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35 Cards in this Set
- Front
- Back
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Where UCC Art 9 applies: |
(a) any transaction regardless of form that creates security interest in personal property or fixtures by k; (b) agricultural liens; © sales of accounts receivable, chattel paper, negotiable instruments, promissory noted and payment intangibles; (d) consignments; and (e) certain lease-purchase agreements.
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Types of Collateral
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(a) goods: all things movable at time security interest attaches; (1) consumer goods; (2) inventory; (3) farm products; and (4) equipment; (5) fictures: goods that become so related to particular real estate that an interest in those goods arises under real property law (subordinate to conflicting interest in the real property); (6) Accessions: goods that are physically united with other goods in such a manner that the identity of the original goods is not lost (if SI perfected when collateral becomes accession, then it remains perfected); (7) commingled goods: pysically united with other goods in such a way that their identity is lost in a product or mass (if SI perfected before becomes commingled goods then the SI that attaches to the ommingled mass is perfected.
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(b) tangible intangibles:
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(1) instruments: negotiable instruments; doesnt include investment securities; (2) documents: bills of lading, dock warrants and receipts, warehouse receipts; (3) chattel paper: record evidencing both menotary obligation and security interest in or lease of specific goods
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© intangible intabgibles:
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(1) accounts
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The Security Interest:
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written security agreement (or by possession, delivery or control) plus attachment of the SI to the collateral
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(a) Security Agreement:
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must be in writing and (1) contain granting clause; (2) description of collateral (must reasonably identify); and (3) be authenticated by debtor (either signing a written document (or some signing substitute) with the present intent of the authenticating person to identify the oerson and adopt or accept a record.; (4) Possession: No security agreement necessary (just requires oral agreement that the secured party is to to have a security interest); (5) Control: SA may be evidenced by control of deposit accounts, electronic chattel paper, investment propertym or letter of credit rights, and secured party has control over cllateral; (6) Validity: generally effective between the parties, against purchaseres of the collateral, and against creditors.
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(b) Attachment:
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once made all enforcement rights of art 9: attachment when all of following exist simultaneously: (1) secured party gives vlue; (2) debtor has rights in collatersl or power of transfer rights in collateral to a secured party; and (3) debtor has authenticated a security agreement that sufficiently describes the collateral (reasonably identifies collateral, or if collateral is consumer goods in consumer transaction must be more specific)
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After Acquired Collateral:
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SA can provide for interest in AAC (automatic in inventory agreement) (cant provide that it cover AAC consumer goods unless debtor acquires rights in consumer goods within 10 days of secured party giving value)
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Disposition:
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continues regardless of sale, lease, or other disposition unless secured authorized disposition free of SI; automatically extends to identifiable proceeds of collateral.
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Purchase Money Security Interest (PMSI):
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(A) as all or part of price of collateral; or (B) for value given to enable to acquire right in or the use of the collateral, if the value is in fact so used.
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Production Money Security Interest:
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NC production money crops-new value given to allow debtor to produce crops, if value in fact used for production of crops.
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© Perfection:
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if it has attached and perfected, before attachment then perfect upon attachment; (a) Law governing perfection: generally where debtor located: (1) individual debtor at residence; (2) org st either debtor's place of business if only one, or chief executive office if more than one; (3) registered org under state law (located in state of organization); or (4) registered org under fed law (in state tha us law designates, or DC); (5) posessory si in collateral: where located.
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(b) Methods of Perfection: (1) filing:
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in right gov office (not effective for deposit accounts (control), letter of credit rights (control), or money requires possession);
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(2) Possession:
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only when tangible: (a) negotiable instruments; (b) goods; © instruments; (d) money; (e) tangible chattel paper....not permitted in (a) accounts, (b) commercial tort claims. © deposit accounts, (d) investment property, (e) letter of credit rights, (f) letters of credit, and (g) oil gas and other minerals before extraction...secured party who has taken possession must use reasonable care in its custody and preservation.
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Control:
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(1) investment securties, (2) letter of credit rights, (3) deposit accounts; and (4) electronic chattel paper.
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Automatic perfection (a) permanent:
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PMSI in consumer goods automatic as soon as SI attaches and remains permanently effective...doesnt apply to property subject to cert of title sattte or fixtures even if consumer goods; also occurs when (1) assignment of accounts or payment intangibles not a significant amount of outstanding accounts or payment intangibles; (2) sale of payment intangible or promissory note; (3) assignment for the benefit of all creditors of the trasnferor and subsequent transfers by the assignee; (4) si created by assignment of a beneficial interest in decedent's estate; and (5) sale by an indv of an account that is a rigth to payment of winnings in a lottery or other game of chance.
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(b) Temporary:
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SI attaches to any identifiable proceeds of collateral upon disposition...perfected in proceeds unless SI specifically says otherwise; continues for only 20 days after attachment unless (1) filed financing statement covers original collateral, proceeds are collateral which may be perfected by filing; and proceeds not acquired w cash proceeds; (2) the proceeds are identifiable cash proceeds; or (3) SI in proceeds is otherwise perfected when SI attaches to proceeds or within 20 days thereafter.
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PMSI relation back:
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IF FS is filed within 20 days after debtor receives delivery of collateral, perfection relates back to the date the security interest attached upon debtor's receipt of collateral.
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(d) Financing Statement:
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(1) NC has notice filing which requires a filing that provides notice that a person may have an SI in collateral indicated; SA itself not required to be filed; (1) necessary info: (a) name, (b) name of secured, and © description of collateral (reasonably identifies what's described or indication that FS convers all assets or personal property); less specific than SA; (d) after acquired property and future advances...perfects either as long as sufficiently broad to cover them even if not mentioned specifically; (2) Authorization of financing statement: must be authorized by debtor, SA authorization for financing statement whether it says so or not; (3) Special rules for fixtures: filing must contain info required in FS, indicate that it covers fixtures, indicate that its to be filed in real pro records, provide description of real property for which fixture is related, and if debtor doesnt have interest of record in real property, provide name of record owner.
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Acceptance and Effectiveness of Financing Statement: (a) rightful rejection:
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must refuse to accept if (1) record not comm by authorized method; (2) filing fee nor paid; (3) debtor's name not provided; (4) amendment that doesnt id initial financing statement or id's one whos effectiveness has been lapsed; (5) real property description insufficeient; (6) secured partys name or address ommitted; (7) debtor's address and status as an indiv or org are not provided; or (8) if org: FS doesnt provide type or jurisdicition of org or org ID number;
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(b) wrongful rejection:
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if not rejected for reason above filing stil leffective except against purchaser of collateral that gives value in reasoable reliance on absence of the recors; © errors or ommissions in FS: effective unless makes FS seriously misleading...not seriously misleading if search under office's search process using correct name would reveal financing statement.
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Changes that affect effectiveness: (a) Name change:
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if debtor changes name resulting in FS that is seriously misleading, FS will only be effective to perfect SI in collateral acquired within 4 months of name change, unless amendment correcting filed within 4 months of name change; (b) Debtor's change of address: perfected SI remains effective in j where debtor located until earliest of (1) time perfection wouldve cease under the law of j; (2) expiration of 4 months after debtor moves to another j; or (3) expiration of one year after collateral is transferred to new debtor in different j.; © Possessory SI: continuously perfected if (a) collateral located in one j and subject to SI perfected under that j's law; (b) collateral later brought into another j; and © SI then perfected under law of other j.
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Period of Effectiveness of filed FS:
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5 YEARS; continuation statement must be filed within 6 months of expiration of 5 years, can be filed repeatedly.
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Priorities:
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(a) generally first in time first in right; (b) among unperfected: first SI to attach prevails; © perfected prevails over unperfected; (d) between 2 perfected: earliest time of filing or perfection without interruption prevails, if chattel paper or instrument, party who perfects by possession takes priority over secured party who perfects bu filing.; (e) production money security interest: priority over all if (1) si is perfected by filing when new value is first given to enable debtor to produe crops; (2) production money secured party sends authenticated notice to conflicting SI interest holders between 10 and 30 days before new value given; and (3) notice states that secured party expect to acquire a production money security interest.
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Second in Time, First in Right:
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perfected PMSI and identifiable proceeds will prevail over conflicting SI if the PMSI is perfected when debtor receives possession of the collateral or within 20 days after; (a) when its inventory, secured party must take additional steps: priority over si in same inventory, chattel paper, or instrument constituting proceeds, and idenfiable cah proceeds if : (1) pmsi perfected when debtor receives possession of inventory; and either (2) (a) if the holder of the conflictin si filed a FFS covering same inventory before PMSI was perfected by filing; (b) or before beginningg of 20 day period, PMSI party sends authenticated ntoification to holder of conflicting interest stating that it has or expects to obtain PMSI in inventory and describes it, and holder of conflicting SI receives notificaton within 5 years before debtor takes possession.
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Conflicting PMSI's:
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PMSI securing price of collateral (in favor of seller) prevails over PMSI that secures a loan, and in all other cases first in time, first in right.
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Contests w/ Lien Creditors:
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(a) first in time first in right generally applies; secured party has priority over lien credito if (1) perfection before lein credit interest ariss; or (2) files FS and evidences SA (by authentication, possession, or control) before lien creditor's interest arises; (b) PMSI: if perfected within 20 days after debtor receives collateral, PMSI will take priority over an intervening lien credior whose rights arise between time SI attaches and time of filing.
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Accessions:
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physically united in such a way that physical id of original goods not lost; SI and perfection continue after accession; first in time first in right except that SI in accession is subordinate to SI in the whole that is perfected by compliance with certificate of title statute (autombiles usually)
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Commingled Goods:
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physically united in such a way that their identity is lost; SI attaches to product that results; if SI perfected before collateral becomes commingled, then perfected as to product that results; perfected before has priority over competiting si that was unperfected at time they became commingled; multiple perfected SI's in commingled will rank equally in proportion to value in collateral t the time of commingling.
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Buyers vs. Secured Parties:
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(a) generally si survives sale; (b) exceptions: secured party consent or (2) if buyer is buyer in ordinnary course of business (who buys in good faith, without knowledge, and in ordinary course from person in business of selling goods of that kind); buyer of consumer goods; buyer of chattel paper; buyer of an instrument; or buyer who takes delivery.; (3) Consumer-consumer exception: applies only when a person buys goods from a person who used or bought goods primarily for personal, family, or household use: without knowledge of security interest; for value; primarily for buyer's personal, family, or household purposes; and before the filing of FS covering the goods.
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Future Advances:
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(a) Competing SI: (1)generally SP takes subject to all advances secured by competing SI having priority; (2) if SI perfected only automatically or temporarily and advance is not made purusant to a commitment entered into while SI was perfected by another method, advance will have priority from date its made.; (B) Lienholders: SP's previously perfected SI in collateral and all future advances made pursuant to that interest have priority over lienholder whose interest attaches after SI perfected.
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Proceeds:
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time of filing of perfection of si also time of filing or perfection of proceeds; priority w conflicting SI in deposit accounts, investment property, letter of credit right, chattel paper, negotiable documents, or instrument also has priority over conflicting si in proceeds if: (a) SI in proceeds perfected; (b) proceeeds are cahs or of same type as collateral; © and in the case of proceeds that are proceeds of proceeds, all intervening proceeds are cahs proceeds, proceeds of same type as collateral, or an account relating to collateral; if perfected by method other than filing, priority at time of filing rules.
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Special rules for fixtures:
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must file fixture filing, generally first in time first in right, in order to get priority over mortgageee of real property; exceptions (a) PMSI in fixture; (b) readily removable fixtures; © a lien on real property; and (d) where owner consents in authenticated record.
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Default:
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upon default SP may reduce claim to judgement, foreclose, or otherwise enforce; SP's rights are cumulative and may be exercised simultaneously; right to repossess if can do so without breach of peace; (a) if collateral accounts receivable, instrument, chattel paper, SP may upon default notify person obligated on collateral to make payment to secured party; (b) right to redeem before: (1) collateral has been collected; (2) SP has disposed of collateral or entered into k for its disposition; or (3) SP has accepted collateral in full or partial satisfaction of obligation; Waiver can be made after default only; © disposition after default: (1) must be commercially reasonable: (a) usual manner of sale; (b) price recognized at market; or © otherwise in conformity w usual practices among dealers; (2) Notification to debtor and any secondary obligor, doesnt apply to perishables, debotr may waive after default; (3) effect of sale: (a) disharges subordinate SI or liesns; as long as transferee acts in good faith; trasnferee in bad faith takes subject to debtor's rightts in collateral and the SI in the collateral.
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Proceeds of Collection, Enforcement, or Disposition:
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(a) order of application: (1) reasonable expenses of ccollection..etc.; (2) satisfaction of sp; (3) satisfaction of subordinate si's liens; (4) surplus to debtor or deficiency unless underlying transaction is a sale of accounts, chattel paper, payment intangibles, or promissory notes; (b) Deficiency: difference between amount owed and proceeds received at sale; © commercially unreasonable sale: rebuttable presumption rule-deficiency can be reduced if commercially unreasonable to difference between outstading amoutn of loan and greater of the actual proceeds of sale or amount it woulve been sold for if commercially reasonable. |
