Secured Transactions

Front 1

Governing Law

Back 1

The Washington variety of UCC Article 9 governs security interests (SIs) in collateral for tangible and intangible goods.

Front 2

Collateral

Back 2

Tangible collateral includes inventory, equipment, consumer goods, and farm products. Intangible goods includes negotiable instruments, chattel paper, accounts, deposit counts, and tort claim collections.

Front 3

Mixed Use

Back 3

If an item has mixed use (personal and business) it’s predominant use prevails. Physical movement of equipment to home does not convert it a consumer good.

Front 4

Attachment

Back 4

Attachment establishes creditor’s (C’s) rights against debtor (D) and is necessary for secured party to repossess collateral or proceeds. It requires a valid security agreement (writing signed by debtor sufficiently describing collateral), D have rights to the collateral, and creditor gave value for interest. Attachment alone may not be sufficient if D has given SI to more than one C, if collateral has been transferred, or against bankruptcy trustee

Front 5

Perfection

Back 5

Perfection is necessary to protect C’s interest against 3rd parties. It requires attachment plus one of: possession, control, filing, mere attachment, or title certificate. Filing of a financing statement (does not have to be signed by debtor, identifies collateral—lower standard than SA) is at State Department of Licensing in Olympia. Filing gives constructive notice to all and is effective at time of filing.

Front 6

PMSI

Back 6

A creditor (C) is a PMSI if C sells a good in exchange for an interest in that good (collateral sale) or gives debtor (D) an enabling loan. PMSI for consumer goods perfects by mere attachment. PMSI C for equipment has 20-day grace period to attach by filing after delivery, and perfection relates back to date of attachment. PMSI C for inventory must give notice to other Cs before delivery goods to perfect.

Front 7

Dual-status

Back 7

is possible, meaning bank is PMSI for specific collateral and non-PMSI in after acquired property and working capitol loan.

Front 8

Priority Rules

Back 8

Attached Cs prevail over unsecured Cs. Perfected Cs have priority over unperfected. Between perfected Cs, first to perfect is first in right. A perfected PMSI has priority over other secured creditors. Bankruptcy trustee becomes perfected when filing petition in court and prevails over merely attached but not perfected.

Front 9

Bank

Back 9

A working capitol loan does not qualify C has a PMSI. Bank is attached to after acquired equipment and inventory (entered an SA with D, gave her the loan, and D has rights to store inventory and equipment). Bank is perfected (attached and properly filed FS) on XX.

Front 10

Consignment

Back 10

C who gives items on consignment has perfected interest in PMSI if gave notice to other Cs prior to delivery.

Front 11

Transfer to 3rd parties

Back 11

If D sells collateral to 3rd party, C’s still has SI in collateral unless 3rd party a retail buyer in the ordinary course. C also has SI in cash proceeds of sale. For non-cash proceeds, C only remains perfected for 20 days after sale; on day 21, C only has priority if FS covers proceeds. If no FS, still attached but not perfected.

Front 12

Bankruptcy

Back 12

Ds cannot give SIs to preferred creditors on the eve of bankruptcy--90 days before filing bankruptcy petition for regular creditors, or one year before for relatives. Once petition filed, automatic stay and all creditor action against collateral stopped (C must file motion for relief)

Front 13

Name change

Back 13

If D’s name is wrong on FS or D changes name, C has four months to file a new FS (and keeps its priority during that time), otherwise FS becomes ineffective. If new creditor files during time and old one doesn’t new creditor wins. Similarly, if D moves out of state, C has 4 months to file in new state.

Front 14

Remedies

Back 14

C (probably bank) can either keep the property (strict foreclosure) or conduct disposition sale. Bank has right of replevin to limited trespass (while keeping peace) to repossess goods. Strict foreclosure requires C give notice to all Cs, forego deficiency judgment, and conduct disposition sale if any C objects in 20 days. Disposition sale is non-judicial and C can obtain deficiency judgment. Bank must give 10 days notice to D and other Cs, and sale must be commercially reasonable. After sale, C reimburses itself for cost of sale, then pays himself amount owed, then junior creditors in priority order, then any excess back to D.