general intangibles

Question 27

An authenticated record is a security agreement that:

Answer 27

This must 1) be in a record, 2) contain a description of collateral, and 3) be authenticated by debtor; can list specific items/list article 9 categories unless it is consumer goods/commercial tort claim (NO super generic descriptions - e.g. all assets)

Question 28

An original authenticated security agreement may serve as what?

Answer 28

This may serve as a new debtor's authenticated security agreement by operation of law/contract (do not need to execute new security agreement with new debtor)

Question 29

Possession/Control over collateral may do this, pursuant to the security agreement:

Answer 29

If this is done, the secured party will have satisfied the Statute of Frauds for Art. 9 purposes

Question 30

The SI may cover collateral owned when:

Answer 30

This may cover collateral when it is granted, as well as that which the debtor acquires after it is given

Question 31

Sellers of consumer goods may not take SI in what kind of property?

Answer 31

These people may only take SI goods sold; however, rule does not apply to vehicles subject to certificate of title statute or goods purchased w/ an open-end credit plan

Question 32

Secured party's duties include:

Answer 32

These include the duty of care, to keep collateral identifiable, to relinquish possession/control of collateral

Question 33

Secured party's rights in collateral include:

Answer 33

These include the right to charge for reasonable expenses, risk of loss or damage is on debtor, right to use/operate collateral, to hold proceeds

Question 34

If debtor assigns right to receive payment from account debtor to secured party, secured party may:

Answer 34

If this occurs, then secured party may notify account debtor to pay secured party; upon receipt of notification, account debtor may discharge obligation only by paying assignee

Question 34

Secured party is:

Answer 34

This is the person whose favor the SI is created under the security agreement

Question 35

An obligor is:

Answer 35

This person must pay/otherwise perform w/r/t obligation that is secured by the SI

Question 36

A debtor is:

Answer 36

This person has interest, other than SI/lien, in collateral, such as sole owner (this person typically obligor)

Question 37

Rights of a debtor include these two:

Answer 37

A debtor has this for accounting/other info from secured party AND to notification from secured party when no longer required to make payments

Question 38

PMSI in goods exists when:

Answer 38

This exists when secured party gave value to debtor that enable debtor to acquire goods & value given was used OR secured party sold goods to debtor, debtor incurred obligation to pay secured part all/part of purchase price

Question 39

PMSI in software:

Answer 39

This exists only when debtor acquired interest in software as part of integrated transaction where acquired interest in goods, and acquiring software is for principal purpose of goods.

Question 40

Accessions are:

Answer 40

These are goods that are physically united w/ other goods such that id of original goods is not lost

Question 41

A SI created in collateral that becomes an accession is:

Answer 41

When this occurs, the SI is not lost; an SI may be created in collateral that is this

Question 42

Comingled goods are:

Answer 42

These are goods that are physically united with other goods such that their identity is lost in a product/mass

Question 43

A SI may attach to the product/mass that results when this occurs, but:

Answer 43

When goods are comingled, an SI may attach in this scenario but not in the specific goods comingled; if SI in collateral that becomes comingled, it is transferred to this

Question 44

Methods of perfecting a security interest (generally):

Answer 44

These include filing, possession, control, and automatic perfection

Question 45

Perfection with a filing statement is this:

Answer 45

This gives interested parties notice of the existence of the SI, and is the method of perfection for any SI except a deposit account, money or letter of credit rights

Question 46

Filing a financing statement requires:

Answer 46

This must contain the debtor's name, secured party's name, and description of the collateral (it is a notice filing)

Question 47

A filing office may only refuse a financing statement in Virginia for:

Answer 47

This may only occur to financing statement for failure to 1) pay required fee, 2) submit financing statement by authorized method, or 3) identify debtor

Question 48

Perfection with possession is this:

Answer 48

A SI in goods, instruments, neg documents, money, tangible chattel paper, and certificated security may be perfected this way BUT it only lasts during the period of it

Question 49

Perfection with control is this:

Answer 49

A SI in investment property, deposit accounts, letter of credit rights, electronic chattel paper, or electronic documents may be perfected this BUT it only lasts while retained

Question 50

For letter of credit rights and deposit account, perfection:

Answer 50

Perfection of this can only occur by control, unless such rights are supporting obligation for other collateral with this type of collateral

Question 51

A PMSI in consumer goods is perfected:

Answer 51

This is automatically perfected upon attachment, and a secured party need not file a financing statement (indefinite)

Question 52

A general creditor is this, and an SI does this to them:

Answer 52

This holds an unsecured claim (including a judgement), but no lien on collateral; thus, this always prevails over their rights in the collateral

Question 53

A perfected SI has priority over this:

Answer 53

This has priority over a judicial lien

Question 54

A judicial lien has priority over this:

Answer 54

This has priority over an unperfected SI unless only reason its unperfected is that secured party has yet to give value

Question 55

If a PMSI is perfected before or w/in 20 days after debtor receives possession of collateral:

Answer 55

When this occurs, the PMSI has priority over creditor's rights that arose between time of attachment of SI and filing