Secured Transactions-- Ky/mee 2009

Front 1

What is a security interest?

Back 1

A security interest is an interest in personal proeprty or fixtues that secures payment or performance of an obligation.

Front 2

What is the scope of article 9?

Back 2

Article 9 covers all kinds of contractual security interests in personal property and fixtures, including sales of accounts, chattel paper, payment intangibles, and promissory notes.

Front 3

What is necessary for a consignment to be an "article 9 consignment?

Back 3

A cosignor must comply with the following (article 9) to protect her interest in consigned goods against creditors of the consignee if:
1. The consigned goods are worth >$1000.
2. The consignor did not use the goods for personal, family, or household purposes.
3. The consignee is a person who a) deals in goods of that kind under a name other than the consignor's; b) is not an auctioneer; & c) is no generally known by her creditors to be substantially engaged in selling the goods of others.

Front 4

What is specifically not covered by article 9?

Back 4

1. Transactions governed by other law (fed,state,foreign)
2. Transactions involving interests or liens in land, except fixtures)
3. Assignments of tort claims other than commercial tort claims;
4. Assignments of deposit accoutns in consumer transactions (trans. in which an individual creates a security interest in proeprty bought or used for personal, family, or household purposes) except where such accounts that are proceeds of collateral.
4) State statutory or common law liens given for services or materials; and
5) assignments of claims for wages.
v)

Front 5

What is a PMSI?

Back 5

A Purchase Money Security Interest is a type of security interest in goods that has priority over all other security interests in the same goods if certain requirements are met. A PMSI arises when:
1) A creditor sells the goods to the debtor on credit and retaisn 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.

Front 6

What is the "dual status rule" for non-consumer goods retaining their PMSI status?

Back 6

A security interest in nonconsumer goods does not lost its status as a PMSI if:
1. The PM collateral also secures an obligation that is not a purchase money obligation.
2. Non-PM collateral also secures the PM obligation; or
3. The PM obligation has been renewed, refinanced, consolidated or restructured.

Front 7

What qualifies as "consumer goods" collateral?

Back 7

Goods used or bought for personal, family, or household purposes are consumer goods.

Front 8

What qualifies as "Farm Products" collateral?

Back 8

Crops, livestock, unmanufactured products of livestock, and supplies used or produced in farming operations are farm products if they are in the possession of or used by a farmer.

Front 9

What qualifies as "inventory" collateral?

Back 9

Goods that are leased or that are held for sale oro lease, goods that are furnished or to be furnished under a contract of service, supplies that are used in manufacturing, materials that are used up quicly or consumed in a business, and works in progress, are inventory.

Front 10

What qualifies as "equipment" collateral?

Back 10

Tangible goods that are not consumer goods, farm products, or inventory are equipment.

Front 11

How does one classify tangible collateral that has multiple uses?

Back 11

The categoy into which tangible collateral is placed does not depend on the nature of the collateral, but rather on the primary use to which the debtor puts the collateral at the time the security interest attaches.

Front 12

What is considered an instrument in the category of "intangible collateral"?

Back 12

Instruments are pieces of paper that repreasent the right to be paid money, and include promissory notes, drafts (checks), CD's, etc.

Front 13

What is considered a document in the category of "intangible collateral"?

Back 13

Documents are pieces of paper that rpresetn the right to recieve goods, and include bills of lading and warehouse receipts.

Front 14

What is considered chattel paper in the category of "intangible collateral"?

Back 14

Chattel paper is a record or records evidencing both a monetary obligation and a security interest in or a lease of sepcific goods, excluing the charter of vessels. If stored in an electronic medium, "electronic chattel paper"; if stored in a tangible medium, "tangible chattel paper"

Front 15

What is considered an account in the category of "intangible collateral"?

Back 15

An accoutn is any right to paymetn for goods, services, real property, use of a credit card, or lottery winnings that is not evidenced by an instrument or chattel paper.

Front 16

What is considered a deposit account in the category of "intangible collateral"?

Back 16

Deposit accoutns are accoutns maintained with a bank, such as savings or passbook accounts. Article 9 applies only to nonconsumer deposit accounts, unless such account is claimed as proceeds of other collateral.

Front 17

What is considered "Investment Property" collateral?

Back 17

Inestment property includes items such as stocks, bonds, mutual funds, and brokerage accounts.

Front 18

What is considered "Commercial Tort Claim" collateral

Back 18

Tort claims filed by organizations are commercial tort claims. Tort claims filed by individuals that arose out of the individual's business and do not involve personal injury are also commercial tort claims.

Front 19

What is considered "General Intangible" collateral?

Back 19

General intangibles include any intangible not coming w/in the scope of the definitions of other types of intangibles--Includes software, patent, trademark rights, copyrights and goodwill. A general intangible in which the principal obligation of one of the parties is the payment of money is also called a payment intangible.

Front 20

Under article 9, how are insurance payments and claims for damages categorized?

Back 20

If collateral is insured and moeny is recieved from the insurance company on account of loss or damage to the collateral, the money is a "Proceed" of the collateral, up to the value of the collateral, unless it is payable to someone other than the debtor or the secured party claiming it. Claims for damages or loss of collateral are "proceeds" of such collateral.

Front 21

What is required for "attachment" to take place?

Back 21

In order for attachment of a security interest to take place, the parties must have an authenticated security agreement, authenticated by the debtor, and reasonably describing the collateral, that provides that the security interest attach, value must be given by the secured party, and the debtor must have rights in the collateral.

In lieu of an authenticated security agreement, the secured party may take possession of the collateral, which will evidence a security agreement between the parties. If the collateral is a non-consumer deposit account, elect. chattel paper, or investment property, the security agreement may be evidenced by control.

Front 22

What are the rights and duties of a creditor in possession of collateral?

Back 22

a) Duty of reasonable care in storing and preserving collateral
b) Right to reimbursement for reasonable expenses incurred in preserving the collateral.
c) Risk of accidental loss or damage lies with the debtor to the extent of any insurance coverage deficiency
d) the secured party may hold as additional security any increase in value of or profits from the collateral except money. Money received from the collateral must either be given to the debtor or applies against the secured obligation.
e) The secured party has a right to repledge the collateral (use collateral as collateral for an obligation of the secured party).

Front 23

How does one "control" a non-consumer deposit account?

Back 23

If the secured party is not the bank in which the account is maintained (and would have automatic control), the secured party can obtain (a security agreement evidenced by control) control over a non-consumer deposit account by putting the deposit account in the secured party's name, or by agreeing in an authenticated record w/debtor and bank in which the deposit account is maintained that the bank will comply w/ the secured party's orders regarding the account w/out requiring the debtor's consent.

Front 24

How does one "control" Electronic Chattel paper?

Back 24

Control (a security agreement evidenced by control) of electronic chattel paper is obtained by the secured party acquiring the authoritative copy of the record or records constituting the Elect. chattel paper that identifies the secured party as the assignee of record of the chattel paper. Non-authoritative copies must be marked as such.

Front 25

How does one "control" Investment property?

Back 25

A secured party has control (a security agreement evidenced by control) of an item of investment property when the secured party has taken whatever steps are necessary to be able to have the investment property sold w/out further action from the owner/debtor.

Front 26

How does one "control" securities accounts?

Back 26

A creditor can take a security interest in such accounts by control if the owner of the account contacts the broker or mutual fund company and instructs the intermediary either that the secured party now has whatever right in the account that the owner has, or that the intermediary is to comply with the secured party's orders w/out further consent of the owner.

Front 27

What are the rights and duties of a secured party in control of collateral?

Back 27

A secured party in control must account for profits of the collateral, and she may also repledge the collateral.

Front 28

How may security agreements attach to after-acquired property?

Back 28

valid security agreement may create a security interest in property to be acquired in the future that will attach to the property as soon as the debtor acquires an interest in the property. Such an interest may be created by specifically including in the security agreement an after-acquired property clause.

Front 29

When is an after-acquired property clause invalid?

Back 29

An after-acquired clause is ineffective as to consumer goods other than accessions (goods attached to other goods) when given as additional security, unless the debtor acquires rights in the goods w/in 10 days after the creditor gives value; Additionally, an after-acquired property clause is ineffective as to commercial tort claims.

Front 30

What types of collateral permit perfection by filing?

Back 30

A security interest may be perfected by filing as to all kinds of collateral, except deposit accounts and money (unless such items are proceeds of the already-filed upon collateral)

Front 31

What must be included in a financing statement?

Back 31

The name and mailing address of the debtor; the nae and mailing address of the secured party; an indication of the collateral covered by the financing statement; and if the financing statement covers real property related collateral, the FS must also provide a description of the Real Property to which the collateral is related.

Additionally, a debtor must authorize the filing of a financing statement in an authenticated record at some time, even if it is after it is filing. If a debtor authenticates a security agreement covering the same collateral as the FS, this will be sufficient.

Front 32

What happens when a financing statement has a mistake in the debtors name?

Back 32

Minor errors in the debtor's name will not invalidate the financing statement, but the statement must not contain any seriously misleading errors. A "safe harbor provision" provides that if a financing statement would be discovered in a filing office search under the debtor's correct name, the incorrect name is not seriously misleading

Front 33

When is a registered organization's name seriously misleading so that a financing statement is invalidated?

Back 33

If a debtor is a registered organization, the debtor' name is seriously misleading if it does not match the name under which the debtor was organized. Use of the debtor's trade name is also insufficient.

Front 34

What happens to a financing statement when a debtor's name changes?

Back 34

If a debtor changes its name after a financing statement has been filed and the new name is seriously misleading, the financing statement is effective only against collateral acquired by the debtor before the name change and w/in 4 months after the change. The secured party must refile using the debtor's new name to perfect a security interest in collateral acquired after thefour-month period.

Front 35

What happens to a financing statement that is missing the addresses of the debtor or the creditor?

Back 35

If a financing statement that does not contain the debtor's or secured party's mailing address is accepted by the filing office, the financing statement is effective despite the missing addresses.

Front 36

What is a sufficient indication of collateral for a financing statement?

Back 36

A financing statement sufficiently indicates collateral if it identifies it specifically or identifies it by category, type, quantity, computational formula or any other method in which the identity of the collateral is objectively determinable. A supergeneric description "all assets" or "all personal property is permitted, though such descriptions are not permitted in security agreements.

Front 37

For how long is a financing statement effective?

Back 37

A financing statement is effective for 5 years; except:
Filing dealing w/ Transmitting utilities continue until terminated, and a recorded real property mortgage covering fixtures continues until the mortgage is released or satisfied.

Front 38

How may a secured party extend an about-to-expire financing statement?

Back 38

By filing a continuation statement during the last six months of the effective period of a prior filing --- This will continue the effectiveness of the filing for an additional 5 years.

Front 39

Must a financing statement include an after-acquired property clause if it covers after acquired property?

Back 39

The financing statement need not mention after-acquired property in order to perfect a security interest in such property if the description in the financing statement is broad enough to cover the after-acquired property. Perfection is intended merely to put a party on notice that there may be a security interest in the collateral, and further investigation may be necessary to disclose the full state of affairs.

Front 40

When must a secured party terminate a financing statement?

Back 40

If there in no outstanding obligation of the debtor and no commitment on the part of the secured party to make further advances, or if the debtor did not authorize the filing of the initial financing statement , the secured party must, on demand of the debtor, w/in 20 days, file a termination statement or provide one to the debtor. In the case of consumer goods, the secured party must file the termination statement w/in one month after there is no obligation or commitment, or w/in 20 days of the debtor's demand.

Front 41

How are security interests in motor vehicles for which certifications of title are issued perfected?

Back 41

Under the state's certificate of title law, security interests in motor vehicles required to be titled are perected by notation on the certificate of title issued by the state; perfection by filing or possession are neither required nor effective.

Security interests created by dealers in leased motor vehicles or motor vehicles held in inventory or sale or lease are perfected by filing under the ordinary code rules, even though a certificate of title covering the vehicle is outstanding.

Front 42

What types of collateral may not be perfected by (pledge) taking possession of the collateral?

Back 42

A security interest in accounts, certificate of title goods, deposit accounts, nonnegotiable documents, electronic chattel paper or general intangibles cannot be perfected by possession, even if tangibly represented; perfection by other means is required.

Front 43

When does perfection by possession occur?

Back 43

Where the secured party takes actual possession of the collateral, the security interest is perfected from the moment of possession, and continues as long as possession is retained.

Where collateral is in the hands of a bailee, the secured party is deemed to be in possession from the moment the bailee authenticates a record acknowledging that it is holding the collateral for the secured party's benefit.

Front 44

Security interests in what types of collateral may be perfected by control?

Back 44

Security interests in investment property, nonconsumer deposit accounts, and electronic chattel paper may be perfected by control.

Front 45

What types of security interests are perfected automatically?

Back 45

A PMSI in consumer goods (ONLY) is perfected as soon as it attaches.
Exception -- Motor vehicles -- Perfected only by notation on cert. of title; Fixtures need a fixture filing to obtain priority over encumbrancers of real property.

Additionally: Small scale assignments of accounts or payment intangibles; Sale of Payment intangibles or promissory notes; a security interest created by an assignment of a beneficial interest in a decedent's estate; in some circumstances-- Investment property.

Front 46

When is a security interest in investment property automatically perfected?

Back 46

1) The debtor is a securities intermediary; 2) If the debtor purchased the asset through a securities intermediary and has not paid the price, the intermediary has an automatically perfected security interest to secure the purchase price; 3) If one who deals in securities or similar financial assets purchases a certificated security from another such dealer under an agreement calling for delivery against payment, the person delivering the asset has an automatically perfected security interest.

Front 47

What is the rule for temporary perfection of proceeds?

Back 47

A security interest in proceeds from original collateral is continuously perfected for 20 days from the debtor's receipt of the proceeds. This security interest becomes unperfected on the 21st day after the debtor's receipt of the proceeds unless the statutory requirements are complied with. (same office rule)

Front 48

What is the rule for temporary perfection of collateral delivered to the debtor for disposition?

Back 48

Where a creditor has a possessory security interest in an instrument, negotiable document, certificated security, or goods not covered by a negotiable document in possession of a bailee, and makes any of the above available to the debtor on a temporary basis, perfection continues for 20 days, after which time the creditor must reperfect by filing or taking possession or lose his perfection.

Front 49

what is the "same office rule?"/ or how is perfection of a security interest in proceeds continued after the temporary perfection?

Back 49

If a secured party has a perfected security interest in collateral and the debtor sells, exchanges, or otherwise disposes of the collateral, the secured party has a temporarily (20 day) perfected security interest in whatever proceeds the debtor receives in exchange for the collateral. The security interest in proceeds will continue beyond the 20 days if: The security interest in the original collateral was perfected by filing a financing statement, a security interest in the type of collateral constituting the proceeds would be filed in the same place as the financing statement for the original collateral, and the proceeds were not purchased w/ cash proceeds of the collateral; the proceeds are identifiable cash proceeds; or the security interest in the proceeds is perfected w/in the 20 day period.

Front 50

Who has priority where there are two parties with unperfected security interests in the same collateral?

Back 50

If both security interest are unperfected, the first to attach has priority. There is little need for this rule b/c either party could obtain priority by perfecting their security interest first.

Front 51

Who has priority in a item of collateral where one party's security interest is perfected and the other party has a perfected security interest in the same collateral?

Back 51

Generally, a perfected security interest prevails over an unperfected security interest even if the perfected secured party takes her security interest w/ knowledge of the earlier unperfected security interest.

Front 52

Who has priority when both parties with an interest in an item of collateral both have perfected security interests?

Back 52

Where there are conflicting perfected security interest in the same collateral, priority goes to whichever party was the first to either file or perfect, whichever is earlier, provided that there is no period thereafter when there is neither filing nor perfection.

Front 53

What is the rule for priority in investment property?

Back 53

Generally,the first to file or perfect rule governs priority questions regarding investment property. However, a security interest perfected by control has priority over a security interest perfected by any other method.

Front 54

What is the "PMSI Superpriority" Rule?

Back 54

PMSI's enjoy a super-priority, meaning that they are superior to prior perfected security interests in the same goods if certain conditions are met. *PMSIs in Inventory, livestock have special rules. If the PMSI is in goods other than inventory or livestock, the PMSI will have priority over conflicting security interests in the same goods and their identifiable proceeds only if the interest is perfected before or w/in 20 days after the debtor receives possession of the goods.

Front 55

What is the rule for priority of PMSI's in inventory and livestock?

Back 55

PMSI in inventory:A PMSI in inventory has priority over a conflicting security interest in the inventory itself, proceeds that are chattel paper, proceeds that are instruments, and any identifiable cash proceeds that are received on or before deliver to a buyer if: The PMSI in inventory is perfected at the time the debtor gets possession of the inventory; and any secured party who has filed her security interest in the same inventory receives an authenticated notification of the PMSI before the debtor receives possession of the inventory, and the notification state that the purchase money party has or expects to take a PMSI in inventory of the debtor described by kind or type. The notification is effective for deliveries of the same type of collateral for five years.

Front 56

what is a consignor's interest in consigned goods?

Back 56

Under article 9, a consignor's interest in consigned goods is considered to be a PMSI in inventory.

Front 57

What is the rule for priority of a PMSI in software?

Back 57

A PMSI in Software arises if there is a PMSI covering both the software and the computer in which the software is to be used. Therefore, if the computer is inventory, the PMSI in software has super-priority if the PMSI in the computer has super-priority under the applicable rules for inventory. The priority of the PMSI in software will be the same as the the security interest in the computer in which the software is used (ie, if the computer is equipment, and the secured party has a PMSI in equipment, she will also have a PMSI in equipment for the software.

Front 58

What is the rule for priority of conflicting PMSI's?

Back 58

If more than one party has PMSI super-priority in collateral, the following rules apply: A secured party who has a PMSI in collateral as a seller has priority over a secured party who has a PMSI in the same collateral as a lender. Otherwise, the first secured party to file or perfect prevails.

Front 59

What is the rule for priority of chattel paper purchasers?

Back 59

If a purchaser of chattel paper in good faith gives new value and takes possession of the chattel paper in the ordinary course of business, or takes control of elect. chattel paper, the purchaser will have priority over:
1) a security interest in chattel paper that arises merely as proceeds of inventory, as long as the chattel paper does not indicate that it has been assigned to anyone other than the purchaser; and
2. Any other security interest in the chattel paper, as long as the chattel paper purchaser acquired its interest without knowledge that its purchase violated the right of the secured party.

Front 60

When does a purchaser of chattel paper have priority in the proceeds of chattel paper ?

Back 60

A purchaser of chattel paper has priority in the proceeds of chattel paper if either she would have had priority under the general rules of priority; or if the proceeds are the specific goods covered by the chattel paper or cash proceeds of the specific goods.

Front 61

When does a purchaser of an instrument have priority over a perfected security interest in the instrument?

Back 61

A purchaser of an instrument has priority over a perfected security interest in the instrument if the purchaser gives value and takes possession of the instrument in good faith and w/out knowledge that the purchase violates the rights of the secured party.

Front 62

What is the rule for priority in proceeds?

Back 62

The general rule: The first to file or perfect; a perfected security interest in proceeds will have the same date of priority as the perfected security interest in the original collateral, as long as the perfection of the security interest in the proceeds extends beyond the 20-day temporary perfection period. Recall that there are also special super-priority rules for proceeds of collateral subject to PMSI's.

Front 63

What is the rule for priority in proceeds of "non-filing" collateral?

Back 63

A secured party has priority in the proceeds of non-filing collateral if: she has priority in the original collateral; her security interest in the proceeds is perfected and the proceeds are cash proceeds or proceeds of the same type as the original collateral. If the proceeds are proceeds of proceeds, all intervening proceeds must either be cash proceeds or proceeds of the same type as the original collateral.

Front 64

What is the general rule of priority for "fixtures"?

Back 64

Generally, in a contest between a holder of a security interest in a fixture and a holder of an interest in the real proeprty to whcih the fixture is attached, the first party to file a fixture filing or records its real property interest prevails.

Front 65

What is a "fixture filing"?

Back 65

A fixture filing is accomplished by filign a financing statement in the office where a mortgage on the real property would be recorded. In addition for the usual requirements for a financing statement, a fixture filing financing sstatement must contain a description of the real property.

Front 66

What is the rule for a PMSI in a fixture?

Back 66

A PMSI secured party who makes a fixture filing w/in 20 days after affixation will prevail over a real property interest in the same fixture that was recorded prior to affixation, except where a construction mortgage was recorded before the goods became fixtures and if the goods became fixtures before the completion of construction.

Front 67

When is "fixture filing" not required for a fixture?

Back 67

A security interest perfected in any manner authorized by the Code before affixation will prevail over a real property interest if: 1) The collateral is a readily removable office or factory machine; 2) The collateral is readily removable equipment that is not primarily used or leased for use in the operation of real property; or 3) The collateral is a readily removable replacement of a domestic appliance that is a consumer good.

Additionally, if the real property encumbrancer consents to the security interest or disclaims its interest in the fixture in an authenticated records, the security interest (perfected or unperfected will prevail over the real property encumbrancer's interest.

If the Debtor has a right to remove fixtures as against the real property owner, the attached security interest has priority over the real property owner's interests.

Front 68

What is the rule for priority in accessions?

Back 68

The general rules for priority generally apply to accessions, unless the accession becomes a part of a whole that is subject to a security interest perfected by notation on a certificate of title, the security interest in the whole has priority over the security interest in the acession.

Front 69

Who has priority in collateral in a situation involving an unperfected secured party vs. buyer of collateral?

Back 69

A buyer of collateral or lessee of goods takes free of a security interest covering hte collateral if she both gives value and receives delivery of the collateral w/out knowledge of the security interest before it is perfected. However, if a secured party attaches a PMSI in the debtor's collateral before the buyer or lessee w/out knowledge pays value and receives delivery, the secured party will have priority over the buyer or lessee if she files w/in 20 days after the debtor receives the collateral.

Front 70

Who has priority in collateral in a situation involving a perfected secured party vs. buyer of collateral?

Back 70

Generally, a perfected security interest in goods is good against subsequent buyers. There are, however, some cases in which the buyer will defeat even a perfected prior security interest:
1. If the secured party consents to the sale of coll.
2. If the buyer is a "buyer in the ordinary course of business-- buyer takes free of a nonpossesory perfected security interest in the inventory, created by the seller of the inventory, even if the buyer knows of it, unless the buyer also knows that the sale is in violation of the terms of the security agreement.

Front 71

What is the rule for priority of a "buyer in the ordinary course of business?"

Back 71

If the buyer is a "buyer in the ordinary course of business" (meaning seller is in the business of selling goods of the kind)-- buyer takes free of a nonpossesory perfected security interest in the inventory, created by the seller of the inventory, even if the buyer knows of it, unless the buyer also knows that the sale is in violation of the terms of the security agreement.

Front 72

What is the "garage sale rule" for PMSI's in consumer goods?

Back 72

PMSI's in consumer goods are perfected automatically without filing. However, in such cases, if the buyer of the consumer goods in turn resells them to anohter consumer for personal, family, or household use, the 2nd buyer takes free of the security interest if he buys w/out knowledge of the security interest, for value and before a financing statement covering hte goods has been filed. Thus, the automatic perfection of a PMSI in consumer goods is lost against a consumer buyer unless the secured party files

Front 73

What is the rule for priority for buyer vs. Future advance creditor?

Back 73

Generally, if a creditor makes a future advance, the time of perfection of the future advance relates back to the time of perfection of the original advance.. However, a buyer or lessee not in the ordinary course of business can gain priority over a secured party who makes a future advance on collateral after the buyer purchases the collateral. Such a buyer has priority over a future advance made 1. After the secured party learned of the purchase or 2. More than 45 days after the purchase, unless the future advance was made pursuant to a commitment made w/out knowledge of the purcahse and before expiration of the 45 day period.

Front 74

What is the rule for priority in collateral where both a secured party and a holder in due course have an interest in said collateral?

Back 74

A HDC of a negotiable instrument, or a holder to whom a negotiable document of title hasbeen negotiated, or a protected purchaser of a security takes priority over any security interest in the negotiable instrument.

Front 75

What is the rule for priority in collateral: Secured party vs. Transferee of Money or Deposit Account Funds?

Back 75

If a debtor transfers money or deposit account funds by writing a check or making an electronic funds transfer to a person, that person takes free of any security interest in the money or funds, unless the transferee acts in collusion w/ the debtor in violating the rights of the secured party.

Front 76

Who has priority in collateral where one party is an Unperfected secured party and the other is a Judicial Lien Creditor?

Back 76

A judicial lien creditor prevails over a holder of a security interest in collateral if the lien creditor becomes such before the security interest is perfected, unless the security interest is a PMSI w/ an unexpire 20-day grace period; a PMSI filed w/in 20 days of the debtor receiving the collateral will have priority over a judicial lien creditor.

Front 77

When does a non-perfected but filed security interest take priority over a judicial lien creditor?

Back 77

If a secureed party files a security interest but does not attach before a judicial lien creditor 's interest arises, the secured party has riority over the judicial lien creditor as long as the secured party 1. evidences its security agreement with an authenticated security agreement, possession, or control, and eventually attaches and perfects its security interest.

Front 78

What is the rule for priority of a person with a possessory lien arising by operation of law?

Back 78

Article 9 provides that such possessory liens have priority over any security interests in the collateral as long as the goods or services were provided in the ordinary course of business and the collateral remains in the lienholder's possession, unless the lien is created by a statute that provides otherwise. Article 9 governs such liens only to the extent of priority.

Front 79

What is the rule for priority of a secured party v. an article 2 claimant?

Back 79

An article 2 claimant will have priority over a secured party who has a security interest in the same goods, as long as the article 2 claimant retains possession of the goods.

Front 80

Does article 9 define when default has occurred?

Back 80

Article 9 does not define the events that will trigger a default. Typically, the security agreement will provide that upon certain evens (failure to make timely payments;failure to maintain insurance on collateral;unauthorized transfer) the secured party may exercise default remedies. Default on an agricultural lien is determined by the lien statute.

Front 81

What are a seller's right on default?

Back 81

A secured party may take possession of and sell the collateral on default. The secured party may take possession by self-help w/out judicial process if she can do so w/out a breach of the peace. The secured party may also disable the property and dispose of it on the debtor's property if it is too large or difficult to move.

A secured party may also take possession by replevying the collateral pursuant to judicial process.

Front 82

What are the consequences of a secured party breaching the peace upon repossession of collateral?

Back 82

When a secured party breaches the peace, he loses the Code's authorization to repossess and may be sued for conversion and is liable for actual (and often punitive) damages.

Front 83

How may a secured party sell collateral after default?

Back 83

The general test as to validity of a sale is commercial reasonableness of the method, manner, time, place, and terms. A sale is commercially reasonable if it is done in the usual manner in a recognized market or at the market price in such a market at the time of sale.

Unless the collateral is perishable or threatens to decline rapidly in value, or is of a kind usually sold on a recognized market, reasonable notice that is authenticated by the secured party must be given to the debtor and any sureties on the debt. After default, the debtor or surety may in an authenticated agreement waive the right to notice of the sale.

Front 84

What is the required time in which pre sale notice must be given? What must the notice contain?

Back 84

Notice must be sent w/in a reasonable time before the sale; this is a question of fact. In a non-consumer transaction, 10 days or more prior to sale is deemed reasonable.

In the sale of collateral other than co\sumer goods, the notice should contain a description of the debtor and secured party; a description of the collateral; method of sale; a statement that the debtor is entitlted to an accounting for the unpaid indebtedness,and the charge for the accounting; and the time and place of public sale or the time after which a private sale will be made. If anything is missing from the notice, it is a question of fact whether said notice is sufficient.

In a sale of consumer goods, the notice must contain the above information to be sufficient, and must also contain the liability for a deficiency, telephone number from which the recipient can discover the cost of redeeming the collateral, and a telephone number or mailing address from which the recipient can get additional information concerning the sale