Secured Transactions

Question 1

Security Interest

Answer 1

An interest in personal property or fixtures that secures payment or performance of an obligation

Question 2

Article 9 governs transactions that

Answer 2

regardless of form, create a security interest in personal

property or fixtures by contract; rights to payment; agriculture liens

Question 3

Treat these Rights to Payments as Secured Transactions

Answer 3

C-PAP
Chattel paper
Promissory Notes
Accounts
Payment Intangibles

Why? To facilitate public notice of these sales

Question 4

Goods Types

Answer 4

Moveable; fixtures; unborn animals

1. Consumer goods
2. Farm Products
3. Inventory
4. Equipment

Question 5

Rights to Payment Types

Answer 5

1. Instruments (promissory notes, checks)
2. Chattel paper (record w/ 2 parts: $ obligation AND SI or a lease)
3. Accounts (rights to $ for goods sold, leased, licensed, or services rendered; accounts receivable; insurance policy payout)
4. Payment Intangibles (catch-all)

Question 6

Chattel Paper

Answer 6

Record w/ 2 parts: $ obligation AND SI or a lease

Exs:
A loan AND granting an SI = chattel paper
A lease AND granting SI = chattel paper

Question 7

Other Types of SIs

Answer 7

Documents (docs of title; bill of lading)
Investment properties (securities)
Deposit Accounts
Commercial Tort Claims
Letter of credit rights
General intangibles

Question 8

Attachment

Answer 8

1. Value Given
2. Rights in Collateral
3. Security Agreement (authenticated record OR possession/control)

Question 9

Authenticated Record

Answer 9

These are RAD

1. a Record (stored in TANGIBLE medium)
2. Authenticated by debtor (sig or symbol; intent to be bound)
3. Describe the collateral to REASONABLY IDENTIFY it (can use art 9 category; no super-generics)

Question 10

Super Generic

Answer 10

NOT sufficient for an authenticated record
such as “all of the debtor’s assets” or “all of the debtor’s personal property” does not reasonably identify the collateral for attachment.

Note: will be sufficient for a UCC-1 filing to perfect

Question 11

After acquired Property

Answer 11

A security interest may apply to collateral the debtor acquires in the future

! Consumer Goods: After acquired clause is NOT effective for consumer goods, UNLESS debtor acquires them within 10 days after the secured party gives value

Question 12

Proceeds

Answer 12

A security interest in collateral AUTO attaches to identifiable proceeds from the sale, exchange, or other disposition of collateral.

Question 13

Accessions

Answer 13

Identity of combined goods aren’t lost = attached security interest.

Question 14

Purchase Money Security Agreement (PMSI)

Answer 14

Gives lender security interest in goods that have been purchased w/ funds borrowed from them or purchased on credit
Exists w/ goods and fixtures
Consumer Goods– AUTO perfects

Question 15

Perfection

Answer 15

Perfection is necessary for party to have a right in the collateral that is superior to others rights.

Perfection = Attachment + compliance with a method of perfection

Question 16

Methods of Perfection

Answer 16

Filing a financing statement 
Possession of collateral 
Control of collateral 
Automatic perfection 
Statutory perfection (like titles for cars)

Question 17

Filing a Financing Statement:

Answer 17

Debtors name
Name of secured party
Description Collateral (can be general)

Effective for 5 years
Must file continuation statement (need to go 6 months prior to expiration)

Question 18

Weird Rules re: Financing Statements

Answer 18

Debtors Name:
(1) if Individual- name on driver’s license or state ID (most states) or legal name (minority)
(2) if Corp: Registered organization- name on public records
Change of name: must amend within 4 months

**its OKAY to have an error in secured party name (b/c wont result in notice problem)

If name is seriously misleading — NOT perfected

Question 19

Filing Location: Real Property

Answer 19

Real property– where the property is located

Question 20

Filing Location: Collateral

Answer 20

Collateral– state of the DEBTOR’s location

Individual– debtor’s principal residence
Non Registered organization– maintains its place of business, if more than one, chief executive office
Registered- where it is organized

Question 21

Automatic Perfection:

Answer 21

PMSI in consumer goods

Proceeds if covered in SI

Cash proceeds

Same Office Rule (Does NOT apply w/ cash proceeds)

Question 22

Temporary Auto-Perfection

Answer 22

20 days from attachment – New value under an authenticated SA for a SI in certificated securities, negotiable documents, or instruments

20 days from attachment – proceeds if SI perfected

20 days – Delivery of collateral to debtor

4 months – Movement of DEBTOR to another state

1 year — Interstate movement of COLLATERAL to debtor in another state re: perfected SI

Question 23

Proceeds

Answer 23

Temporary perfection:
If SI in original collateral perfected, SI in proceeds perfected for 20 days from attachment

Automatic perfection (indefinite)
Pursuant to financing statement- broad enough to cover proceeds then its OK
Cash proceeds
Same office (Does NOT apply w/ cash proceeds)

Question 24

Statutory or common-law lien creditor

Answer 24

Possessory lien > SI; if the lien secured payment for the goods furnished in the ordinary course of business

Question 25

Unsecured General Lien Creditor

Answer 25

General Creditor (unsecured)- has a claim, including judgment but no lien on or SI in collateral SI will ALWAYS prevail over general creditor

Question 26

Judicial Lien Creditors Priority

Answer 26

Judicial lien creditor > unsecured security interest | Judicial lien creditor < secured interest

Question 27

Transferee v. secured party w/ SI

Answer 27

SI continues in collateral (aka buyer takes SUBJECT TO) UNLESS: secured party authorized the transfer free of the SI

Question 28

Buyers rights v. unperfected SI

Answer 28

Buyer takes collateral FREE OF the SI IF the buyer: (1) gives value (2) receives delivery and (3) without knowledge of SI

Question 29

Buyers rights v. perfected Si

Answer 29

Buyer generally takes collateral SUBJECT TO the SI

Question 30

Buyer in the ordinary course of business

Answer 30

BOCB takes FREE OF any SI in the goods given by the buyers seller (1) Buy goods in the ordinary course (2) for value (3) from seller in the business of selling goods of that kind (4) in good faith (5) without actual knowledge that the sale VIOLATES another’s rights in the goods**

Question 31

Consumer Buyer:

Answer 31

A consumer buyer takes FREE OF any SI in consumer goods UNLESS a secured party has filed a financing statement covering the goods (1) Buys consumer goods for his own personal use (2) from a consumer seller, (3) for value (4) without knowledge or record notice of the SI

Question 32

Perfected SI v. Perfected SI

Answer 32

first to file or perfect has priority | a lapse in filing or perfection restarts the clock

Question 33

Perfected SI v. Unperfected SI

Answer 33

a perfected SI has priority over an unperfected interest

Question 34

Unperfected SI v. Unperfected SI

Answer 34

the first to attach has priority

Question 35

PMSI v. Non-PMSI

Answer 35

PMSI will have priority

Question 36

PMSI in goods other than inventory or livestock v. Any SI

Answer 36

PMSI has priority IF perfected BEFORE OR WITHIN 20 days after the debtor receives possession of the collateral

Question 37

PMSI in inventory or livestock v. Any PMSI

Answer 37

PMSI has priority IF: (1) PERFECTED @ time the debtor receives possession of the collateral, and (2) PMSI party sends an authenticated NOTICE of the PMSI to the holder of any conflicting SI BEFORE the debtor receives possession of the collateral. Debtor receives possession of collateral + notice of PMSI to other conflicting SI

Question 38

Perfected PMSI v. Perfected PMSI

Answer 38

first to file or perfect has priority Exception: a Seller with a PMSI > lender with a PMSI

Question 39

Seller with a PMSI vs. Lender with a PMSI

Answer 39

Seller with a PMSI > lender with a PMSI

Question 40

Proceeds from PMSI in goods

Answer 40

a priority of a PMSI in goods generally extends to the proceeds of the original collateral if SI is perfected when the debtor receives possession of the collateral OR within 20 days after.

Question 41

SI in fixtures vs Real property interest-

Answer 41

a SI in fixtures > real property with which the fixtures are associated IF the SI in fixtures is perfected by a fixture filing BEFORE the real property interest RECORDED

Question 42

Perfected SI in fixtures vs Subsequent judicial lien

Answer 42

Perfected SI in fixtures > subsequent judicial lien

Question 43

PMSI in Fixtures vs Prior real property interest

Answer 43

PMSI in fixtures > property interest; IF fixture filing BEFORE goods BECAME fixtures OR within 20 days

Question 44

SI in fixtures vs Prior construction mortgage

Answer 44

construction mortgage > SI in fixtures; IF recorded BEFORE goods BECAME fixtures

Question 45

Proceeds Filing Date

Answer 45

The filing or perfection date for the original collateral is the filing/ perfection date for the proceeds

Question 46

Proceeds

Answer 46

Proceeds for non-filing collateral-- priority of the OG collateral generally continues in the proceeds IF: (1) the SI in the proceeds is perfected and (2) the proceeds are either (a) cash proceeds OR (b) proceeds of same type of collateral

Question 47

Solving SI Issues

Answer 47

A SA is a contract; contract law determines enforceability of any terms in a SA