Secured Transactions - Topic 9-12 - Part Iv: Protecting The Sec Int - Perfection Part 1

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.1. Part IV: Protecting the Sec Int - Perfection

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. Assign 9: Intro: Perfection by Filing, and Where to File

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.2. Purpose of perfection?

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A SP wants to protect its int against the claims of third parties to the coll.

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.3. The steps for making a lien public - i.e. the steps req to perfect a sec int - vary as a function of the kind of coll.
In Art 9, the main methods for doing so are:(3)

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1- filing a fs in a public place (SOS office)
2- sp taking possession of the coll
3- sp taking control of the coll

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.4. Where to file: which state?

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General rule: Location of debtor
But debtor's location depends on if debtor is an individual, non registered organization or a registered organization

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.5. General rule: File at location of debtor
Exceptions?

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1- fixtures
2- as extracted coll
3- timber to be cut

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.6. Where to file if sp has possession?

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file where the coll is located

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.7. Where is a debtor who is an individual located?

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A debtor who is an ind is located at:
the ind's principal residence

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.8. Where should a searcher search for records?

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where the sp should have filed

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.9. What if the business is a sole proprietorship?

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Ind debtor is deemed to be located at the ind's principal residence w/ respect to both personal and business assets.

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10. Organization means

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a person other than an individual

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11. Registered organization means

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an organization organized solely under the law of a single State or the US and as to which the State or the US must maintain a public record showing the organization to have been organized.
Basically it is incorporated

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12. Where is a non-registered org located (one place of business)?

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A debtor that is an org and has only one place of biz is located at the place of biz.

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13. Where is a non-registered org located (more than one place of business)?

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A debtor that is an org and has more than one place of biz is located at:
its chief executive office.

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14. Where is a registered org located?

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A registered org that is is org under the law of a state is located in that state.

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15. What if the chief executive office is in Canada or Mexico?

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File in Canada system cuz they have a legal filing system like our UCC.
Mexico does not have a a legal filing system so file in DC.
Unless it is a non-registered org that has more than one place of biz and the chief executive office is located in US; then file in US applicable state.

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16. What are as-extracted coll?

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oil and accounts.

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17. For as-extracted coll, what must fs incl?

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1- indicate that coll is as-extracted coll
2- indicate that fs is to be filed in real estate records
3- describe the real prop (sufficiently so it reas identifies what is described)

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18. Where to file for as-extracted coll?

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Where ever the wellhead is located. Then file in that real prop office

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19. Assgn 10 - Perfection: The Initial FS

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.
There is a uniform form initial fs in back of book

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20. What are the req contents of the fs?

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1- name of debtor
2- name of sp or a rep
3- indicate the coll covered

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21. Def indicate

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indicate is much less demanding than describes

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22. Is a signature or authentication req on fs?

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No.

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23. How r fs indexed and searched?

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by the debtor's name

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24. If the debtor's name is erroneous, will the fs be invalid?

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No. there is a savings provision. But the error must not be seriously misleading.

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25. What is the test for seriously misleading for debtor's name?

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Whether a search under the debtor's actual name would discover the fs indexed under the erroneous name appearing on the fs.
Would using the official search logic under the proper name produce the fs with improper names?

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26. What name should appear on a fs for sole proprietor biz?

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The name of the debtor

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27. What name should be used for a partnership?

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If the partnership has a name (look at partnership agreement) then list name of partnership.
If partnership has no name, then provide names of partners.

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28. What if the fs only provides the trade name of the org?


Where does org's name appear?

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then its clearly deficient.
But if the debtor's name is correct, the absence of the trade name doesn't undermine its sufficiency. Trade name is not nec. (cuz indexed by debtor's name)

On the public organic record

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29. Which ind's name should appear on fs? Alt A
TX?

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Alternative A (which Tex has adopted effective next July) makes the individual's name on the driver's license or state ID necessary and sufficient.
That is, the driver's license name is required.

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30. Which ind's name should appear on fs? Alt B
TX?

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Alternative B makes the driver's license name sufficient but not necessary; it is like the current Texas version, in that it makes use of the driver's license name a safe harbor.
But it also permits other individual names to be sufficient -- the "individual name" (I guess that means the common law name; uncertainty here) and "the surname and first personal name of the debtor" (again, whatever that means; it's probably redundant of "individual name"; uncertainty here).

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31. What if fs has a nickname instead of legal name?

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Depends - in TX, there is a list of proper nicknames

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32. What do saving provisions save from?

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Minor errors that are not seriously misleading don't render fs deficient. But a fs that fails sufficiently to state the debtor's name is seriously misleading. Not seriously misleading if a search under the debtor's correct name using the stnd search logic would disclose the erroneous filing.

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33. Texas Search Logic - The rules:

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1- No distinction btwn upper and lowercase.
2- Punctuation and accents ignored
3- Organization words disregarded
4- & is deleted and replaced with 'and'
Only produces searches that are exact matches.

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34. Collateral Description: Basic Principles

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- A fs is sufficient only if it "indicates the coll covered by the" FS.

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35. - A fs sufficiently indicates the coll that it covers if the FS provides:
(2 safe harbors/guaranteed for indication of coll:)

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(a) a description of the coll pursuant to 9-108 or
(b) an indication that the fs covers all assets or all personal prop.

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36. - A description of personal or real property is suff, whether or not it is specific,

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if it reas identifies what is described.
Purpose of fs is to give notice that a person may have a sec int in the coll claimed.

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37. What indications of coll in FS are okay?

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category
type of coll def in UCC
all assets
all personal property

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38. Is AAPC clause req on fs?

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nope, permissible but unnec

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39. What is the test of sufficiency of a fs description?

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It do the job assigned to it.
Put searcher on inquiry notice

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40. Assgn 11: Perfection - The Process of Filing

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.

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41. How do u file?

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hand delivery or
mail delivery or
electronic filing
and pay fees

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42. A person may file a FS only if:

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1- the debtor authorizes the filing in an authenticated writing
2- the debtor authenticates or becomes bound by a sec agreement

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43. When does a sec int become perfected?

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When it is mailed by SP / filed and other reqs:
perfected
attached - authenticated

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44. Assign 12: Perfection - Later Filins and Changes in the Situation

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.

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45. How long is fs effective for?

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5 years from the date of filing by SOS

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46. When is a continuation statement effective and how long more does it give fs?

How many times can sp file continuation statement?

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When its made w/in 6 months before lapse
Five more years

unlimited

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47. If the continuation is not effective, what happens to fs?

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it lapses and the new fs is effective as a new fs only

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48. If u want to switch coll with another coll, how is this done and does this effect lapse date?

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Have to amend the sec agreement to provide for a sec int in new coll and must file an amend to fs. Amend doesn't extend lapse date

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49. Rules re: termination statement of consumer goods

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SP must file
SP fails to do so then $500 statutory penalty

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50. Rules re: termination statement of non-consumer goods

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SP must file or
give to debtor to file only if it receives authenticated demand and then it must do so w/in 20 days

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51. Termination statement might be bogus. What can new SP do to make sure its legit?

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SP should go to debtor and ask debtor to ask their SP cuz SP has a statutory responsibility to timely respond to debtor when he requests for accounting or list of coll or a stat of accnt.

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52. Amend FS if store relocates and changes its trade name?

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No. It is the location of the debtor that matters for filling, not location of the coll.

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53. Amend FS if store remains in same place but debtor relocates?

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SP remains perfected until the earliest of: 4 mo after a change of the debtor's location to another jxn
SP must file a new initial fs b4 expiration of the 4 mo pd to avoid any gap in perfection
(Put in sec agreement that debtor notify u if they move or it would be a default)

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54. FS is not rendered ineffective if after FS is filed, info becomes seriously misleading.
Name changes exception

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Name changes do render fs seriously misleading.

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55. FS is effective to perfect a sec int in coll acquired by the debtor

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before or w/in 4 mo after the change and

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56. the fs is not effective to perfect a sec int in coll

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acquired by the debtor more than 4 mo. after the change, unless an amend to the fs which renders the fs not seriously misleading is filed w/in 4 mo. after the change

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57. What effect does the sale of coll have on fs (transferee is located in the same jxn)?

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Sec int is preserved and there is no need to file a new fs

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58. What effect does the sale of coll have on fs (transferee is located in the diff state/jxn)?

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It remains perfected until one year after transfer of coll