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77 Cards in this Set
- Front
- Back
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What is a Secured Transaction?
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A transaction intended to create a security interest in someone's personal property.
Governed by UCC, Art. 9 |
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How will Secured Transactions appear on the bar?
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Look for:
(1) credit transaction (2) agreement with collateral to secure a debt |
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Past bar exam Sec Trans issues
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(1) Dispute between debtor & creditor (Was there a SI? Repossession correctly?)
(2) Dispute between debtor, third parties, and creditor (Priority disputes) |
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Structure of a Sec Trans answer
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(1) Is there a SI? (Or a SI disguised as a lease?)
(2) Definitions (Identify the parties) (3) Attachment? (4) Perfection? (5) Priority? (If dispute present) (6) Repossession/Breach of Peace/Sale/Deficiency/Surplus |
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Types of Collateral
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(1) Goods (all things movable at time SI attaches)
(2) Quasi-tangible property (instruments, documents, chattel paper, investment property) (3) Intangible Property (account, deposit account, general intangibles) |
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Goods - categories
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(1) Consumer goods
(2) Inventory (3) Farm Products (4) Equipment |
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Consumer Goods
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Primarily for personal, family, or household purposes
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Inventory
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Held for sale, lease, or to be furnished under a service K
Material used or consumed in business (office supplies, raw materials) |
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Farm Products
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Crops or livestock or supplies used or produced in farming operations
Products of crops or livestock in their unmanufactured state |
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Equipment
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Non-inventory goods used or bought for use primarily in business
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Quasi-Tangible Goods - categories
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(1) Instruments
(2) Documents (3) Chattel Paper (4) Investment Property |
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Instruments
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Negotiable instruments (drafts, notes, checks)
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Documents
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Bills of lading
Warehouse slips |
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Chattel Paper
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Combination of monetary obligation and SI in specific goods
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Investment Property
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Stocks, bonds, etc.
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Intangible Property - categories
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(1) Account
(2) Deposit Account (3) General Intangible |
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Account
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any right to payment (accounts receivable)
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Deposit Account
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checking or savings account at bank
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General Intangibles
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residual category, includes:
(1) trademark and patent rights (2) copyrights (3) goodwill (4) licenses |
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How is an Art 9 SI created?
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Attachment
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What is required for attachment?
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(1) Agreement
(2) SP gives value (3) Debtor has rights in the collateral (partial or contingent OK) |
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What is required for an Agreement for attachment?
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(1) WRITING (unless SP has possession or control of collateral)
(2) INTENT to create a SA (3) authenticated by the debtor (SIGNED; SOF) (4) Description of the collateral |
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What kind of value must SP give?
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Any consideration sufficient to support a K, including past consideration.
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Scope of SI
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(1) MAY include Future Advances (future loans secured by current collateral)
(2) MAY include After-Acquired Property (for Consumer Goods, only those acquired within 10d of SP giving value) (3) AUTOMATICALLY includes Proceeds |
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Proceeds
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Whatever debtor receives from the disposition of the collateral.
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What if Proceeds are co-mingled?
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Need to be able to trace.
Follow the Lowest Immediate Balance Rule (amt in the bank account that is Collateral is equal to the lowest balance of all the funds in the act up to the value of the original deposits of proceeds btwn the time of deposit and attempted identification) |
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Significance of Perfection
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(1) Determines rights between competing SPs.
(2) Gives notice to the world of SI Cf. Attachment (determines rights btwn SP and debtor) |
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Methods of Perfection
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(1) Automatic
(2) Possession (3) Control (4) Notation on Certificate of Title (5) Filing a FS |
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What kinds of collateral can be perfected automatically?
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PMSI in consumer goods
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What kinds of collateral can be perfected by possession?
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MUST: money (cash, currency)
MAY: inventory, equipment, consumer goods |
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What kinds of collateral can be perfected by control?
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MUST: deposit accounts
MAY: investment property, letter of credit rights |
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What kinds of collateral can be perfected by notation on certificate of title?
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MUST: goods subject to certificate of title laws (cars, boats)
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Contents of a FS
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(1) debtor's legal name
(2) SP's name (party or agent) (3) Description of collateral |
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Requirements for Debtor's Legal Name on FS
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(1) name of individual or corp or PS
(2) NOT effective if seriously misleading and can't find using standard search logic (3) filing office mistake does not make it ineffective |
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Requirements for changing Debtor's Legal Name on FS
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Original SI covers collateral up to 4m after name change, then need to modify FS
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Requirements for Description of Collateral on FS
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(1) Must reasonably identify the collateral (general categories and descriptions sufficient)
(2) Land-related collateral: must e sufficient to give constructive notice under real estate laws |
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When can Filing Office reject a FS?
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When it does not include:
(1) SP's address (2) Debtor's address (3) Type of organization of Debtor BUT EFFECTIVE if these are missing and office accepts anyways. |
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Where do you file a FS?
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RULE: with the SoS where the Debtor is located.
EXCEPTIONS: land, copyrights, airplanes |
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Where is a Debtor located for purposes of filing a FS?
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Individuals: residence
Registered Entities: state where registered Unregistered Entities: state where business located or where chief executive office located |
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Exception on where to file a FS
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Land-related: filed with county recorder where the land is located
Copyrights: filed in Fed Copyright Office (DC) Airplanes: filed in Fed filing office (OKC) |
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Duration of a FS
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(1) Effective for 5y from date of filing
(2) Extended by filing Continuation Statements within 6m prior to lapse (3) If FS lapses, then LOSE PERFECTION |
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Termination of a FS
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(1) MUST file termination statement upon written demand by Debtor
(2) If Consumer Good, then within 1m of no outstanding obligation or within 20d of written demand |
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Priority: SP v. SP
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RULE: first to file or perfect has priority
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Priority of a PMSI in Non-Inventory Goods
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(usually equipment in business)
RULE: priority over conflicting SI in equipment or proceeds if PMSI perfected within 20d of debtor receiving possession of the collateral |
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Priority of PMSI in Inventory
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RULE: priority over conflicting SI if before Debtor takes possession, SP:
(1) Perfects (2) AND gives written notice to holders of conflicting SI NOTE: includes Consignments |
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Priority: SP v. Buyer of Collateral - authorized sale
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RULE: if sale AUTHORIZED by the SP, buyer takes free of SI.
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Priority: SP v. Buyer of Collateral - unauthorized sale
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RULE: if sale UNAUTHORIZED by the SP, SI continues after sale of collateral
EXCEPTION: Buyer in Ordinary Course of Business |
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Who is a Buyer in the Ordinary Course of Business?
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(1) Buys for value
(2) GF (3) w/o knowledge of another's rights (4) in ordinary course of seller's business (5) usual/customary business (6) seller's own practice (7) takes possession/has right to recover (8) not in payment of a debt (9) takes free of SI by "buyer's seller" (10) even if perfected or actual knowledge |
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Buyers NOT in the Ordinary Course of Business
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(1) Take subject to perfected SI
(2) Take free of unperfected SI unless know about them |
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Garage Sale Rule
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Consumer to Consumer sales; consumer good for both buyer and seller.
RULE: take free of SI, unless: (1) Buys with knowledge of the SI (2) OR prior to purchase, SP has filed a FS |
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Priority: SP v. Judgment Lien Holders/Bankruptcy Trustees
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RULE: If SP perfected, then SP generally has priority.
EXCEPTION: if judgment lien levied (bankruptcy filed) prior to perfection, then judgment lien (bankruptcy trustee) has priority. EXCEPTION: SA + FS beats a Lien Creditor. Don't need SP to give value. |
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When does a Judgment Lien attach?
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At time of levy by sheriff.
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Priority: PMSI v. Lien Creditor
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PMSI filed within 20d of debtor possession takes priority over rights of a lien that arises during that time.
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Priority: SP v. Statutory Lien Claimants
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RULE: Statutory Lien Claimants usually have priority over a SP, so long as they have complied with the applicable state law.
EX: Mechanic's Lien |
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Default
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Usually defined in the SA.
Failure to perform or pay the obligation when due. |
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Remedies upon Default
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(1) Self-Help Repossession (but no breach of peace)
(2) Judicial Process (if no self-help available) (3) Retention of collateral (4) Resale of collateral |
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Self-Help Repossession
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Only permitted if NO "breach of the peace" and NOT after bankruptcy filed (automatic stay)
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Breach of the Peace
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Look for risk of violence, damage to property, and conduct that could be deemed unreasonable under the circumstances.
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Retention of collateral - Strict Foreclosure
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Retaining collateral in full or partial satisfaction of the debt after giving notice to debtor and any competing SPs.
Debtor, or a competing SP, can prevent retention by giving written objection within 20d after notice. |
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Retention of collateral - Consumer Goods
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If consumer has paid over 60% of debt, then SP must sell the goods and cannot retain them as satisfaction, unless consumer agrees in writing.
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Art 9 Resale of Collateral requirements
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(1) Reasonable Notification
(2) Commercially Reasonable Sale |
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Art 9 Resale of Collateral - Reasonable Notification
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(1) give reasonable notice to debtor and any other SPs who have filed statements or given notice
(2) time and place of public sale (3) time after which any private sale will be made |
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Art 9 Resale of Collateral - Reasonable Notification Exceptions
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When goods are:
(1) Perishable (2) Threatens to decline rapidly in value (3) Is of a kind ordinarily sold in a recognized market (stock) |
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Art 9 Resale of Collateral - Commercially Reasonable Sale
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Every aspect of the sale must be commercially reasonable.
Highest price NOT necessary. |
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Art 9 Resale of Collateral - SP buying collateral
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May buy at a PUBLIC sale.
May buy at a PRIVATE sale ONLY IF collateral is of a type: (1) Sold in a recognized market (stock) (2) OR subject to standard price quotations |
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Art 9 Resale of Collateral - SP's Right to Deficiency
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Money still owed after sale of collateral
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Failure to comply with Art 9 Resale of Collateral requirements
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(1) Rebuttable presumption that collateral was worth enough to pay off entire debt. (prevents recovery of deficiency; BOP on SP)
(2) Damages: creditor is liable for any loss caused by failure to comply (BOP on debtor to prove loss) |
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Debtor's Right to Redeem
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Tender fulfillment of all obligations secured by the collateral, any repossession costs, and atty fees
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Fixtures
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Goods attached to real estate that are attached with the intent that it become a permanent part of the real estate.
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Perfection of Fixtures
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Fixture filing in the county recorder where a mortgage would be filed.
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Priority on Fixture: SP v. Subsequent real estate interest
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RULE: perfected SI in fixture has priority over any subsequent real estate interest.
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Priority on Fixture: SP v. Prior real estate interest
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RULE: prior real estate interest properly recorded has priority over subsequent SI.
EXCEPTION: PMSI (if perfected by fixture filing before becomes a fixture or within 20d thereafter) EXCEPTION: Construction Mortgage has priority over a PMSI |
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When is a Fixture Filing unnecessary?
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Readily removable factory or office machines.
Readily removable replacements of domestic appliances that are consumer goods. |
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Accessions
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Goods installed in or affixed to other goods (new tires on a car)
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Priority on Accessions
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RULE: general priority provisions apply, including PMSI
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Priority on Accessions - Certificate of Title Goods
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Perfected SI in entire item takes priority over a competing interest in the accession.
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Right to Remove Accession
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If SP has priority in the accession, has right to remove it after default.
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