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40 Cards in this Set

  • Front
  • Back
Security Interest
an interest in personal property or fixutres that secures payment or performance of an obligation.
Purhase Money Security Interest (PMSI)
1. A creditor sells the goods to the debtor on credit, retaining a security interest in the goods for all or part of the purchase price; or
2. A creditor advances funds that are used by the debtor to purchase the goods.
PMSI generally
A PMSI exists if (i)credit was advanced or a loan was made for teh purpose of enabling the debtor to acquire the collateral, and (ii)the credit or oloan proceeds were actually used to acquire teh collateral.
Types of Collateral
1. Consumer goods: personal, household purposes
2. Farm Products: crops, livestock
3. Inventory: Goods that are leased or that are held for sale or lease.
4. Equipment: Goods that don't fit in the other three categories
*look at the primary use at the time the interest attaches.
Intangible or Semi-Intangible Collateral
1 Instruments (notes, checks)
2. Documents (warehouse rec.)
3. Chattel Paper
4. Accounts
5. Deposit Accounts
6. Investment Property
7. Commercial Tort Claims
8. General Intangibles.
Whatever is received upon the sale, lease, exchange, license, collection, or otehr disposition of collateral or proceeds.
*Insurance Payments and Claims for Damage are "proceeds"
An interest is nonenforceable unless it has attached.
Three Requirements for Attachment
1 Parties have an agreement that the security interest attach.
2. Value must be given by the secured party
3. Debtor must have rights in the collateral.
Agreement of Parties
1. Authenticated Security Agreement (w/ descrip. of collateral)
2. Creditor's possession of the collateral
3. Control of accounts, electronic chattel, etc.
After-Acquired Property
Security Interest may attach to AAP as soon as teh debtor acquires an interest in the property. Security agreement must include an after-acquired property clause.
Exception to After-Acquired Property
ineffective as to consumer goods unless debtor acquires rights int he goods within 10 days after teh creditor gives value.
**ineffective as to commercial tort claims.
Five Methods for Perfection
1. Filing
2. Taking posssession of collateral
3. Control
4. Automatic Pefection
5. Temporary perfection
Timing of Perfection
Must be attached first. If after acquired clause, you may file, but it will not become perfected until it attaches.
Filing a Financing Statement
Statement must include:
1. Name and address of debtor
2. Name and address of secured party
3. indication of the collateral
4. description of real property (if applicable)
Filing is effective
1. Five years (except utilities and aosme fixtures)
2. File continuation statement during last six months for another 5 years.
Automatic Perfection
1. PMSI in consumer goods when it attaches
2. Investment property (sometimes)
Temporary Pefection
1. Proceeds are perfected for 20 days from debtor's recept.
2. Thereafter tehy remain perfected if original collateral was perfected by filing and the same filing would work for the proceeds, the proceeds are identifiable cash procees, or the SI in the procees is perfected w/in the 20 day period.
Secured Party v. Secured Party
1. If unperfected - 1st to attach.
2. Perfected has priorty over unperfected
Perfected Secured Parties
General Rule - 1st to file or perfect; whichever is earlier. If one party perfected by filing and the other by possession, filing will winif filed before other perfected, even if perfection wasn't complete.
PMSI in Inventory
priority over confliting security interest int he inventory if:
1. PMSI is perfected at time debor gets possession of inventory, and
2. other secured party receives an authenticated notification of the PMSI before debtor receives inventory.
PMSI in goods other than inventory and livestock
Has priority over conflicting security interests if the interest is perfected before or within 20 days after the debtor receives possession of the goods.
Conflicting PMSI's
1. Sectured party who has a PMSI in collateral as a seller beats a lender.
2. Otherwise, first to file or perfect.
Purchasers of Chattel Paper
If a purchser of chattel paper in good faith gives new value adn takes possession of the chattel paper int he ordinary course of business, teh purchaser will have priority over
1. SI in chattel paper tah arises as proceeds of inventory
2. any other SI int he chattel paper, as long as no knowlege taht purhase violated rights of secured party.
Priority in Proceeds
General Rule - a perected SI in procees will have the same date of priority as a perfected SI in the original collateral, as long as perfection extends past the 20 day period.
Security Interest in Fixtures
General Rule - the first party to file a fixture filing or record its real property interest prevails.
Goodst hat become so attached or otherwise related to real property that an interest in them arises under real property law.
Fixture Filing
To gain priority over a holder of an interest in real property, a party with a security interest in a fixture must perfect by making a fixture filing.
Exceptions to Fixture Filing Rule
PMSI - secured party who makes a fixture filing within 20 days after affixation will prevail over a real proerty interest.
Readily Removable Collateral
A SI perfected in any manner authorized by the Code before affixation will prevail over real property interest if:
1. collateral is a readily removable machine
2. readily removable equipment
3 readily removable appliance (consumer good)
Secured Party v. Buyer or other Transferee
General Rule - a buyer of collateral takes free of a SI covering the collateral if she both gives value and receives delivery of the collateral w/o knowledge of teh SI before it's perfected.
Perfected Secured Party v. Buyer
Secured party wins unless:
1. Buyer in Ordinary Course of Business
2. Secured party consents to sale
3. PMSI in consumer goods.
4. Future Advances
Buyer in Ordinary Course of Business
takes free of a nonpossessory perfected security interest even if buyer knows. Requirements:
1. Seller is in business of selling goods of the kind
2. buyer takes free only of interests created by seller
3. knowlege doesn't matter.
Secured Party v. Holder in Due Course
Holder in Due Course had priority.
Priorities in a Nutshell
1. Buyer in ordinary course
2. Holder in due course
3. Transferee of funds from deposit account
4. certain purchsers of chattel paper
5. possessory lienhholders
6. Article 2 claimants with possession of goods
7. PMSI's
8. Perfected security interests.
9. Purhasers of collateral
10. Unperfected SI
11. Debtor
Right to Take Possession and Sell Collateral
Secured party may take possession by self-help w/o judicial process if she can do so w/o a breach of the peace.
Breach of Peace
If secured party breaches the peace, they lose the right to reposess and can be liable for damages.
Secured party can have public or private sale. Must comply with commercial reasonableness of teh method, manner, time, place and terms.
Must give reasonable notice to debtor. 10 days or more before sale.
Contents of Notice
1. Description of the debtor and secured party
2. Description of Collateral
3. Method of Sale
4. statemetn that the debtor is entitled to an accounting for the unaid indebtedness
5. Time and place of public sale or time after which a private sall will be made.
Strict Foreclosure
Debtor consents to strict foreclosure either by:
1. Agreeing to it in an authenticated record or
2. Failing to make an authenticated objection within 20 days of notice.