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Secured Transactions Flashcards

2
Q

What is a collateralized transaction?

A

Any transaction, regardless of its form, which is intended to create a security interest in personal property or fixtures.

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3
Q

What is a PMSI?

A

A collateralized transaction where the collateral is acquired with the relevant loan.

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4
Q

What are receivables?

A

The sale of accounts, chattel paper, payment intangibles, and promissory notes.

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5
Q

What is a consignment?

A

The bailment by the owner/bailor/cosignor giving the bailee/consignee the authority to sell. The goods covered by a consignment can also be covered by a security interest.

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6
Q

What consignments required Article 9 compliance for the true consignment owner to gain priority over other creditors?

A

When the consignment is 1). for goods worth more than 1,000$2). The consignor did not use the goods for personal, family, or household purposes, AND3). He is in a position to deceive potential creditors: a). The cosignee deals with goods of that kind under a name other than the consignor’s name, b). The consignee is not an auctioneer, AND c). The consignee is not generally known by the consignee’s creditors to be substantially engaged in selling consigned goods

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7
Q

How can a lease be under Art. 9?

A

Leases that are installment/credit sales are covered. That’s when the lease term is greater than or equal to the economic life of the goods, the lessee owns the property at the end of teh lease term, or the lessee has the option to buy the goods for nominal consideration at the end of the lease term.

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8
Q

Name some things not covered by Art. 9.

A

Leases of goodsreal propertyrights governed by federal lawnoncommercial tort claimsConsumer deposit accountsstatutory liens (mechanic’s Lanlords’, artisans)Wage assignmenets

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9
Q

What is a commercial tort claim?

A

tort claims from business, like unfair competition, not personal injury.

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10
Q

What types of goods are there under Art. 9?

A

Consumer goodsEquipmentInventoryFarm products.Not money, minerals in the ground

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11
Q

What is Equipment?

A

Goods that are not consumed, but are used primarily for business purposes. IT is the default category

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12
Q

What is inventory?

A

Goods held for sale or lease in the ordinary course of business, consumed goods, and raw materials.

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13
Q

What are farm products?

A

Any crops or livestock in possession of a farmer engaged in farming in an unmanufactured condition.

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14
Q

What are instruments?

A

an intangible type of collateral that represents goods as a document of title, like a warehouse receipt ( goods in storage) or a bill of lading (goods in transit)

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15
Q

What is chattel paper?

A

A writing or group of writings evidencing a monetary obligation (like a promissory note) and a security interest or lease in goods. It can be tangible or electronic. An intangible form of collateral.

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16
Q

What is an account?

A

A right to payment of money for goods sold or leased or services rendered NOT evidenced by an instrument or chattel paper. Typically an accounts receivables for a business, software licensing fees, credit card receivables… An intangible form of collateral.

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17
Q

What is a deposit account?

A

a financial instutution account. Consumer deposit accounts are not under ARt. 9

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18
Q

What is investment property?

A

Intangible form of collateral. Stocks, bonds, etc.

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19
Q

What are general intangibles?

A

The leftover form of intangible collateral, like IP, liquor licenses, good will, and souls.

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20
Q

What are proceeds?

A

A form of collateral. Whatever is recieved with the sale, exchange, or other disposition of collateral or proceeds.

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21
Q

What is attachment?

A

The process of creating a security interest and making it enforceable against the debtor, thereby allowing repossession.

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22
Q

What is required for attachment?

A

1). Teh creditor must give value.2). There must be a contract3). The debtor must have rights in the collateral.

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23
Q

What is a pledge?

A

When the debtor creates a security interest and gives possession of the collateral to the creditor.

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24
Q

What is required for the security agreement/contract?

A

1). possession of the collateral (pledge),2). control, OR3). a signed written/electronic authenticated record with a description of the collateral reasonably identifying it

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25
Q

What is afar-acquried property?

A

Property acquired after the security agreement that hte debtor can agree to include as collateral. It is common with inventory and also called a floating lien.

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26
What is the consumer goods limitation for after-acquired property?
An after-acquired property clause for consumer goods is only valid for consumer goods acquired within 10 days of giving value.
27
What are after- acquired property clauses not valid for?
commercial tort claims
28
What is perfection?
the process where the creditor protects the security interest from other claimants to the collateral.
29
What is a future advance?
When the debtor agrees that the collateral will serve as collateral for new loans as well as the current one as a line of credit.
30
What types of collateral is not perfectable by possession?
accounts, deposit accounts, nonnegotiable documents, electronic documents, electronic chattel paper, and general intangibles.
31
What happens if a creditor loses possession of collateral perfected by possession?
It is lost, unless it is an instrument, negotiable document, or a certificated security.
32
List the methods of perfection.
possessionfiling a financing statementautomatic permanentautomatic temporarycontrolnotice on a certifiate of title
33
What types of collateral are not subject to perfection by filing?
deposit accountsmoney
34
What is required to be in a financing statement?
1). The names and addresses of the creditor and debtor2). The debtor's authorization in an authenticated record before or after filing (automatic if the debtor authenticated the security agreement) 3). Description of the collateral/land
35
Errors in the financing statement?
Minor errors that are not seriously misleading are excused
36
How is the financing statement filed?
Under the debtor's nameAn individual's name is the driver's license name, an organization's name is its organized name and only extremely similar trade names will work
37
Debtor's name changes?
Collateral that the debtor has at the time of the name change remains perfectedCollateral obtained within 4 months of the name change continues and for collateral obtained after 4 months, perfection ends unless refiled
38
Where is the financing statement filed?
Secretary of State's office but fixtures, minerals and timber in that county's mortgage filing system
39
How long is the financing statement effective for?
5 years from the date of filing, and refile is open in-between 4.5 to 5 yearsFixtures go until the mortgage is released
40
When is a termination statement required?
When the security interest is for consumer goods: within 20 days of the debtor's written demand or 1 month after the security interest endsFor non-consumer goods within 20 days of written demands
41
What is the penalty of fraudulently filing a financing statement?
$5K + court costs + attorneys fees minimum
42
When is perfection automatic and permanent?
A PMSI in consumer goods, assignment of insignificant amount of debtor's accounts, sale of promissory notes
43
When is perfection automatic and temporary?
Proceeds for 20 daysNew value for instruments, negotiable documents and certified certificates for 20 daysDelivery of instruments, negotiable documents or certified security to debtor for 20 days
44
What is perfection by control?
When the creditor has the right to sell or cash in the collateral without debtors further action
45
When is perfection by control allowed?
In investment property, non-consumer deposit accounts, electronic documents, electronic chattel paperIn a deposit account, the secured party has control if it is the bank where the account is
46
When is perfection by notation on certificate of title allowed?
Motor vehicles, boats, manufactured housingIf the collateral is inventory, perfection should be by filing or possession
47
How are proceeds perfected?
Automatic for 20 days and that continues: 1). under same office rule: when the financing statement covering the proceeds would be filed in the same place as the original collateral2). tracing the cash proceeds3). perfect within the 20 days
48
How do you determine what states perfection rules apply?
The debtor's principle residence or organization's place of organization
49
What are exceptions to the debtor's location perfection rules rule?
Perfection by possessionfixturestimberagricultural lienscertificate of title items (state with most recent certificate)deposit accounts (bank's chief executive office)
50
What happens when the debtor or collateral moves states?
Perfection continues for 4 months but if by possession or certificate of title then perfection continues
51
What is subordination?
When competing parties agree to priority order
52
When two secured creditors are unperfected, which has priority?
The first to attach.
53
When both secured creditors have perfected, which has priority?
The first to either file or perfect regardless of knowledge
54
How does a PMSI in goods gain priority over other secureds?
Perfect when the debtor receives possession or within 20 days
55
How does a PMSI in inventory gain priority?
1). perfect when the debtor obtains possession AND2). give notice to all previously filed creditors before the debtor obtains possessiona PMSI in livestock is the same
56
How does a PMSI in livestock gain priority?
1). perfect when the debtor obtains possession AND2). give notice to all previously filed creditors before the debtor obtains possessiona PMSI in inventory is the same
57
How does a creditor get priority in deposit accounts?
with control
58
How does a creditor get priority in investment property?
with control
59
Who wins between a secured party and a donee?
a secured party
60
How can a purchaser beat a secured?
1). The debtor has permission to sell2). The buyer gives value, receives delivery, has no knowledge of a secured interest, and a secured is unperfected
61
What is a gap purchaser?
When the debtor receives collateral subject to an unperfected PMSI, then sells it, then the PMSI perfects within 20 days. Then the PMSI has priority. This also applies to a PMSI and a lien creditor
62
When can a buyer in the ordinary course of business get priority over a secured?
1). Good faith2). Without knowledge of a security interest violation3). Not farm products4). In the ordinary business of the seller5). The security interest created by the seller6). No possession by the creditor
63
When does a consumer purchaser of consumer goods get priority?
1). Buyer pays value2). No knowledge of a security interest3). A creditor is not perfected by possession4). Security interest is not filed
64
Who wins between a secured and a holder in due course?
A holder in due course
65
Who wins between a secured and a lien creditor?
Whomever attaches or perfects first
66
When can a lien creditor in future advances beat a secured?
When the secured creditor has knowledge of the lien, and it has been there for 45 days
67
When does a statutory mechanic's lien beat a secured?
When the person furnishes services/materials related to goods covered by the security interest in the ordinary course of business and has possession of the collateral.
68
What is a fixture?
A good not completely integrated into a building but so related to the real estate that an interest in it arises under real estate law. It is removable, though there may be damage to the realty. Goods are readily movable, fixtures are not.
69
Who wins between a mortgage holder and a secured party in fixtures?
The secured, if he perfects before the mortgage is recorded with a fixture filing. Also, a PMSI in fixtures wins if the real estate interest is not a construction mortgage and he perfects with a fixture filing within the good/fixture transition
70
How are fixture filings perfected?
file a financing statement in the mortgage office where the real property is, describing the real property.
71
Who wins between a fixture filing and a judicial lien?
the security interest.
72
Who wins between a mortgage and a crops security interest?
The crops security interest.
73
When can a secured party take the collateral?
Any time the debtor is in default as long as he does not breach the peace.
74
What acts breach the peace?
breaking into a garage, taking despite screaming debtor, threats. Not lying!
75
Repo man as creditor's agent?
The creditor is strictly liable for the repoman's breach of the peace, even if a contractor--extending possibly to a conversion action.
76
What can a creditor do after obtaining the property?
Resell the collateralstrict foreclosure
77
What is required for the resell of collateral?
Notice of salecommercially reasonable sale
78
What is required in a notice of resell?
1). A description of the debtor and secured party2). A description of the collateral3). The method of sale4). a statement that the debtor is entitled to an accounting5). time and place of public sale or time after which a private sale will be made6). For consumer goods, explaination of deficiency, telephone number for redemption information, and other sale information
79
When must notice of a resell be given?
A reasonable amount of time before the sale, but 10 days in a nonconsumer transaction
80
Who must notice be sent to?
The debtor unless he waives notice AFTER DEFAULT, Sureties, and for anything not consumer goods, creditors who have perfected by filing, certificate of title, or have given notice
81
When is notice of a resell not required?
for perishable collateral, collateral with a speedy decline in value, or collateral customarily sold on a recognized market.
82
What is a right to redeem?
The debtor's right to cure the default until collateral is sold or disposed of, or AFTER DEFAULT, the debtor waives it.
83
How does a debtor redeem property?
Tender the total amount due, not just late payments, plus all creditor's reasonable expenses.
84
What is the standard of care and burden of proof for a resell?
The sale must be commercially reasonable and the creditor has the burden to show this
85
When can a creditor purchase collateral at a resell?
Anytime for public sales. For private sales, only if the collateral is customarily sold in a recognized market or subject to widely distributed standard price quotations.
86
What does the creditor warrant at the resale?
Title, possession, and quiet enjoyment of the collateral unless he disclaims.
87
How are resale proceed prioritized?
1). resonable expenses of the sale2). pay off the debt3). Pay off subordinate creditors4). surplus to the debtor
88
What is a deficiency?
The amount the debtor still owes the creditor after a resell. This amount is unsecured. The creditor was therefore undersecured.
89
What is a surplus?
The amount the collateral sold for in excess of the debt. That goes to the debtor, and that makes the secured Oversecured.
90
What happens if a secured does not properly resell?
He is liable to the debtor and other creditors for actual damages and there is a rebuttable presumption that the value of the collateral was equal to the amount of the debt. For consumer goods he is automatically charged the total finance charge plus 10% AND he is barred from recovering any deficiencies.
91
What special action is available for secured creditors of Accounts or instruments?
He can tell the obligor to pay him directly, rather than the debtor.
92
What is a strict foreclosure?
The debtor can keep the collateral in partial or total satisfaction of the debt, but partial is not allowed for consumer debts.
93
How can a secured do a strict foreclosure?
1). Debtor's authenticated record consent AFTER DEFAULT or nonresponse after 20 day notice2). Send authenticated record to the debtor unless he's waived notice and, if the collateral is not consumer goods, a notice to creditors that have perfected by filing, notification on certificate of title or have given notice to the creditor, AND3). There is no written objection from the debtor or another creditor within 20 days
94
When is strict foreclosure really not allowed?
When the debtor of consumer goods has paid 60% of the price, then resale is required in 90 days of repossession, unless the debtor waives.
95
When is a buyer not bound by a security agreement?
When he is a buyer in the ordinary course of business: 1). the security agreement is not perfected by perfection,2). he buys in the ordinary course of business3). from someone who normally sells t hose goods4). without knowledge of a security agreement violation.

Texas Essays (12 decks)

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