011 Secured Essays

Front 1

PMSI

Back 1

a creditor who loans money for purchase of collateral, when the money is actually used to purchase the collateral, holds a purchase money security interest in the collateral.
-significant because holder can gain priority over all other security interests in the same collateral including earlier perfected creditors

Front 2

Repo

Back 2

Upon default by the debtor, a creditor may repossess the collateral
through the courts or through the self-help method.

if self-help is unavailable secured party can use judicial process via an action for REPLEVIN
The doctrine of selfhelp allows the creditor to take the secured property if it can be done without a breach of the peace.

Although it is clear that a breach of the peace occurs if the creditor breaks into a building or uses force to collect the collateral, it is unclear whether entering property surrounded by a 'unlocked gate is a breach of the peace.

Front 3

After-acquired property clause

Back 3

allows a creditor to take in interest in existing and after acquired property.

Front 4

Breach of the peace

Back 4

any conduct by secured party that has the POTENTIAL to lead to VIOLENCE is a breach of the peace.

generally, physical presence plus verbal objection is enough to create breach of the peace

Front 5

Breach of the Peace--liability for committing

Back 5

when a sec party commits breach of the peace, he loses authorization to repossess and can be sued for CONVERSION and is liable for actual and punitive damages.

Front 6

perfecting an s.i. in a motor vehicle

Back 6

The creditor must obtain a notation on the title of the vehicle reflecting its interest.

Front 7

How do you perfect a security interest in promissory notes?

Back 7

By possession.

Front 8

How maya creditor obtain priority in movable buildings on
land against persons with an existing interest in the land?

Back 8

Have the debtor obtain from the landlord and from any other
person holding an interest in the land where the movable buildings were located a signed consent to the bank's security interest in the buildings

Front 9

What is the fee for filling a financing statement with the
Secretary of State?

Back 9

$15 plus 50 cents per page after the first 10 pages.

Recordation tax of 11.5 cents per $100 debt after the first $2000 must be paid.

tax assessed according to amount of debt actually outstanding

Front 10

How may a creditor sell a repossessed item?

Back 10

Notice of the sale must be given to the debtor, and the sale must be
commercially reasonable. (generaly at least 10 days).
-guarantors are also entitled to notice of sale.

This means that the sale must take place in the usual manner of the market and the seller must make a good faith effort to obtain market price. If this is done and the item sells for less than the amount of the debt, the seller can obtain a deficiency judgment from the
debtor.

However, if the provisions oft he ucc are not complied with,
there is a rebuttable presumption that the value of the collateral is equal to the amount of the debt.

ALSO

secured creditor in violation may be liable for any ACTUAL DAMAGES that may have been caused by failure to comply sith code requirements.

Front 11

How maya security interest in stocks and bonds be
perfected?

Back 11

1. Financing statement

2. perfection by control.

This occurs when a certificated
security is delivered in bearer fonn, or delivered and endorsed to the
secured party, if it is in registered form.
An uncertificated security requires
that the secured party be registered as the owner, or the registered owner
acknowledges that they are holding it for the secured party or the issuer
agrees that it will comply with the secured party's instructions without
further consent of the owner.

Front 12

perfection of fixture filings

Back 12

Fixture filings should be filed in the office of the register of deeds
in the county in which the land to which the fixtures are attached is
located.

Front 13

How does a security interest in collateral attach?

Back 13

TIle attachment of a secnrity interest reqnires a secnrity agreement
containing language granting a security interest in the collateral.

While a promissory note can serve as a security agreement if it contains granting language, most notes do not contain tins language.

Front 14

A security interest is not created until there is attachment. What
does attachment require?

Back 14

Attachment requires: (i) a security agreement between the debtor and the
creditor (i.e., an agreement to create a security interest); (ii) the giving of
value; and (iii) the debtor to have rights in the collateral.

A security agreement can be evidenced by a signed writing (signed by the
debtor), or it can be oral so long as the collateral is in the possession of the creditor.

(A security agreement may also be evidenced by control)

Front 15

A future advance made by a secured party whose security interest
is perfected has priority over a lien creditor if:

Back 15

1. the future advance is made pursuant to a commitment entered
into before the secured party acquired knowledge of the lien, or
(ii) the future advance is made within 45 days after the lien
arose.

Front 16

Under TN law, can a bank obtain a valid security interest in a tort
claim?

Back 16

if it is a
"commercial tort claim," as that term is defined in the U.C.C. the
definition of"commercial tort claim" excludes claims arising out of
personal injuries.

Front 17

Which bank account has priority?

Back 17

TIle Tennessee V.C.C. allows a bank to obtain a security interest in a bank
account maintained at another bank and provides procedures for obtaining
such a security interest. TIle Tennessee V.C.C. provides that a security
interest in favor of the bank at which the account is maintained has
priority over a security interest of another lender perfected by a control
agreement, even ifthe other lender obtains its security interest first. For a
control agreement to have priority it has to expressly provide that the bank which holds the account subordinate its security interest.

Front 18

How arc security interests created by dealers in motor vehicles
held in inventoryt

Back 18

Security interests created by dealers in motor vehicles held in inventory
are perfected by filing.

Front 19

Fixture filings--PMSI

Back 19

a PMSI secured party who makes a fixture filing within 20 days after affixation will prevail over a real property interest in the same fixture that was recorded prior to affixation.

--construction mortgage takes priority over even a subsequent PMSI in fixtures even if prefected by fixture filing within 20 days.

Front 20

How do you perfect your security interest in an airplane?

Back 20

Only by filing with the Federal Aviation Agency.

Front 21

What is the statutory penalty when a secured party sells COI/SlImer goods in a manner that is not commercially reasonable or where the secured party fails to give notice ofthe sale?

Back 21

The debtor is entitled to a statutory penalty equal to the amount o f interest to be paid over the life o f the loan plus 10% o f the initial loan amount.

Front 22

security interests in personal property

Back 22

A secured party taldng a security interest in personal property gets no greater rights in it than those of the debtor through whom it is claiming,

Front 23

seller who learns that the buyer has received goods on credit while insolvent

Back 23

can reclaim the goods upon demand within 10 days after the buyer's receipt of the goods. The Bankruptcy Code requires the demand be in writing

While there are no reported Tennessee decisions on point, the overwhelming majority of cases from other jurisdictions have held that a secured party qualities as a good faith purchaser, and that a secured party holding a security interest in the debtor's inventory has priority over a reclaiming seller.

Front 24

Perfected secured party vs. BIOC

Back 24

A BIOC is a person who 1. buys goods 2. in good faith 3. without knowledge that the sale violates the right of another person 4. in the ordinary course of business from 5. a seller dealing in goods of that kind.

AND thus takes free ofthe security interest.

Front 25

How do you enforce your security interest upon default?

Back 25

Obtain possession o f those items o f collateral that are capable o f physical possession. One may obtain possession of the collateral by filing an action to recover personal property and obtaining a writ o f possession. Alternatively, one may recover the collateral by self-help if this can be done without a breach o f the peace. 2/97

Front 26

**priority in investment property

Back 26

pefection by control prevails over perfection by filing

-both sis perfected by control, first to perfect by contol

Front 27

**Priority rules for deposit accounts

Back 27

1. si. perf by control wins over si perfected by filing

2. both perfected by control, first to perfect

3. paty that perfects by control bc it put the deposit account in its own name prevails over all other secured parties with control

4. bank that has control bc it maintains the deposit account has priority over all other sec. parties with control except a secured party obtained control by putting the account in its own name.

Front 28

**deposit accounts--bank right to set-off

Back 28

bank with which deposit account maintained has right to set-off against secured parties with control of deposit account

UNLESS

the secured party has control by putting the account in its own name.

transferee takes funds free of the si in deposit account unless acting in collusion.

Front 29

PMSI in goods other than inventory and livestock priority

Back 29

has priority over a conflicting security interest in the same goods.

Front 30

sale of collateral

Back 30

A security interest in collateral continues in collateral notwithstanding the collateral's sale unless the secured creditor consented to the sale free of the security interest.

Front 31

proceeds

Back 31

a security interest generally continues in identify cash proceeds of the collateral.

A secured party may identify cash proceeds commingled with other funds by "tracing" using the "lowest intermediate balance rule"

Front 32

Future Advance Clause
permissible

Back 32

contemplate making future loans to debtor, secured party can secure future advances in teh present SA

Front 33

know for exam:

Back 33

categories of collateral
3 elements of attachment
5 methods of perfection
basic priority rules

Front 34

Types of collateral:

GOODS

Back 34

Consumer Goods = used or bought for use primarily for personal or family purposes

Equipment - used or bought for use primarily in business

Front 35

Types of collateral

GOODS

Back 35

Farm Products = crops/ livestock; farming operations

Inventory = holds for sale or lease or to be furnished under service contracts (OR used by a business in a short period of time, i.e., office supplies)

Front 36

Types of Collateral

INTANGIBLE PROP

Back 36

Instruments = negotiable or any other writing (prom notes, checks)

Documents (bills of lading or warehouse receipt)

Front 37

Types of Collateral

INTANGIBLE PROP

Back 37

Chattel Paper = prom note + SA

Investment Prop = stocks, bonds, mutual funds

Comm Tort Claims = (not including PI or WD)

Front 38

Types of Collateral

INTANGIBLE PROP

Back 38

Accounts = rt to pymt (accounts receivable)

Deposit Account = can't take SI in bank accuont

General Intangible = intellectual prop

Front 39

Article 9 applies to:

Back 39

any transaction recreating a SI in pp or fixtures, agricultural lien, sale of accounts/ chattel paper/ prom notes, certain consignments, secured sale disguised as lease

Front 40

ATTACHMENT:

3 elements

Back 40

1. SA
2. Secured party given VALUE (past consid sufficient)
3. Debtor has RIGHTS in collateral

Front 41

Security Agreement (K between debtor and creditor that is rq'd for attachment):

Back 41

1. written record authenticated by debtor describing collateral

Front 42

PROCEEDS --includes whatever is received upon the sale, exchange, collection, or other disposition of collateral OR proceeds

Back 42

unless otherwise agreed, a SI automatically gives teh secured party a right to identifiable proceeds

Front 43

When proceeds are commingled:

Back 43

Lowest Intermediate Balance Test--start at time proceeds deposited and end at time applying test

Front 44

PERFECTION

5 methods:

Back 44

1. Automatic
2. Possession fo collateral by secured party
3. By Control
4. Notation on Cert of Title
5. Filing a FS (form UCC-1)

Front 45

PERFECTION

Automatic

Back 45

PMSI in Consumer Goods (automatically upon attachment).

does not apply to equipment or inventory

Front 46

PERFECTION

Possession of Collateral by Secured Party

Back 46

only way to perfect a SI in $

impossible for accounts, deposit accounts and genearl intantibles

Front 47

PERFECTION By Control

Nonconsumer deposit accounts in 3 manners:

Back 47

1. bank in which maintained automatically has control
2. SP listed as a co-owner on acct
3. authenticated record bt SP, bank and debtor allowing SP to make orders

Front 48

PERFECTION

Notation of lien on Cert of Title

Back 48

only way to perfect SI in an automobile

(unless debtor holdign car as inventory..then file a financing statement)

Front 49

PERFECTION

Financing Statement (SOS or County filing of register of deeds if real prop)

Back 49

1. Debtors name (not a trade name)
2. description of collateral
3. SP name
4. Real property related (refer to real property records)
5. No signature, but authorization
6. SA may be filed

Front 50

Financing Statement is effective for 5 years

Termination Statement r'qd within 20 days of demand by debtor

Back 50

can extend by filing a continuatino statement within last 6 months of "life"

Front 51

Perfection as to Proceeds

Back 51

If SP has a perfected SI in collateral, automatically has a perfected SI in proceeds FOR 20 DAYS!! then must take action to amend

Front 52

PRIORITY

Secured v. Secured

Back 52

General Rule: first to file OR perfect

*PMSI in goods (other than inventory) has priority over conflicting SI in the same goods or its proceeds

Front 53

In event of conflicting PMSIs

Back 53

Seller PMSI has priority over a Financer PMSI

Front 54

Special Priority Rules for Deposit Accounts (remember, only way to perfect is by control).

Back 54

SI perfected by control has priority over a SI perfected via proceeds

if conflicting interests perfected by control, rank according to time of control

name on acount has priority over all other secured parties with control

bank has control bc it maintains account has priority over all except party with name on account

Front 55

PRIORITY

SP v. Buyer of Collateral

(general rule: lien remains)

Back 55

Inventory sold implicitly free of lien

BIOC takes free of SI created by seller even if SI is perfected AND even if BIOC knows of it

Front 56

BIOC = person who buys goods in good faith, without knowledge taht teh sale violates the rights of another person in the goods, and in the ordinary course from a person in the business of selling goods of that kind

Back 56

NOT a BIOC - take subject to perfected SIs. Take free from unperfected SI unless know if it.

Front 57

PRIORITY

Consumer to Consumer Sales

"Garage Sale Exception"

Back 57

buyer takes free

Front 58

PRIORITY

SP v. Judgment Lien Holders

Back 58

SI has priority if perfected before judgment/ writ

(which is first, writ or perfection?)

Front 59

PRIORITY

PMSI v. Lien Creditor

Back 59

if SP files within 30 days after debtor receives possession, will have priority

Front 60

PRIORITY

SP v. Mechanic's Lien

Back 60

Statutory Lien beats even a perfected SI!!

Front 61

Foreclosure Sales--must be commercially reasonable

discharges SI and all subordinate SIs, but subject to superior SIs

Back 61

Deficiency Judgment may be avialable to SP, but overage to debtor.

Front 62

FIXTURES

require a fixture filing to perfect (same as UCC form but filed in land records)

Back 62

SI in fixtures has priority over subsequently arising real estate interest but NOT for prior interest EXCEPT for a PMSI filed within 20 days of becoming a fixture

Front 63

Strict Foreclosure upon Default (resale)

NOTICE RQMT (reasonable time before sale = 10+ days)

Back 63

written notice to (1) debtor, (2) sureties, (3) secured parties who have notified SP, and (4) secured parties who have perfected by filing FS or Notation on CoT

Front 64

Strict Foreclosure upon Default (resale)

COMMERCIALLY REASONABLE requirement

Back 64

if not, rebuttable presumption against deficiency