Secured Transactions

Question 1

Three Requirements for Attachment

Answer 1

Violet Roses Smell Amazing

Value: same consideration; binding commitment to extend credit.

Rights: SI only attaches to debtor’s rights. Debtor can tansfer full title to BFP if prior SP didn’t record. After-acquired property.

Security Agreement: RAD. Record. Authenticated by Debtor. Description of Collatera. Reasonable. More particular for Consumer Goods; Commercial Tort Claims.

Question 2

Non-Security Agreement Attachment

Answer 2

Possession: Something you can hold in your hands. Attachment only lasts as long as Possession.
Must be possession per an oral/unauthenticated security agreement.

Control:

Question 3

After-Acquired Property and Certain Types. 1-What? 2-Does SI attach to AAC? 3-Wrinkle?

Answer 3

Property acquired by Debort after the SI attaches. No reference to AAC then SI only attaches to property at time. But - inventory or accounts >> rebuttable presumption AAC included.

Question 4

Accessions 1 - What? and 2 - Impact on Attachment

Commingled Goods 1 - What? and 2 - Impact

Answer 4

1 - Goods physically united with other goods so that the identity of original goods not lost. SI continues even if good becomes an accession.

2 - Commingled Goods - Goods physically united so identity is lost. SI is lost in goods but proportional interest exists in the commingled product/mass.

Question 5

Proceeds - 1 - What? 2 - Attachment?

Answer 5

1 - Proceeds are whatever results when collateral is sold, leased, licensed, exchanged, etc.

2 - SI attaches to the original collateral, it also attacheds to the proceeds automatically.

Question 6

PMSI - 1 - What? - 2 - Types? 3 - Partial?

Answer 6

Think like a Purchase Money Mortgage. Seller PMSIs: goods bought on credit. Lender PMSIs: goods bought with value from Lender. Same goods are collateral for the loan. Partial PMSIs: Only with Non Consumer Goods. When multiple loans: 1 a PMSI; and the other not a PMSI.

Question 7

6 Methods of Perfection - Mnemonic

Answer 7

Famouse People Can’t Avoid Attention

• *F**iling (most common way)
• *P**ossession (exception to no record/unauth.

Control (same)

Alternate Perfection System (state law controls it)

Perfection under a state’s certificate of title law (think must note it on car title to perfect)

Automatic Perfection

Question 8

Perfection by Filing Required (5). What cant be perfected by Filing? (1) Error Standard. (1)

Answer 8

1. File FS in Central Filing Office where Debtor is, unless RP-related then County where RP is.
2. Correct Legal Name of Debtor - if incorrect then void if search won’t reveal. State DL. If not then Legal name. Corporations: not their trade name.
3. Name of SP.
4. Description of Collateral. Generally super-generic allowed. If RP-related: FS must say covers. Say where local RP is. Describe. Name record O of the RP.
5. Authorization from Debtor. If no authorization, actual and statutory damages.
6. Any collateral except Deposit Accounts; Money; LoCs; collateral governed by other rules (like cars)
7. Error Standard: Seriously Misleading

Question 9

Duration of a FS

Answer 9

Lapse 5 years after filing.

Continue by filing within 6 months before lapse.

Question 10

1 - Possession is the only way to perfect an SI in

2 - Control is the only way to perfect an SI in

3 - DAs how? (3)

Answer 10

1 - Money

2 - Deposit Accounts; LoC rights

3 - SP is bank with DA. SP, Bank, and Debtor all agree. SP becomes bank’s customer w/r/t DA.

Question 11

Perfection and Certificate of Title. 1 - How? 2 - What excluded?

Answer 11

1 - Perfect by noting the SI on the certificate of title.

2 - Inventory cars dont have to be perfected like this because they generally don’t have titles.

Question 12

Auto-Perfection. 1 - What? 2 - Most common? 3 - Other two?

Answer 12

1 - SI atttaches and perfection without filing; possession, or control.

2 - Most common are PMSIs in goods.

3 - Others are causal or isolated assignment of accounts; Payment intangibles, promissory notes.

Question 13

A. Debtor Name Change. 1 - Standard? 2 - Grace Period?
B. Debtor moves out of state. 1 - Grace Period?
C. Collateral Moves out of State. 1 - Debtor still? 2 - New Debtor out of state? 3 - Impact?
D. Possession + SP gives back to Debtor. 1 - Impact? 2 - Exception?

Answer 13

A1 - Must amend if Debtor’s name change makes filed FS seriously misleading. A2 - SP would have 4 months to amend.
B1 - Grace period is 4 months.
C1 - If Debtor still owns then only B1 would matter. 2 - 1 year** to amend if new debtor lives OOS. 3 - If fail to meet **1 year then you lose future and past w/r/t BFPs.
D1 - Lost perfection. 2 - Unless SP gives back right type for right reasons >> 20 days to repossess or refile an FS.

Question 14

Perfection for Proceeds. 1 - Grace? 2 - After? 3 - Cash Proceeds Rule? 4 - Same Office Rule? 5 - Inventory and Accounts?

Answer 14

1 - 20 days after collateral sold to amend. 2 - Lapses unless originally broad enough to cover the proceeds. 3 - Perfection continues in cash proceeds so long as you can still ID them. 4 - Perfection continues when the new FS would go to same office; and it wasn’t collateral >> cash >> new collateral. Usually Accounts/CP. 5 - FS says inventory >> its going to cover accounts as well.

Question 15

Priority Disputes
1-PSI v. PSI
2-PSI v. UPSI
3-UPSI v. UPSI
4-PSI v. LC
5-UPSI v. LC
6. SI v. StatLien
7. SP v. SP over futures
8. SP v. LC over futures

Answer 15

1- Fist to file** **OR** **perfect**. 2-Perfected beats unperfected. 3-First to attach or become effective. 4-PSI beats LC. 5-LC beats UPSI, unless UPSI filed but no value yet. 6-StatLien beats SI so long as possession and lien over ordinary course of business. 7-First to file or perfect even if advance comes after 2nd-P/F’er. 8-SP if advance **within 45 days**. After **45 LC wins unless SP has no K of lien.

Question 16

1-B v. PSI
2-BIOCB
3-Garage Sale 3A-PMSIs?
4-B v. UPSI
5-B v. Future Advance

Answer 16

1-B takes subject to PSI. 2-BIOCB B takes free of SI if: Merchant in goods of the kind; not a pawn-broker; B in good-faith and without K that sale violated rights. 3-Consumer to Consumer B takes free if: value; personal use; consumer-to-consumer; No K of the SI, unless SP has an FS filed. 3A-Though PMSIs are auto-perfected, a garage sale beats an unfiled, though perfected, PMSI. 4-B takes subject to, unless: Value; delivery; no K. 5-B takes free if 1) SP had K over B; or FA 45 days or more after purchase.

Question 17

1-CP/Instruments & Possession Priority
2-Transferee of $/DA funds v. SP
3-A2 interest v. A9 interest

Answer 17

1-Bs and SPs with Possession and without K win.
2-Transferees take free unless collusion.
3-A2 interest-holders win if they have possession.

Question 18

PMSI Perfection (2)
3-PMSI v. LC
4-PMSIs v. SI Non-Inventory Goods
5-PMSIs v. SI Inventory
6-PMSIs v. SI Proceeds A-Non-inventory B-Inventory
7-PMSI v. PMSI

Answer 18

1-PMSIs in Consumer Goods are auto-perfected. But no FS and can lose out to Garage Sale.
2-All other PMSIs must file FS or take possession of collateral.
3-Same as SI v. LC, except 20 days grace period to perfect after Debtor possesses in order to beat an LC within those 20 days.
4-PMSIs always win if perfect within 20 days of debtor receipt. If don’t then first in time to file or perfect. Consumer Goods will always win, except for Garage Sale.
5-PMSIs win if: 1) perfect before delivery; and 2) send notification to SPs.
6A-Non-Inventory - PMSI priority extends. 6B-Inventory- PMSI priority only to up-front cash for inventory sold.
7-PMSI Sellers beat PMSI Lenders.

Question 19

1-Fixtures v. RP Interest
2-PMSI in Fixtures v. RP
3-Construction Mortgage

Answer 19

1-SP in fixtures wins if files before RP recorded.
2-PMSI wins if Debtor’s RP interest recorded; or Debtor in possession; and SI perfected by filing before** goods are fixtures; or within **20 days after goods are fixtures.
3-CM beats any if: 1) recorded before goods fixtures; and goods become fixtures before C complete.

Question 20

Is it a Lease or a SI? 1 and one of 3.

Answer 20

Lease in name is really an SI if:
1-Lesseee must pay full obligation no matter what; and
A) term of lease is equal or more $ than remaining economic life of goods; B) lessee bound to renew until life of goods over; C) “option” to renew/become owner in name only, anyone would do it.

Question 21

Consignment. 1-What is it? Risk? 2-Requirements for A9 SI treatment?

Answer 21

1-Consignor has O of goods but gives Possession of goods to Consignee who sells them. Buyer might think Consignee actually owns them free of interest.
2-Consignment is A9, and must file, only when: A) Consignor delivers to Merchant of goods in kind; B) Merchant not known to sell other people’s goods; C) Value at least $1000 per delivery; D) Not Consumer Goods.

Question 22

1-What governs Default? 2-SPs rights after default (3)? 3-Repossessing rules? 4-Mere trespass? 5-Big stuff?

Answer 22

1-Default governed by Contract law. 2-SP can seek possession and seller or retain; abandon A9 and get a judgment; anything else agreed upon. 3-Repossess through Judicial process; or Self-Help, but Self-Help cannot breach peace. Mere trespass is not Breach of Peace. 5-If too big to repossess then can sell on sight.

Question 23

1-What’s the Commercially Reasonable Standard w/r/t disposition? (3)
2-Disposition Rules on Public v. Private
3-Notice unless (3)?
4-Notice timing? 5-Notice includes? 6-Consumer Goods extra (2)?

Answer 23

1-After default, SP takes possession and sells: must: 1) sell in usual manner; sell at current market price; sell in conformity with reasonable commercial practices. 2-Private sale only if price is fixed by some standard. 3-Seller must give notice unless: perishable; recognized market like stock exchange; or waived. 4-Reasonable if at least 10 days before sale. 5-Names; description; how/when/where; debtor entitled to accounting; 6-Consumer Goods - liability for deficiency; Phone # Debtor can call to see about redeeming.

Question 24

Disposition Proceeds (4)

Answer 24

1-Expenses; 2-Debt of Senior; 3-Debts of Juniors; 4-Surplus to Debtor

Question 25

1- Acceptance of Full Satisfaction by Debtor (2)
2- Consumer Goods Wrinkles; why?
3- Acceptance of Partial? How different than Full?
4- Right of Redemption? Waivable?

Answer 25

1-Consent; or 2-Silent for 20 days**. 2-Full Satisfaction of CG only. If Debtor **60% or more then must sell goods; unless Debtor waives. Assume to give Debtor chance to buy it? 3- Acceptance of Partial Sfx only by consent. No silence. 4- Can redeem by paying off before SP sells or accepts in satisfaction. Not waivable right.

Question 26

Satisfaction and
1-Fixtures?
2-Accessions?
3-Rights to Payment?

Answer 26

1-SP can remove from RP but must pay for damages caused.
2-SP can remove from other goods.
3-SP steps into Debtor’s shoes. Account Debtors must pay SP after notice.

Question 27

Remedies for SP failing to dispose correctly? (3)
Violation ramification for SP?

Answer 27

1-Injunctive relief if ongoing; Actual Damages if loss done; Statutory damages in consumer goods. 2-SP might lose chance to claim deficiency.

Question 28

When Buyer takes free of prior SI, like a BIOCB then what if Buyer subsequently sells?

Answer 28

Subequent buyer from BIOCB buyer automatically also takes free of.