Flashcards in Secured Transaction Deck (19):
What are the requirements of attachment?
(1) Debtor authenticated a security agreement, (2) value was given, (3) and he had rights in the property.
What are the three main requirements of the security agreement?
The agreement must be evidenced by a record and must show an intent to create a security interest.
The agreement must be authenticated by the debtor.
--this usually means signed by the debtor. Any symbol, including an electronic symbol, that is made with the present intent to authenticate the record for work.
The security agreement describes the collateral.
--A description is sufficient whether or not it is specific, if it reasonably identifies what is described. However, super generic descriptions are not allowed.
What is perfection?
Perfection of a security interest is not usually critical to the ability of the secured party to enforce its security interest in the personal property as against the debtor. Perfection of a security interest is critical to the ability of the security party to enforce its security interest in personal property as against other secured parties.
What are the five methods of perfection?
--purchase money security interest in consumer goods
Possession of collateral:
--possession is effective as a perfection method only as long as the secured party, it's agent, or the third party has possession of the collateral.
Perfection by control:
--The bank in which a nonconsumer deposit account is maintain automatically has control over the deposit account.
--if the secured parties not the bank it can take control by having his name placed on the account or by having a written agreement with the bank that has control.
Notation of lien on certificate of title:
--security interest in automobiles. However, watch for a company holding the automobile as inventory.
Filing a financing statement:
--A financing statement must provide three items of information: the debtors name; the secured party's name or the name of the secured parties representative: and an indication of the collateral.
Financing statements debtors name requirement?
Debtors name: financing statements are indexed by the debtor's name. If the debtor is an individual, the individuals name should be given. If the debtor is a corporation, the corporate name should be given. If the debtor is a partnership the partnership's name should be given.
--if name errors are not seriously misleading they will not invalidate the financing statement. An error is seriously misleading if using the search logic under debtors correct name would retrieve the erroneous financing statement.
--filings are still effective if because of an error on behalf of the filing office the index as incorrect information in it.
--if debtor changes his name and the name change causes it to be seriously misleading, the SP must before or within four months after the change re-file to continue perfect interest
Financing statements description of collateral requirement?
So long as description reasonably describes the collateral it will be sufficient.
--super generic descriptions are allowed.
Financing statements secured party's name requirement?
Error does not matter because search logic does not care about SP's name.
--also note that no signature is required though the debtor must authorize the filing of the financing statement. However, the debtor automatically authorizes a financing statement if she authenticates a security agreement covering the same collateral.
Where is the dancing statement filed?
Except as otherwise provided in a states article 9, the financing statement is filed with Secretary of State.
--real property: must be filed where real property exist.
--if the debtor moves a secured party has four months to refile in the proper jurisdiction to continue perfection.
--if the collateral moves the secure party will become unprotected after one year unless the secured party refiles the financing statement in the new jurisdiction before the one-year period.
Perfection as to proceeds?
Scared party automatically has a perfected security interest in whatever proceeds the debtor receives in exchange for the collateral for 20 days. If the new proceeds are different than that already in the filing statement or cash proceeds the SP must re-perfect.
General priority rule?
The first to file or perfect, whichever occurs first, has priority.
--two unprotected secured creditors: first to attach has priority.
--PMSI v PMSI: the seller PMSI has a priority over a financer PMSI.
--secured party v. buyer of collateral:
----authorized sales: if the SP authorizes the sale, the buyer takes free of the security interest.
----unauthorized sales: a buyer in the ordinary course of business takes free the security interest created by the seller even though the security interest is perfected and even though the buyer knows of its existence.
--secured party v. Judgment lien holder: first in time.
What is a buyer in the ordinary course of business?
A buyer in the ordinary course means a person who buys goods in good faith, without knowledge of the sale violates the rights of another person in the goods, and in ordinary course from a person in the business of selling goods of that kind.
What is the garage sale exception?
In the case of consumer goods, a buyer takes free of a security interest even though it is perfected if he buys without knowledge of the security interest for value, and for his own personal, family, or household purpose, unless prior to the purchase the secured party has filed a financing statement covering such goods.
--note the goods must be consumer goods in both the buyer and seller's hands.
What are the special priority rules for deposit accounts?
A security interest perfected by control has priority over a security interest protected via proceeds.
If conflicting interest each were perfected by control, they ranked according to the time of obtaining control.
A secured party who has attained control by putting the deposit accounts in his own name has priority over all other secured parties with control.
A bank that has control because it maintains the deposit accounts has priority of all other secured parties with control except as to a party who has obtained control by putting the deposit accounts in his name.
How can a SP obtain possession of control of the collateral?
Upon default the SP has the right to obtain possession of the collateral. To obtain possession of the collateral, the SP has two choices, (1) judicial process, or (2) self-help repossession without breach of the peace.
How must an SP dispose of collateral?
The secured party may dispose of the collateral in its current condition or may prepare the collateral for disposition in any commercially reasonable manner.
--every aspect of the disposition must be commercially reasonable, including the method, manner, time, place, and terms of the disposition.
SP must give notice if possible to debtor and secondary obligor's.
When can the SP keep the collateral as full or partial satisfaction?
Both the debtor and the SP must consent to the retention, and the proposal to retain the collateral for partial satisfaction of the obligation secured must be in good faith.
--notice to other interest parties must be given. Such parties must not object.
--if the secured party has a purchase money security interest in consumer goods and more than 60% of the price or the debt has been paid, the SP may not retain the consumer goods in full or partial satisfaction of the debt.
----if the collateral is consumer goods, the collateral may not be in the possession of the SP when the debtor consents to the retention of collateral in partial or full satisfaction of the debt.
What is SP's liability for damages caused by failure to comply with the UCC?
Gen. rule: when the secured party violates the UCC default rules with respect to collateral that is a consumer good, the debtor is entitled under the code to either (1) actual damages or, (2) a minimum, 10% of the cash price of the goods plus an amount equal to all interest charge to be paid over the life of the loan.
--The actual damages usually measured by the difference between the price obtained for the collateral and the price the collateral would have fetched at a proper sale.
What are the rules as to fixtures?
Non PMSI secured party: as between a secured party and the person having an interest in the real property, the first to file or record rule applies. In most cases, for the secured party to prevail, it must have filed a fixture filing before a recording of the real property interest and the debtor must have been in possession of the real property or have an interest in it when the security interest was given.
PMSI: a PMSI in fixtures takes priority over a conflicting interest of a mortgagee or owner of the property if: (1) the interest of the mortgagor or owner arose before the good became fixtures, OR (2)the SP filed a fixture filing within 20 days of the time the goods became fixtures.