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59 Cards in this Set

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5 things covered by Article 9
1. accounts
2. chattel paper
3. payment intangibles
4. promisory notes
5. commercial consignments
security interest
it's a right to collateral

PMSI - where creditor sells the goods to the debtor on credit, retaining a security interest in the goods, or creditor advances funds used to purchase the goods
consumer goods
KEY: family use
farm products
crops, livestock, etc. in hands of a farmer
good held for sale or lease
goods used in business - long term

Also note:
- primary use test
- original use test
- general use rule (i.e. no changing in one person's hands)
- farmer exception to gen use rule
- software, embedded test
Art. 3, UCC - money paper, or a promissory note, transferred by indorsement and delivery
Art. 7, UCC - includes only the following:

1. warehouse receipts
2. bills of lading
3. delivery order

no other docs! term of art!
right to payment - with no writing, or insufficient writing to be an instrument, or chattel paper.

excludes deposit accts, health care insurance receivables and investment property

includes credit card debt
deposit accounts
accts maintained with a bank
health care insurance receivables
right to pymt, under insurance, for health care goods or services provided
chattel paper
writing(s) evidencing 1) obligation and 2) security interest (i.e., I will pay you $1 a month for this tie, and if I default, you get tie back)
electronic chattel paper
chattel paper evid by info stored in an electronic form
letter of credit right
rt to pymt under a letter of credit. Excludes the rt to draw on a letter of credit
commercial tort claims
tort claims filed by a business that arose out of business (excluding personal injuries).

Reqs specificity.
No "after-acquired tort clauses"
general intangibles
anything else! Catchall term for non-goods (patents, Tm, goodwill, liquor licenses, taxicab medallions)
investment property
certificated securities - held by you in paper form

uncertificated - held by you in electronic form
2 types
whatever is acquired upon disposition of collateral (it is collateral that has changed in form) ***security interests generally continue in proceeds
Nothing is in proceeds by itself, it's always proceeds plus one of the 15 cats above
Usually, one of four things:
a) Accounts
b) Instrument
c) Chattel paper
d) Cash (never an initial kind of collateral, doesn't make sense)
definition, then usual 4 types
3 steps between debtor and creditor
1. creation
2. attachment
3. perfection
creation - ways to establish
possession OR
security agreement
giving up the object to the creditor (like a pawn shop, where you give up ring for $)
security agreement
when you want to borrow $ but can't give up possession (say, equipment in a restaurant)
a) Authenticated record (written or elec stored), b) Signed by debtor (or marked electronically),
c) Describing collateral.

d) Control (if collateral is one of below, then the sec agmt may be evid by control):
i) Deposit acct ii) Electronic chattel paper
iii) Letter of credit right
iv) Investment property
2 reqs for attachment
1. secured party must give value
2. debtor must have rts in the collateral
execeptions to need for debtor rts in collateral
i) Ten day rule for add'l security for consumer goods
ii) Commercial tort claims
after-acquired property clause
btor acquired an interest in the property (eg chair seller - collateral will be sold, so you do agmt w/existing chairs and future chairs as collateral for present loan)
future advances clause
- ok - present collateral for a future loan; no attachment until the secured party gives value (collateral serves as security not just for present obligation, but for advances the creditor makes to the debtor in the future)
5 methods of perfection
1. filing
2. possession
3. control
4. automatic
5. temporary
filing (how to file, and what it's effective for)
effective to all kinds of collateral except deposit account and money (except as to proceeds)

1. file financing statement
2. in the location of the debtor
3. lasts for 5 years
info in the filing statement
Includes names, addresses and descriptions of the collateral
1. Names - name of debtor req'd; signature not. Trade name of debtor is insufficient.
2. Addresses - if filing office accepts w/out addresses, it is still effective
3. Description - supergeneric (ie "all assets") is effective (but not for a security agreement). TEST: is it seriously misleading? If yes = ineffective. The name is sufficient if it would be found using the filing office's search logic.
3 things
where is the financing stmt filed?
1. generally, central filing w/ the secretary of state.

2. local filing for real estate transactions

1. Registered orgs - state where organized
2. If individual - stat of indiv principal's residence
3. If org with one place of business - that state
4. If org w/ more than one place of business - state where chief exec office is located
possession - cannot perfect...(5 things)
accounts, deposit accounts, elec chattel paper, letter of credit rts, and general intangibles
control - applies to 3 categories
1. deposit accts
2. letter of credit rts
3. investment property
3 types
control & deposit accts
control is the exclusive method of perfection of deposit accts. Bank agrees that it will act on secured party's instructions w/out any further debtor action
control & letter of credit rts
control occurs when issuer of letter consents in writing to assnmt of the proceeds
control & investment property
analagous to commercial paper
i) Certificated security - bearer: secured party needs possession. Registered: needs possession plus indorsement
ii) Uncertificated security - secured party must be registered as owner, or owner acknowledges he is holding for secured party, or issuer agrees he will comply with the secured party's instructions
iii) secured party must be entitlement holder, or intermediary agrees it will comply with his orders
automatic - 4 security interests that are perfected when they attach
a) PMSI in consumer goods
b) Assnmt of accts, healt care insurance receivables or pymt intangibles
c) Sale of pymt intangibles or promissory notes d) Security interests in invstmt property
4 months -
- if goods and debtor move to diff state
- org chgs its name (not a new legal entity)

20 days
- for proceeds, instruments, negotiable docs and certificated securities
same office rule
The security interest in proceeds will continue to be perfected beyond the 20 days if:
- The security interest in the org collateral was perfected by filing a financing stmt, and
- a security interest in the type of collateral constituting the proceeds would be filed in the same place as the financing stmt for the orig collateral, and
- the proceeds were not purchased with cash proceeds of the collateral
cash proceeds rule
The security interest in proceeds will continue to be perfected beyond the 20 days if the proceeds are identifiable cash proceeds
The security interest in proceeds will continue to be perfected beyond the 20 days if (3rd way)...
the security interest in the proceeds s perfected w/in the 20 day period
Secured party v. lien creditor
KEY is perfection! (20 day grace period for PMSI). Ask - did creditor perfect? If Y, he wins!
unperfected secured party v. purchaser
buyer prevails, takes free of claim of unperfected secured party
Consumer purchaser to consumer purchaser
garage sale - purchaser prevails (takes free of claim of secured party) unless filing. Automatic perfection is ineffective.
business purchaser
Secured party prevails. Automatic perfection is effective.
BIOC (purchaser from a business)
Purchaser wins even if filing by secure party! Same rule for purchase of software - you take free of claim of secured party of licensor
HDC Rule
HDC (holder in due course) takes free of personal defenses and claims (even over earlier perfected security interest)
Future advances (may not need to know)
gen, if a creditor makes a future advance, the time of perfection of it relates back to the time of perfection of orig advance. However, buyer or lessee not in the ord course of business can gain priority over a secured party who makes a future advance on collateral after the buyer purchases the collateral
secured party v. secured party - gen rule, and exceptions
first to file or perfect
1. PMSI - (and chattel paper or instruments proceeds) - notice, no grace
2. PMSI - equipment (and proceeds) - grace, no notice
3. purchaser of chattel paper (with possession) takes over non-possessory secured party as proceeds of inventory
secured party v. secured party, re: investment property
secured party with control prevails over secured party who filed
secured party v. secured party,
priority of proceeds
1) Filing collateral - secured party would normally achieve priority by filing a financing stmt (goods, accts, commercial tort claims, gen intangibles, nonnegotiable docs)
2) Nonfiling collateral - secured party would normally achieve priority by possession or control, rather than filing (chattel paper, deposit accts, neg docs, instruments, and investment property)

very confusing rule - see outline
personal property that becomes real estate by affixation

Gen, first to file or record prevails.
Exception: PMSI secured party who makes fixture filing w/in 20 days will prevail over prior real estate filing
Exception to exception: a construction mortgagee prevails so long as recorded before the goods became fixtures, and goods became fixtures before the completion of construction
added value to personal property (motor to car)
a) Exception: if accession became part of whole asset subj to cert of title law (automobiles), the security interest in the whole (car) has priority over the security interest in the accession
rights upon default
1. collection and enforcement by secured party
2. possession and disposition by secured party
3. noncompliance
4. acceptance of collateral in full (or partial) satisfaction (strict foreclosure)
5. application of proceeds of sale
collection and enforcement by a third party
i. Secured party gets rts against debtor, and any other person obligated to make pymt
ii. Collection rt of secured party - w/ nongoods collateral (eg, accts), where agreed, the secured party is entitled to notify the acct debtor to make pymt to her rather than the debtor in default
possession and disposition of secured party (2 pts of each)
possession - self-help (w/out breach of peace), replevin (sequestration)

disposition - commercial reasonableness, form of notification (to whom, contents - nonconsumer goods v. consumer goods)
i. Liability for dmgs (lpuse $500 for each noncompliance)
ii. If consumer goods - statutory - 10% of purchase price, and all interest chrgs to be paid over the life of the loan. Some juris say can't have deficiency; others allow but creditor must prove $ due
Acceptance of collateral in full (or partial) satisfaction (strict foreclosure) in nonconsumer goods cases
parties can agree to vol turnover in ret for an agreed credit against the debt w/ the debtor acknowledging remaining deficiency
Acceptance of collateral in full (or partial) satisfaction (strict foreclosure) in consumer goods cases
parties can agree to vol turnover in ret for full satisfaction only
application of proceeds of sale
1. Expenses
2. Satis of obligation secured by security interest (1st mortgage)
3. Satis of obligation secured by subordinate security interest (2nd, 3rd, 4th mortgage)
4. Debtor or trustee