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71 Cards in this Set
- Front
- Back
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What are the types of collateral?
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Goods,
tangible intangible, intangible intangibles, investment property. |
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Name the types of goods.
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consumer goods, inventory, farm products, equipment.
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Why are categories of collateral important?
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Because perfection, priorities, and enforcement differ base on the types of goods.
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What is collateral?
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"Collateral" means the property subject to a security interest or agricultural lien. The term includes:
(A) proceeds to which a security interest attaches; (B) accounts, chattel paper, payment intangibles, and promissory notes that have been sold; and (C) goods that are the subject of a consignment |
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Consignment?
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Consignment" means a transaction, regardless of its form, in which a person delivers goods to a merchant for the purpose of sale and:
(A) the merchant: (i) deals in goods of that kind under a name other than the name of the person making delivery; (ii) is not an auctioneer; and (iii) is not generally known by its creditors to be substantially engaged in selling the goods of others; (B) with respect to each delivery, the aggregate value of the goods is $1,000 or more at the time of delivery; (C) the goods are not consumer goods immediately before delivery; and (D) the transaction does not create a security interest that secures an obligation |
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What does Art 9 of the UCC govern?
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any transaction , regardless of its form, that creates a security interest in personal property or fixtures by K. categories are agriculotural liens, sales of accounts (chattel paper, prom notes, and payment intangibles), cosignment and certain lease-purchase agreements.
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What are consumer goods?
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Consumer goods" means goods that are used or bought for use primarily for personal, family, or household purposes.
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Explains Farm Products
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"Farm products" means goods, other than standing timber, with respect to which the debtor is engaged in a farming operation and which are:
(A) crops grown, growing, or to be grown, including: (i) crops produced on trees, vines, and bushes; and (ii) aquatic goods produced in aquacultural operations; (B) livestock, born or unborn, including aquatic goods produced in aquacultural operations; (C) supplies used or produced in a farming operation; or (D) products of crops or livestock in their unmanufactured states. |
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Why is equipment a catchall provisions?
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"Equipment" means goods other than inventory, farm products, or consumer goods. Usually refers to goods used and bought primarily for use in the business.
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Inventory?
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"Inventory" means goods, other than farm products, which:
(A) are leased by a person as lessor; (B) are held by a person for sale or lease or to be furnished under a contract of service; (C) are furnished by a person under a contract of service; or (D) consist of raw materials, work in process, or materials used or consumed in a business includes timber to be cut |
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What are fixtures?
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"Fixtures" means goods that have become so related to particular real property that an interest in them arises under real property law.
SI in fixtures is subordiante to conflicting SI in real estate |
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Define Accession
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Accession" means goods that are physically united with other goods in such a manner that the identity of the original goods is not lost
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Give an exampleof commingled goods.
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flour in a bakery. these goods are goods that are physically united with ither goods to the extent that their identity is lost.
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Tangible intangibles
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Intangible rights or obligations memorialized in writing.
Categories are ... instruments (negotiable instru) documents (docs of title) chattel paper (record of monetary and SI in or lease of goods. |
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May Intangible intangibles alse be evidenced by a writing?
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Yes, the difference btwn intangible intangible is that the writings take on no commercial significants. The categories are
accounts (rights to payments) commercial tort claim general intangibles (catchall) |
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Investment Property
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Investment property" means a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract, or commodity account.
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What are proceeds?
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Proceeds", except as used in Section 9-609(b), means the following property:
(A) whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral; (B) whatever is collected on, or distributed on account of, collateral; (C) rights arising out of collateral; (D) to the extent of the value of collateral, claims arising out of the loss, nonconformity, or interference with the use of, defects or infringement of rights in, or damage to, the collateral; or (E) to the extent of the value of collateral and to the extent payable to the debtor or the secured party, insurance payable by reason of the loss or nonconformity of, defects or infringement of rights in, or damage to, the collateral. |
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How are SI created?
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a security interest is created by a written security agreement or by the secured party's taking posession, delivery, or control of the collateral with the intentto secure a debt.
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What does the SI need to be enforced?
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1. Authentication by debtor (signing with the intent to authentcate) and
2. Description of collateral 9must reasonably identify property. |
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What does a financing statement do?
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Give notice of the security to perfect the SI once filed.
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Possession
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If secured party has possession of collateral debtor may orally agree that secured party has a SI.
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What do you do if an item cannot be possessed?
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Control it.....if dealing with deposit accounts, chattel paper, investment prop, etc. Control will take the place of possession.
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What is attachment
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process by which the SI is created.
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When does the SI attach?
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When
1. Secured party gives value 2. Debtor has a right in the collateral or power to transfer rights and 3. debtor has authenticated a Security agreement that sufficiently describes the collateral (unless there is controll or possession) Must take place simultaneously. |
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What is SI is sold?
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SI in collateral automatically extends to proceeds of collateral.
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When is a SI a PMSI?
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when the SI is in goods that are purchase money collateral.
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what is Purchase money collateral?
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goods or software securing a purchase money obligation that the debtor incurs to purchase th goods. (the thing bought is the collateral)
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How does the debor incur a purchase money obligation?
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if the obligation is incurred in all or part of the price of the collateral or for the value given to enable the debtor to acquire rights in or use of the collteral.
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What is the special consumer goods rule in regards to PMSI?
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when the goods are consumer goods a seller may take a SI only in the goods sold so when there is a PMSI in consumer goods this PMSI will not extend to other present or future goods. this rule does not apply to goods procured by an open credit line.
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What is the dual status rule
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PMSI does not lose its status eveb if
A. the purchase money collateral also secures an obligation that is not a PMobligation b. collateral that is not purchase-money collateral also secures the PM obligation or the PMO has been renewed, refinaniced, consoldiated, or restructured. |
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What law governs perfection?
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Law of the debtor's juris.
If Person the Principal residence If Organization- then pleace of business or is more than one then CEO's office If Registered Org then state of organization If registered org under fed law then place designated by law, if none, then state designated by org, if none the DC. |
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What are the methods of perfection?
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1. filing
2. possession 3. control 4. automatic perfection |
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How to you perfect by filing?
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filing a financing statement in the public office. In VA we file with the State Corporation Commission.
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When is filing not effective?
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not effective for
a. deposit account (control) b. letter of credit (control) c. Money (possession) |
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Where do you file the statement?
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Where the debotor is located.
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What does perfection by possession apply to?
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Negotiable documents
goods instruments money tangiible chattel paper |
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What is the duty of a secured party in possession?
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Must exercise the duty of care in its custory and preservation
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When is perfection automatic?
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when the SI is a PMSI in consumer goods, which perfects upon attachment. This type pf perfection does not apply to certificate of title
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When is perfection temporary?
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when the SI attaches to proceeds of collateral. It continues for 20 days after attachment unless financing statement covers the original collateral.
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What is the PMSI relation back theory?
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If financing statement is filed w/n 20 days after debtor receives delivery of collateral, perfection relates back to the date the SI attached.
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What must be included in the financings statement?
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1. name of debtor
2. name of secured party 3. description of collateral must reasonable identify and saying covers all assets (which wasnot good enought for security agreement) will suffice. 4. authorized by debtor (secuirty agreement is authorization for the financing statement.) |
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What are the fixture filing rules?
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Must
a. contain all info required in financing statement plus b. indicate that it civers fixtures c. indicate that it is to be recorded in real property records d. provide description of real prop e. if the debtor does not have an interest in the real prop then provide the name of the record owner. |
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When can the financing statement be rightfully rejected?
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1. record not communicated by authorized method
2. filing fee not paid 3. Debtor's name not provided 4. if an amendmnet does not identify initial statement or initial statement has lapsed 5. record filed in reap prop filing w/o debtors name or address 6.Sufficient description of real prop isnot filed 7.secured partu's name is omitted 8.status of indivdual or org isnot provided 9. statement indicates that debtor is an org but does not provide typr or juris of org or org ID number |
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what is the effect of a wrongful rejection?
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the financing statement is still effective except against a purchaser that gives value in reasonable reliance upon the absence of the record from the files
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Will an error effect a financing statement?
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Maybe. Minor errors will not unless they are seriously misleading. ex. failure to provide proper name of debtor = seriouy misleading unless a by standard search logic the debtor can be found.
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When can a financing stateent be filed?
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May be filed before a security agreement is made or a security interest otherwise attaches.
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What happens if a statement becomes seriouly misleading after filing?
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Amendment to correct misleading issues must be filed w/n 4 months. ex.changing the name of company or women getting married and last name changes.
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What happens if the debtor moves?
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Filing statement must be refiled in debtors new location w/n 4 months of move in order for perfection to continue and relate back to original filing date. If not, the SI will be unperfected.
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How long is a financing statement effective?
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for 5 yrs unless filed inc onnection with a public finance transaction or manufactured home transaction then 30yrs.
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How do you keep the financing statemnt going/effective?
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file a continutaion statement w/n 6 months of before the expiration of the 5 yr period or else the statement will lapse.
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When must a termination statement be filed.
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1. If consumer goods- w/n 1 month after the debt is no longer outstanding. OR w/n 20 days of a demand by the debtor.
2. If non consumer goos w/n 20 days after a demand from the debtor |
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What is the general rule of priority?
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First in time is first is right.
1. Unperfected SI- the first SI to attach wins. 2. Prefected Over Unperfected- Prefected will prevail over unperfected 3. Two perfected interest- earlist filing time or earliest perfection w/o interruption will prevail. ex. secured party who perfects by possession will prevail over secured party who perfects by filing. |
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When is second in time first in right?
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Perfected PMSI in goods will prevail over conflicting SI if the PMSI is perfected when the debtor receives possession of collateral or w/n 20 days thereafter.
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Can second in time first in right be applied to inventory?
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Yes the PMSI will have priority in inventory, chattel paper, and an instrument constituting proceeds if
1. PMSI is perfected when the debtor receives possession 2. PM secured party sends a notification to holder of conflicting interest describing inventory and interest 3. holder of interest receives notice w/n 5 yrs b4 debtor take possession of inventory. (rules applies to consignments as well.) |
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How do you determine simultaneous PMSI's?
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PMSI in the price of collateral trumps PMSI that secures a loan.
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What is a lien creaditor?
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1. creditor that acquires an interest in prop by attachment.
2. an assignee for the benfits of creditos 3. trustee in bankruptcy 4 a receiver in equity. |
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How can a secured party have priority over a lien creaditor?
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If secured party perfects b4 the lien creditor's interest arises or
financing statement is filed b4 rights arise. |
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Will a posssessory lien take priority over a secured party?
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Yes, a possessory lien is an interest other than an SI or argricultural lien that secures payment or performance, is created by statute or law, and person need possession for effectiveness.
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What role does priority play in accessions?
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An SI in an accession is subordinate to a SI in the whole that is perfected.
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What are the rights of a Buyer in the Ordinary Course?
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Buey will take free of SI if
1. Buys in GF 2. w/o knowledge that sale violates the rights of another 3. buys in the ordinary course frm person in the business of selling the goods of that kind. |
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What are the rights of abuyer of Consumer goods?
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If purchased at a garage sale or other consumer to consumer transaction, buyer takes free of SI.
Must buy 1. w/o knowledge 2. for value 3. primarily for personal, fam, or household use 4. b4 filing of a financing statement |
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How can a creditor get priority over a mortgagee for a fixture?
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fixture filing
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What is the rule and the exception to fixture filing with PMSIs?
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Generrally if the SI in the fixture is PMSI= priority as long as filed w/n 20days.
Exception is a construction mortgage. This is a mortgage that secures an obligation incurred for the construction mortgage of an improvement in land. This trumps PMSI in a fixture |
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What rights does a secured party have upon default?
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A secured party may reduce claim to judgement, foreclose, or use any avialable judicial proceeding.
A secured party also has the right to reposes tangible collateral if it can be done w/o breach of the peace. |
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Does the debtor have a redemption right?
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Yes, debtor may redeem by paying the amt of obligation, including interest, reasonable expenses and attorney fees caused by default.
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When must debtor exercise redemption rights?
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B4
1. collateral has been collected 2. Secured party has disposed of or entered K to dispose of collateral 3. Secured party has accepted collateral in full or partial satisfaction of the obligation. |
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When may a debtor waive his right to redeem?
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May waive by agreement after default and may not waive if consumer goods.
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When is a sale after default considered commercially reasonable?
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if made in the usual manner of recognized market
at price current in recognized market otherwise in conformity with reasonably commercial practices. |
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Must debtor be notified of the sale?
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Yes, debtor and any secondary oblogor must be notified unless collateral is perishable, or may decline quickly on value, or is of a type customarily sold on the market
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What must be included in the notice if it is a consumer goods transaction?
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1. description of any liability for a deficiency
2. telephone number the debtor can call to get amt required to redeem 3. telephone number and mailing address frm which additional info is available |
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How can a secured party acquire the interest of the debtor without conducting a sale?
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Strict Foreclosure.
- May be conducted if the debtor consents or does not object to the forclosure w.n 20 days of notice. - Notice must be sent to any person with an authenticated claim of interest. any other secured party who held a perfected security interest at least 10 days before the debtor consented to the sale and any other person who holds a subordinate interest in the collateral. |
