Secured Transactions

Front 1

When does a consignor need to comply with Article 9?

Back 1

1. $1000 or more,
2. Consignor (store guy) did not use goods for household purposes, and
3. Potentially Deceptive:
a. Deals with goods of that kind under a name other than owner,
b. not auctioneer, and
c. Not known by creditors to be substantially engaged in consignment

Front 2

When is a purported lease really a sale covered by Art. 9?

Back 2

1. Lessee cannot terminate lease, and
2. Lease term is same or longer than economic life,
Lessee owns at end of term, OR
Lessee can buy for nominal consideration

Front 3

What is chattel paper for purposes of classification as collateral?

Back 3

Promissory note, AND
Security interest

Front 4

Money is not typically collateral, but if the money is from proceeds it can be collateral.

Back 4

NA

Front 5

What is required for attachment?

Back 5

1. Value
2. Security Agreement, AND
3. Rights for debtor in collateral

Front 6

When can you have an oral security agreement?

Back 6

When collateral is in creditor's possession (e.g. pawn)

Front 7

What is required for an authenticated record security agreement?

Back 7

1. Written/electronic signed agreement
2. REASONABLY DESCRIBE collateral


Consumer goods - "All my consumer goods" not good enough

Front 8

How long is an after acquired property clause valid for in a CONSUMER GOODS context?

Back 8

10 days

Front 9

What is required to be present in a financing statement?

Back 9

1. Names
2. Addresses
3. Debtor's authorization in authenticated record
4. Description of collateral

Front 10

When are errors excused in a financing statement?

Back 10

When not "seriously misleading"

Front 11

What is the grace period where a creditor stays perfected against subsequent creditors when debtor changes name?

Back 11

4 months. During that period, perfection continues, but not collateral acquired after 4 months.

Front 12

How long is a financing statement good for?

Back 12

5 years, UNLESS fixture (continues until mortgage ends)

Front 13

When should a continuation statement be filed to continue perfection after financing statement expires?

Back 13

Within 6 months before 5 year expiration.

Front 14

When must a termination statement be filed?

Back 14

CONSUMER GOODS - Creditor must file the earlier of:
1. 20 days after demand, oor
2. 1 month after secured obligation ends


NON-CONSUMER GOODS: only within 20 days of request, not automatic

Front 15

When is a creditor automatically perfected?

Back 15

PMSI for CONSUMER GOODS

Front 16

When does a creditor get automatic temporary perfection?

Back 16

20 days for:
1. Proceeds
2. Instruments/Negotiable (w/ new value)
3. Delivery of instrument to debtor for exchange or presentation

Front 17

What is the general rule on multi-state transactions and what are the exceptions?

Back 17

Rule: Use law of state where debtor is located

Exceptions:
1. SIs perfected by possession
2. Fixtures
3. Title items
4. Deposit Accounts

Front 18

What happens if debtor or collateral changes states?

Back 18

Perfected for 4 months, and possession & title continues automatically.

Front 19

Secured creditor wins over unsecured, even if not perfected.

Back 19

NA

Front 20

Who wins in secured vs. secured?

Back 20

Both unperfected - first to attach

One creditor perfected - perfected wins

Both perfected - First to file OR perfect
(Doesn't matter who attached or had a security agreement first)

Front 21

Who wins in PMSI in GOODS vs. anyone?

Back 21

PMSI wins if perfected at the time within 20 days of debtor receiving possession.

Remember that PMSI is perfected automatically as soon as attachment happens for CONSUMER goods.

Front 22

Who wins in PMSI in INVENTORY vs. anyone?

Back 22

PMSI wins if:
1. PMSI is perfected when debtor receives possession (NO 20 DAY GRACE PERIOD) AND
2. Notice to conflicting interest holders BEFORE debtor receives possession.

Notice good for 5 years.

Front 23

Who wins in secured party vs. purchaser?

Rule: Secured creditor wins, unless debtor has permission to sell

Exceptions?

Back 23

Unperfected at time of purchase:
1. Value
2. Buyer gets delivery, and
3. NO knowledge of security interest


PMSI exception: 20 day grace period from when debtor receives collateral.


Buyers in Ordinary Course:
another card

Consumer purchases of Consumer Goods:
another card

Front 24

What is the Buyers in Ordinary Course exception for secured creditor vs. purchaser?

Back 24

1. Good faith (reasonable commercial standards)
2. No knowledge of VIOLATION
3. Purchase of goods
4. Seller IN THE BUSINESS of selling that kind of goods
5. SI from immediate seller
6. Creditor not perfected by possession

Front 25

What is the Consumers Purchase of Consumer Goods exception for secured creditor vs. purchaser?

Back 25

Purchaser wins if:
1. consumer buys from consumer for value
2. with no knowledge of security interest, and
3. Creditor has not filed and not perfected by possession.

Front 26

A holder in due course wins over earlier perfected SIs in a negotiable instrument.

Back 26

NA

Front 27

Who wins in secured creditor vs. lien creditor?

Back 27

Unperfected when lien attached = lien creditor, unless PMSI and perfects within the 20 day grace period.

Perfected when lien attached = secured creditor

Front 28

Who wins in secured creditor vs. mechanics lien?

Back 28

Mechanics lien wins if:
1. Mechanic provided services on the collateral,
2. ORDINARY course of business, and
3. Collateral in POSSESSION of mechanic.

Front 29

Who wins in secured creditor (fixture) vs. real property mortgage holder?

PMSI special rule?

Back 29

Secured party wins if:
1. Perfected BEFORE mortgage recorded, AND
2. Perfected with fixture filing
-describes property and filed in office where mortgage is filed



Exception for PMSI - secured creditor can still win if perfected after the mortgage if:
1. PMSI got fixture filing
2. within 20 days of becoming a fixture, AND
3. opponent NOT construction mortgage

Front 30

What is the limitation on repossession?

Back 30

Cannot breach the peace

Creditor can resell collateral and sue for deficiency/give surplus to debtor, or strict foreclosure by keeping collateral and calling it square

Front 31

What are the rules on sale of collateral by creditor?

Back 31

Notice required including:
1. Parties
2. Collateral
3. Method of sale
4. Entitled to accounting
5. Time and place of sale
6. If CONSUMER GOODS, also must say:
a. Debtor liable for deficiency
b. Contact info for redemption


Notice must be reasonable time before sale (10 days in commercial).

Methods must be commercially reasonable.

Front 32

When does debtor have right to redeem following decision to resell?

Back 32

1. Not sold
2. Not strict foreclosure
3. No waiver AFTER DEFAULT
4. Pay ALL obligations & expenses

Front 33

What are the penalties for failing to comply with resale requirements?

Back 33

Actual damages, and
Consumer goods - interest + 10% principal, and bar to recovery of deficiency

Nonconsumer - rebuttable presumption value of collateral = debt

Front 34

Can strict foreclosure only partially satisfy debt?

Back 34

Consumer - no
Nonconsumer - yes

Front 35

Does consumer get choice regarding strict foreclosure?

Back 35

Must obect within 20 days of notice of strict foreclosure.

Front 36

Any situations when you can't do strict foreclosure besides objection by debtor or other creditor?

Back 36

CONSUMER GOODS ONLY: Debtor has paid at least 60% of price.

Resale required within 90 days