PERFECTION BY POSSESSION, AUTOMATIC PERFECTION – THE PMSI IN CONSUMER GOODS, & PERFECTION BY CONTROL Flashcards
Perfection by possession
Perfection by Possession, Automatic Perfection – The PMSI in Consumer Goods, & Perfection by Control
A secured party may perfect a security interest in negotiable documents, goods, instruments, money, or tangible chattel paper by taking a possession of the collateral. A secured party may perfect a security interest in certificated securities by taking delivery of the certificated securities.
How to know that a secured party has legal possession even without physical possession
Perfection by Possession, Automatic Perfection – The PMSI in Consumer Goods, & Perfection by Control
A secured party takes possession of collateral in the possession of a person other than the debtor, the secured party, or a lessee of the collateral form the debtor in the ordinary course of the debtor’s business, when: (1) the person in possession authenticates a record acknowledging that it holds possession of the collateral for the secured party’s benefit; or (2) the person takes possession of the collateral after having authenticated a record acknowledging that it will hold possession of collateral for the secured party’s benefit.
Timing of perfection by possession
Perfection by Possession, Automatic Perfection – The PMSI in Consumer Goods, & Perfection by Control
If perfection of a security interest depends upon collateral by a secured party, perfection occurs no earlier than the time the secured party takes possession and continues only while the secured party retains possession.
Possession by the debtor as agent for the secured party
Perfection by Possession, Automatic Perfection – The PMSI in Consumer Goods, & Perfection by Control
The debtor cannot qualify as an agent for the secured party taking possession. And, under appropriate circumstances, a court may determine that a person in possession is so closely connected to or controlled by the debtor that the debtor has retained effective possession, even though the person may have agreed to take possession on behalf of the secured party.
Secured party’s possession and reasonable care
Perfection by Possession, Automatic Perfection – The PMSI in Consumer Goods, & Perfection by Control
A secured party shall use reasonable care in the custody and preservation of collateral in the secured party’s possession
If a secured party has possession of collateral: (1) reasonable expenses, including the cost of insurance and payment of taxes or other charges, incurred in the custody, preservation, use, or operation of the collateral are chargeable to the debtor and are secured by the collateral; (2) the risk of accidental loss or damage is on the debtor to the extent of a deficiency in any effective insurance coverage; (3) the secured party shall keep the collateral identifiable, but fungible collateral may be commingled; and (4) the secured party may use or operate the collateral: (A) for the purpose of preserving the collateral or its value; (B) as permitted by an order of a court having competent jurisdiction; or (C) except in the case of consumer goods, in the manner and to the extent agreed by the debtor
When PMSI in consumer goods perfects
Perfection by Possession, Automatic Perfection – The PMSI in Consumer Goods, & Perfection by Control
A PMSI in consumer goods is perfected when it attaches.
Perfection by control
Perfection by Possession, Automatic Perfection – The PMSI in Consumer Goods, & Perfection by Control
A security interest in investment property, deposit accounts, letter-of-credit rights, or electronic chattel paper may be perfected by control.
Deposit accounts and perfection by control
Perfection by Possession, Automatic Perfection – The PMSI in Consumer Goods, & Perfection by Control
A security interest in a deposit account may be perfected only by control
When a secured party has control of a deposit account
Perfection by Possession, Automatic Perfection – The PMSI in Consumer Goods, & Perfection by Control
A secured party has control of a deposit account if: (1) the secured party is the bank with which the deposit account is maintained; (2) the debtor, secured party, and bank have agreed in an authenticated record that the bank will comply with instructions originated by the secured party directing disposition of the funds in the deposit account without further consent by the debtor; or (3) the secured party becomes the bank’s customer with respect to the deposit account.
Control of Certificated Securities – Bearer Form
Perfection by Possession, Automatic Perfection – The PMSI in Consumer Goods, & Perfection by Control
A purchaser has “control” over a certificated security in bearer form if the certificated security is delivered to the purchaser
Control of Certificated Securities – Registered Form
Perfection by Possession, Automatic Perfection – The PMSI in Consumer Goods, & Perfection by Control
Control is established if the certificated security is delivered to the purchaser, and:
(1) the certificate is indorsed to the purchaser or in blank by an effective indorsement; or
(2) the certificate is registered in the name of the purchaser, upon original issue or registration of transfer by the issuer.
Perfection by Control of Uncertification Securities
Perfection by Possession, Automatic Perfection – The PMSI in Consumer Goods, & Perfection by Control
The uncertificated security is delivered to the purchaser or the issuer has agreed that it will comply with instruction originated by the purchaser without further consent by the registered owner
Delivery of an Uncertificated Security
Perfection by Possession, Automatic Perfection – The PMSI in Consumer Goods, & Perfection by Control
Delivery of an uncertificated security to a purchaser occurs when:
(1) the issuer registers the purchaser as the registered owner, upon original issue or registration of transfer; or
(2) another person does so on their behalf
