Secured Transactions Mee

Front 1

Define attachment and what are the requirements for attachment

Back 1

Attachment makes the security interest in collateral affective against the debtor.

(1) security agreement (unless a valid alternative exists); (2) value was given; (3) and debtor has rights in the collateral.

Front 2

Define perfection and ways to perfect

Back 2

Perfection gives the secured party an interest that is effective against third parties.

(1) Automatic (e.g., PMSI consumer goods); (2) control (e.g., non-consumer deposit accounts); (3) possession (tangible property); or (4) by filing a financing statement.statement

Front 3

Define goods

Back 3

All things that are movable at the time the security interest attaches.

(1) consumer goods (primarily for personal, family, or household use);
(2) Equipment;
(3) farm products; and
(4) inventory (short period of time).

Equipment is fallback when close call.

Front 4

Types of semi-intangible property

Back 4

(1) instruments (any writing that evidence a right to payment);
(2) documents (bill of lading, warehouse receipt);
(3) chattel paper (record or records which evidence a monetary obligation and a security interest or a lease of specific goods);
(4) Investment property (stocks, bonds, mutual funds, etc.);
(5) Accounts (a right to payment;
(6) Deposit accounts (A non-consumer account maintained in a bank);
(7) Commercial tort claims (claim arising in tort in which claimant is an organization; and
(8) General intangibles (any personal property not in the scope of other definitions.

Front 5

Two primary things in which Article 9 applies to:

Back 5

(1) Any transaction, regardless of its form that creates a security interest in personal property or fixtures by contract; and
(2) a secured sale disguised as a lease.

Front 6

Test as to whether an agreement is a lease or a secured transaction governed by Article 9

Back 6

At the time the parties entered the transaction, was it reasonably likely that lessor would get the item back when it still had meaningful value? If yes then it is a lease, otherwise it is a sale governed by article 9.

Different situations a Article 9 Secured transaction will be found: If at at the end of the term the debtor (1) will become the owner for little or no consideration; or (2) the lessee is bound to purchase the goods or renew the lease for the remaining economic life; or (3) the lease is for the entire economic life of the leased goods.

Front 7

Define pledge

Back 7

When the collateral is in the possession of the secured party pursuant to an oral security agreement (e.g., pawn shop).

Front 8

Requirements for a valid security agreement

Back 8

(1) Intent to create a security interest that is evidenced in a record;
(2) authenticated by the debtor (any symbol w/ present intent); and
(3) a description that reasonably identifies the collateral.

Front 9

Is an after-acquired clause required in order that the security agreement include after acquired?

The exceptions and limitations

Back 9

Yes, unless the collateral is readily depleted and replenished. In that cast the court will imply the clause. (e.g., inventory, accounts).

Consumer goods-after-acquired debtor must acquire the item within 10 fays of giving value.

Commercial tort-after-acquired does not include.

Front 10

Define proceeds

Back 10

Whatever is received upon the sale, exchange, collection, or other disposition of the collateral or proceeds.

Front 11

Rules as to proceeds

Back 11

(20 days, unless Id cash, Same office, or purchased with cash but financing statement already covers the collateral)

Secured party has automatic right to identifiable proceeds for 20 days unless:

(1) identifiable cash proceeds; or
(2) Same office rule: (a) proceeds not purchased with cash and (b) security interest in proceeds would be filed in same place as financing statement for original; or
(3) the proceeds were purchased with cash but the financing statement already covers the type of proceeds.

Commingling: apply the lowest intermediate balance test.

Front 12

Rules for priority

Back 12

First to file or first to perfect unless
(1) PMSI for consumer goods
or non-consumer if filed financing statement within 20 days;
(2) a levied judgment by the sheriff (lien creditor) that occurs prior to the perfection of the security interest or filing a financing statement; or
(3) statutory lien (wins every time)

Front 13

Priority as to deposit accounts

Back 13

(1) control over proceeds; (2) first to control; (3) party who has account in own name takes priority; and (4) a bank has control over deposit account in own bank takes priority except where account in secured party's name.

Front 14

Rules as to buyers vs. secured party where secured party does not authorize sale but is sold in the ordinary course of business (watch for inventory that usually courts will imply authorization).

Back 14

(ord. course takes free even if has knowledge of security interest as long as no knowledge that sell in violation of security agreement)
A buyer in the ordinary course of business takes free of the security interest created by his seller even though the security interest is perfected and even though the buyer knows of its existence.

Front 15

Elements of buyer in ordinary course

Back 15

(1) buyer purchased the good;
(2) good faith;
(3) without knowledge that sale "violates" the rights of another person in the goods; and
(4) the seller is in the ordinary business of selling that kind of good.

Front 16

Rules as to buyers vs secured party not in the ordinary course of business

Back 16

Buyer takes free of security interest unless: (1) they know of the security interest; or (2) it is a consumer to consumer sale and the secured party filed a financing statement.

Note: consumer to consumer value must be given (less rest.), not payment like non-consumer to take free.

Front 17

Rules for self-help repossession

Back 17

After default, the secured party is entitled to take possession of the collateral without judicial process if this can be done without breach of the peace. Breach of the peace will entitle debtor to damages including possibly conversion.

Front 18

Define breach of the peace

Back 18

Any conduct by the secured party that has the potential to lead to violence. (usually requires some affirmative act meaning objection and presence alone usually not enough).

Front 19

Retention of collateral

Back 19

After default and repossession, the secured party may propose retaining the collateral in full or partial satisfaction of the debt. Secured party must send notice to debtor and other secured parties or lien-holders who if oppose within 20 days then the collateral must be sold.

Front 20

Resale of collateral

Back 20

After default,t he secured party may dispose of the collateral at public or private auction. The sale discharges the security interest all subordinate security interests. Debtor remains subject to the senior security interests.

Front 21

Requirements for resale of collateral

Back 21

(1) Notification must be given within a reasonable time to debtor (10 days non-consumer) and secured parties unless item is perishable or threatened to decline rapidly;
(2) if for public sale, notice of time and place is required.

Front 22

What if the secured party fails to act in a commercially reasonable manner when they resale the collateral?

Back 22

There is a rebuttable presumption that the sale proceeds equal the amount of the debt.

Front 23

What is required to perfect a security interest in a fixture?

Back 23

A fixture filing must be made in the office where a mortgage on real estate would be filed and it must reasonably identify the real estate and contain name of the owner.

Front 24

Define accessions

Back 24

Goods that are physically united with other goods in such a manner that the identity of the original goods is not lost. A security interest in accession follows same rules for priority unless there is a security interest in the whole that is perfected by compliance with the requirements of a certificate-of-title statute.

Front 25

Rule as attempt to retain title

Back 25

When one attempts to retain title until payment for the goods and then delivers the goods their interest will be treated as a security interest. (requiring perfection, etc.)

Front 26

What notice if any must be given to other secured parties prior to reselling the collateral?

Back 26

Notice must be given any secured party that the secured party knows about and any secured party who has perfected by filing a financing statement (no notice for unperfected that secured party does not know about).

Front 27

Requirements for a valid financing statement

Back 27

(1) the name and mailing address of the debtor, (2) the name and address of the secured party, and (3) a description of the collateral covered by the financing statement.

Front 28

Can perfection occur automatically based on an assignment of an account or payment intangible.

Back 28

Only in a small-scale assignment, ot a significant part of the outstanding accounts.

Front 29

Consignment rules

Back 29

Where: (1) consigned goods are worth a total of $1000 or more; (2) the consignor did not use the goods for personal, family, or household purposes; (3) the consignee is a person who deals in goods of that kind under a name other than the consignor's; (4 the consignee is not an auctioneer; and (4) the consignee is not generally known by his creditors to be substantially engaged in selling the goods of others, the consignor's interests in the consigned goods is treated like a purchase money security interest in inventory.