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118 Cards in this Set

  • Front
  • Back
Debtor
Person who owes payment or performance of the obligation secured
Secured Party
A lender, seller or other person in whose favor there is a security interest
Security Agreement
Agreement between the debtor and the secured party that creates the security interest
Security Interest
An interest in personal property or fixtures which secures payment or performacne of an obligation. It is a contingent property interest in the debtor's collateral that the debtor grants to the creditor. When the contingency, which is DEFAULT occurs, the property interest springs to life and the creditor has rights in the debtor's collateral
Collateral
Property subject to a security interest. Collateral is property the secured party can repossess upon default to insure that the debt is paid
PMSI - Seller-financed
Secured party sells the debtor collateral on credit and retains a security interest in the item sold
PMSI - Financer-financed
An enabling loan; a loan to a debtor that enables the debtor to buy specific collateral and the creditor takes a security interest in the specific collateral. NOTE: the credit or loan proceeds MUST ACTUALLY BE USED to acquire the collateral (if not, it is still a security interest, but not a PMSI)
After-acquired property clause
Secured party often will want to obtain a security interest not only in debtor's present property, but also in property that the debtor will obtain in the future. This is permissible. Security agreements typically contain an after-acquired property clause.
Future advance clause
A secured party often contemplates making future loans to the debtor and wants to secure these future advances in the present security agreement. This is permissible. Security agreements typically contain a future advance clause in which case a new security agreement is not needed when a future advance is made.
Attachment
Deals with those steps legally required to give the secured party a security interest in the collateral that is effective as against the debtor. Once a security interest attaches, it is effective against the debtor and the creditor has all of the rights of a secured creditor under Article 9. A creditor is not a secured creditor until attachment.
Perfection
Deals with those steps legally required to give the secured party an interest in the collateral that is effective as against the world. In general, perfection is the process of giving public notice of the security interest to the world
Financing statement
Document generally used to provide public notice of the security interest, and so to perfect the security interest
GOODS
All things which are MOVABLE at the time the security interest attaches, and includes the unborn young of animals and growing crops. Goods also include FIXTURES.
Four main types of GOODS under Article 9
Consumer goods, equipment, farm products, inventory; In classifying collateral, look to see HOW THE DEBTOR IS USING THE COLLATERAL. What is the collateral in the hands of the debtor?
Consumer goods
Used OR bought for use primarily for PERSONAL, FAMILY OR HOUSEHOLD PURPOSES
Equipment
Used or bought for use primarily in business; This is the CATCH-ALL or default category for goods
Farm products
Crops or livestock or supplies used or produced in farming operations or products of crops or livestock in their UNMANUFACTURED states (such as ginned cotton, wool-clip, maple syrup, milk and eggs) if they are in the possession of a debtor engaged in farming operations
Inventory
Held by a person who holds them for sale or lease or to be furnished under service contracts; materials used or consumed in a business during a SHORT PERIOD OF TIME
A guitar purchased by Harry Homebody as a present for his son Marvin
Consumer goods
A guitar purchased by Sterling Studly, a professional rock musician, to be used on tour
Equipment
Milk in the hands of a farmer (who got it from his cows)
Farm products
Milk in the hands of a grocery store or restaurant
Inventory
Milk in the hands of the grocery store's customer who is buying for his family's consumption
Consumer goods
Automobiles held by a local car rental agency
Inventory
Pencils and other stationery supplies used by Sears or some other large retailer in its credit offices
Equipment OR inventory
8 types of SEMI-INTANGIBLE AND INTANGIBLE PROPERTY
Instruments, Documents, Chattel Paper, Investment Property, Accounts, Deposit Accounts, Commercial Tort-Claims, General Intangibles
Instruments
Negotiable instruments and any other writing which evidences a right to the payment of a monetary obligation, and which are in the ordinary course of business transferred by delivery with any necessary indorsement or assignment (does not include investment property) - PROMISSORY NOTES - CHECKS
Documents
Bill of lading / Warehouse receipt - Document which in the regular course of business is treated as evidencing that the person in possession of it is entitled to receive, hold and dispose of the document and the goods it covers
Chattel Paper
Promissory note plus security agreement; A record or records which evidence both a MONETARY OBLIGATION and a SECURITY INTEREST in or a lease of specific goods. A "record" is information that is stored in either a tangible medium (written on paper), or an intangible medium (electronically stored). Chattel paper that is stored in an electronic medium also is called ELECTRONIC CHATTEL PAPER
Investment property
Includes items such as stocks, bonds, mutual funds, and brokerage accounts containing such items
Accounts
A right to payment [not evidenced by an instrument or chattel paper] 1) for goods, 2) for services, 3) for real property, 4) for a policy of insurance issued or to be issued, 5) for a secondary obligation incurred or to be incurred, 6) for energy provided or to be provided, 7) for the use or hire of a vessel, 8) arising out of the use of a credit card, or 9) as lottery winnings. Health care insurance receivables are included. A contractual obligation arising from a loan of money is NOT an account - it is a general intangible
Deposit accounts
An account maintained with a bank. NOTE: Article 9 only applies to nonconsumer deposit accounts and deposit accounts that are claimed as proceeds of other collateral. You CANNOT take a security interest in a PERSONAL bank account
Commercial tort claims
A claim arising in tort with respect to which the claimant is an organization (e.g. partnership or corporation), OR where the claimant is an individual and the claim arose in the claimant's business or profession and does NOT include damages for personal injury or the death of an individual
General intangibles
Any personal property not coming within the scope of the other definitions (e.g. software, patent and trademark rights, copyrights, goodwill). A general intangible under which the account debtor's principal obligation is a monetary obligation is a PAYMENT INTANGIBLE.
Classify: promissory note
An instrument
Classify: Stock certificate
Investment property
Classify: A receipt given to a farmer by a silo operator when the farmer stored her grain there
Document (warehouse receipt)
Classify: A written contract in which a buyer purchasing on credit promises to pay the car dealership for the car and grants the dealership a security interest in the car
Chattel paper
Big T sells tires on credit. Classify its customers' obligations
Accounts
A hospital has patients who come in for treatment and sign paperwork authorizing the hospital to seek payment from their health insurance coverage provider. Can the hospital use the monies due from the health plans as collateral?
Yes. These are accounts
Credit card company issues millions of credit cards to cardholders, who use them in transactions with merchants. Merchants send the resulting paperwork to credit card company for reimbursement (minus certain fees). Can credit card company use these credit card transactions as collateral?
Yes. These are accounts
The checking account you have at your bank
Category is deposit account. If it is your personal check account, bank cannot take an article 9 security interest in it
Patent and trademark rights, copyrights, goodwill, a tax refund claim, a liquor license, a commercial clamming license, a right to the return of a security deposit held by a landlord
General intangibles
A right to sue a corporation for wooing away a trusted employee
Commercial tort claim
A claim arising in tort that has been settled and reduced to a contractual obligation to pay
General intangible (payment intangible)
A computer program
If embedded on computer, then it has same character of computer. If separate, general intangible
Distinguishing a "true lease" (not covered by art 9) from a "disguised sale"
Ask whether the transaction is, in substance, a lease or a sale. In a lease, the lessor is going to receive the item back at the end of the lease term when the item still has meaningful economic value. In a sale, the buyer is the owner and is generally going to drain all the economic value from the item. Q: At the time the parties entered into the transaction, was it reasonably likely that the lessor would get the item back when it still had meaningful economic value? If yes, then true lease. If no, it is a sale with a security interest governed by Article 9
Attachment
1) Security agreement, 2) Value has been given, 3) Debtor has rights in the collateral
Security agreement
Unless the collateral is in the possession or control of the secured party pursuant to an agreement, a written (or electronically stored) security agreement is required. If oral, then PLEDGE. Form of security agreement (when written): Must be evidenced by a record and show an INTENT to create a security interest, must be AUTHENTICATED by the debtor (signed - any symbol), must contain a DESCRIPTION OF THE COLLATERAL; NB: Cannot say "all of your assets" or "all of your property" - too generic, but CAN say "all of your inventory"
What is "value" for the "value given" requirement of attachment
Very liberal; ANY CONSIDERATION sufficient to support a simple contract is enough. Even past consideration is enough.
Scope of the security interest
May include future advances, after-acquired property, proceeds (!), security interests in supporting obligations for the collateral (if someone is a surety on an account that you take as collateral, their obligation becomes part of the collateral)
When courts will imply an after-acquired property clause
When the collateral is of a type that is rapidly depleted and replenished (inventory or accounts) - courts assume that the parties must have meant to cover after-acquired property, or the security interest will reach nothing
Exception to after-acquired property clauses
A security interest does not attach under an after-acquired property clause to consumer goods UNLESS the debtor acquires rights in them within 10 days after the secured party gives value. ALSO, they do not work with commercial tort claims
Proceeds
Property secured generally includes proceeds! Proceeds: Whatever is received upon the sale, exchange, collection or other disposition of collateral or proceeds. This includes insurance proceeds, and any claims arising out of the loss of, defects in, or damage to collateral. RULE: Unless otherwise agreed, a security interest automatically gives the secured party a right to identifiable proceeds
Lowest Intermediate balance test
To determine which part of a commingled mass of cash is identifiable proceeds. Look at the balance in a commingled bank account starting at the time the proceeds are deposited and ending at the time you are applying the test. Lowest balance during that time period is the secured party's identifiable proceeds (but it cannot exceed the value of the cash proceeds originally deposited)
Perfection
Deals primarily with rights as between the secured party and third parties. Perfection is NOT necessary to create a valid, enforceable security interest as between the debtor and the secured party; usually requires attachment and one of five methods
Perfection: Automatic perfection
A security interest is perfected when it has attached and when some additional step (possession or filing) is taken. SOMETIMES THOUGH< PERFECTION IS AUTOMATIC: PMSI in consumer goods!
PMSI in consumer goods
Automatic perfection!
Perfection: Possession of collateral by secured party
A secured party may perfect a security interest in most types of collateral simply by taking possession of the collateral. The security interest is perfected from the moment of possession without relation back to the time of attachment. Perfection continues only so long as possession is retained. Ex: Only way to perfect an SI in money is by possession. Ex.: Cannot take possession of Accounts, Deposit accounts, General intangibles.
Perfection: Perfection by "control"
Security interests in investment property and electronic chattel paper may be perfected by control. Security interests in nonconsumer deposit accounts can only be perfected by control. Investment property, nonconsumer deposit accounts, electronic chattel paper
Perfection by control - Investment property
Basically, a secured party has 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 without further action from the owner
Perfection by control - nonconsumer deposit accounts
a few ways --> 1) the bank in which a nonconsumer deposit account is maintained automatically has control over the deposit account; 2) if the secured party is not a bank, it can obtain control over the deposit account by either a) putting the deposit account in the secured party's name OR b) agreeing in an authenticated record with the debtor and the bank in which the deposit account is maintained that the bank will follow the secured party's orders without further consent by the debtor.
Perfection by control - Electronic chattel paper
A secured party has control over chattel paper if: 1) a single, authoritative copy of the record exists and 2) this authoritative copy identifies the secured party as the assignee of the record AND 3) the authoritative copy is communicated and maintained by the secured party or its designated custodian
Perfection by control - Notation of lien on certificate of title
Cars & trucks; Only way to perfect a security interest in an automobile is for the secured party to note its lien on the certificate of title; Exception: if the debtor is holding the automobile as INVENTORY (i.e. if the debtor is a dealer), then a secured party MUST perfect by filing a financing statement against inventory.
Perfection by control - Filing a financing statement UCC1
Notice filing - notice must indicate merely that a person MAY have a security interest in the collateral indicated. Contents: Debtor's name (individual or corporate name if corp or partnership name if partnership, NOT TRADE NAMES). errors ok if not SERIOUSLY MISLEADING (use filing office's standard search logic). NB: Secured creditor is not responsible for filing office errors.
Debtor's name change
If the debtor so changes its name that a filed financing statement becomes seriously misleading (i.e. a search under the debtor's correct name, using the filing office's standard search logic, would not retrieve the financing statement with the debtor's former name), the financing statement is effective to perfect a security interest in collateral acquired by the debtor before or within four months after the change. It is not effective to perfect a security interest in collateral acquired by the debtor more than 4 months after the change (unless an amended financing statement is filed w/in the 4 months that renders the financing statement not seriously misleading)
Description of collateral when dealing with "real property"-related financing statements
When realty interests are involved (timber, fixtures, minerals to be extracted) then the financing statement must describe the realty (must "reasonably identify" the real estate - a metes and bounds description is not necessary) and must indicate that it is to be filed in the real property records (so that the filing officer gets it to the right place)
UCC1 - is a signature required?
No signature required, though debtor must authorize the filing. The debtor automatically authorizes the financing statement if she authenticates a security agreement covering the same collateral.
Can you file an authenticated security agreement itself?
Yes. An authenticated security agreement itself may be filed, but the same requirements for UCC1's come into play: description, debtor's name
Where to file a UCC1
Except as otherwise provided in TN's article 9, filed with the Secretary of State. For real estate-related filings, in TN, we file in the real estate records office of the Register of Deeds in the county where realty is located
Where to file a UCC1 in multistate transactions
General rule: File where debtor is located. If debtor is individual, she is located at her PRINCIPAL RESIDENCE. If debtor is a registered organization, the debtor is located in the state where the registered organization is organized. If debtor is an unregistered organizations, the debtor is located at its place of business, if only one. If more than one, the debtor is located at its CHIEF EXECUTIVE OFFICE.
What if UCC1 is properly filed, then debtor moves?
The secured party will become unperfected FOUR MONTHS after the debtor's move unless it files a financing statement in that jurisdiction before four months is up
What if UCC1 is properly filed, then collateral moves
The secured party will become unperfected ONE YEAR after the collateral moves unless it files a financing statement in the new jurisdiction before that ONE YEAR PERIOD is up.
What kind of filing must you do for FARM PRODUCTS
When farm products are located in a state, an agricultural lien on those farm products should be perfected in that state
How long is a UCC1 effective
Five years from the date of filing. Can be extended by filing a CONTINUATION STATEMENT. Continuation statement must be filed in the last 6 months of the five-year "life" of the financing statement (between 4.5 and 5 years)
When must termination statement be filed
When the debtor's obligation runs out and the secured party no longer has to make any advances, the SECURED PARTY, UPON RECEIVING AN AUTHENTICATED DEMAND BY THE DEBTOR, must within 20 DAYS provide the debtor with a termination statement to the effect that the secured party no longer claims a security interest under the financing statement. If a financing statement covers CONSUMER GOODS, then within ONE MONTH after obligation ceases OR within 20 DAYS of receiving an authenticated demand from the debtor, a termination statement must be filed by the secured party. Secured party is liable for $500 plus any loss caused by failure to comply.
Can a UCC1 be filed before a security agreement is entered into?
Yes!
Perfecting interest in proceeds
If you have a security interest in collateral and it is perfected, you AUTOMATICALLY have a perfected security interest in proceeds for 20 DAYS. After that, you have to take new action to perfect UNLESS: the proceeds are IDENTIFIABLE CASH PROCEEDS or 1) *the security interest in the original collateral was perfected by filing a financing statement, a security interest in the type of collateral constituting proceeds would be filed in the same place as the original UCC1 AND the proceeds were not purchased with cash proceeds of the collateral (same office rule)
What happens if debtor changes its use of the collateral
The filed financing statement (with the description of "equipment" for example) remains effective to perfect the security interest. The secured creditor has no duty to monitor the collateral or to amend the financing statement even if it knows that the description is seriously misleading
Priority: Secured party v. Secured party
General rule: First to file OR perfect, whichever occurs first, has priority
Who has priority as between two unperfected secured creditors
The first to ATTACH
PRIORITY: PMSI in goods other than inventory or livestock
Usually a PMSI in equipment. Has priority over a conflicting security interest in the same goods or its proceeds if the PMSI is perfected at the time the debtor received possession of the collateral or w/in 30 days thereafter
PRIORITY: PMSI in Inventory or Livestock
Has priority over a conflicting security interest in the same inventory or livestock (as well as proceeds that are chattel paper, instruments and identifiable cash proceeds) if, before the debtor receives possession of the inventory or livestock, the secured party 1) PERFECTS and 2) SENDS AN AUTHENTICATED NOTIFICATION to holders of previously filed conflicting security interests in the collateral. The holder of the conflicting SI must receive this notice w/in 5 years before debtor receives possession.
Priority: Seller-financed PMSI v. Financer-financed PMSI
Seller-financed PMSI has priority over a financer-financed PMSI
The power of perfecting by control!
Security interest perfected by control has priority over a security interest perfected by any other method (filing or automatic); If conflicting security interests each were perfected by control, they rank according to the time of obtaining control; A security interest granted to a debtor's intermediary has priority over a security interest granted by the debtor to another secured party (unless the intermediary agrees otherwise); Other than these above rules, first to file OR perfect governs
Priority rules for DEPOSIT ACCOUNTS
A security interest perfected by control has priority over a security interest perfected via proceeds; If conflicting interests each were perfected by control, they rank according to the time of obtaining control; A secured party who has obtained control by putting the deposit account in its own name has priority over all other secured parties with control; A bank that has control because it maintains the deposit account has priority over all other secured parties with control (EXCEPT A SECURED PARTY WHO HAS OBTAINED CONTROL BY PUTTING THE DEPOSIT ACCOUNT IN HIS NAME)
Purchaser of chattel paper
If a purchaser of chattel paper in good faith gives new value and takes possession in the ordinary course of business (or takes control of electronic 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 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 rights of the secured party
Purchaser of instruments
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 without knowledge that the purchase violates the rights of the secured party.
Priority: Secured party v. Buyer of the collateral (authorized sales)
Authorized sales: If the sale is authorized by the secured party, the buyer takes free of the security interest. This authorization may be express, or it may be implied from the type of sale or from the seller's conduct. NB: The sale of inventory (in the ordinary course of business) is expressly authorized free of the security interest.
Priority: Secured party v. Buyer of the collateral (unauthorized sales)
General rule: A buyer in the ordinary course of business (other than a person buying farm products from a person engaged in farming operations) takes free of a security interest created by his seller even though the security interest is perfected and even though the buyer knows of its existence
Buyer in the ordinary course of business
A person who buys goods in good faith, without knowledge that the sale violates the rights of another person (usually the secured party) in the goods, and in the ordinary course from a person in the business of selling goods of that kind.
Buyers NOT in the ordinary course of business
**Take subject to perfected security interests. They take free from unperfected security interests (and unperfected agricultural liens) unless they know of the security interest.
Garage Sale Exception
Special rule: Consumer to consumer sales: In the case of these, a buyer takes free of a security interest even though it is perfected if he buys without knowledge of the security interest, for value, and for his own personal, family or household purposes, unless prior to the purchase the secured party has filed a financing statement covering such goods. NB: The goods must be consumer goods in the hands of both the buyer and the seller.
PRIORITY: Secured party v. judgment lien holders
An unperfected SI is subordinate to the rights of a person who becomes a lien creditor before the SI is perfected. If the SI is perfected before the person becomes a lien creditor, the SI has priority.
Lien creditor (defined)
An unsecured creditor who has obtained a judgment and has gotten a writ issued. NOTE: Becomes a lien creditor WHEN THE WRIT IS ISSUED (TN)
PRIORITY: PMSI v. Lien Creditor
If the secured party (PMSI holder) files w/in 30 days after the debtor receives possession of the collateral, he takes priority over the rights of a lien creditor which arises between the time the security interest attaches and the time of filing.
Priority for future advances
A security agreement can secure present and future advances. A future advance by a secured creditor has priority over a lien creditor if the future advance is made 1) without knowledge of the lien OR 2) w/in 45 days of the lien arising OR 3) pursuant to a commitment entered into w/out knowledge of the lien
Secured party v. Statutory lien claimants (mechanics lien)
Statutory lien BEATS even perfected security interests
Default
Triggers right to collect. Not defined in Article 9. Typically, grounds for default are specified in the security agreement. In the absence of this, default has been restricted to failure to perform or pay the obligation when it is due.
Self-help repossession
After default, secured party may take possession of collateral WITHOUT JUDICIAL PROCESS if this can be done WITHOUT BREACH OF THE PEACE. When SP breaches the peace, he loses the authorization to repossess and may be sued for conversion and be held liable for actual (and punitive) damages.
Breach of the peace (defined)
Any conduct by the secured party that has the POTENTIAL to lead to VIOLENCE is a breach of the peace. Generally, physical presence by the debtor plus verbal objection is enough to create a breach of the peace. Note: Unauthorized entry to home, attached garage, closed door are all likely to be breaches of peace. Less likely with open doors, businesses, etc. Also, if you bust a lock and fail to relock on the way out, some states have said breach of peace
Retention of collateral (strict foreclosure)
After default and repossession, the secured party may propose retaining the collateral in full or partial satisfaction of the debt. Only if no one objects. 20 day window for objections; if someone objects, must sell; Also, cannot sell w/out consent of the debtor
Resale of collateral
After default, SP may sell, lease, license or otherwise dispose of the collateral in its condition when repossessed or after reasonable preparation. Sale may be public (auction) or private, and may be by one or more contracts. THE SALE DISCHARGES THE SECURITY INTEREST UNDER WHICH THE SALE IS BEING MADE AND ALL SUBORDINATE SECURITY INTERESTS. The purchaser however, is still subject to superior security interests. MUST GIVE REASONABLE NOTICE OF SALE
Content of notice of foreclosure sale
Timeliness (reasonable time). In nonconsumer transactions, notice is reasonable if sent 10 days or more before sale. CONTENT: depends on type of sale and type of collateral. Public: Notice of time and place of sale; Private: Notice of time AFTER which sale will occur (i.e. car will be sold at a private sale after 1/1/06). Extra info is required for consumer goods
Commercially reasonable sale
Every aspect of the sale (incl. the method, manner, time, place and terms) must be commercially reasonable
Secured party buying collateral
The secured party may buy at any public sale, but may buy at a private sale ONLY IF the collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations.
What if secured party does not hold commercially reasonable sale
General rule: If the Sp fails to conduct a commercially reasonable sale, there is a rebuttable presumption that the sale proceeds EQUAL the amount of the debt (in other words, he cannot go after debtor for a deficiency)
Debtor's right to redeem
Any time before the SP has resold the collateral or entered into a contract for its disposition, debtor may redeem. To do so, debtor must tender fulfillment of all obligations secured by the collateral. Typically, because most security agreements have an acceleration clause, debtor must pay whole amt.
Fixture
Goods so related to particular real property that an interest in them arises under real property law; personalty attached to realty with the intent that it become a permanent part of the real estate; Note: No security interest can exist in ordinary building materials (bricks, lumber, shingles, etc.) incorporated into an improvement on land
Fixture perfection
Fixture filing must be made in office where a mortgage on the real estate would be filed. Must also reasonably identify the real estate and must show the name of the owner
Priority: Secured party in fixtures v. Subsequent real estate interest
Security interest in fixtures has priority over any real estate interest that arises subsequent to the perfection of the security interest by fixture filing
Priority: Secured party v. Prior real estate interest
General rule: A prior real estate interest that is properly recorded has a priority over a security interest that SUBSEQUENTLY arises. Exception: A PMSI takes priority over an earlier realty interest if it is perfected by a fixture filing before the goods become fixtures OR w/in 20 days thereafter.
Priority: Construction mortgage v. PMSI in fixtures
Construction mortgage takes priority over a subsequent pmsi in fixtures even if the security interest is perfected by a fixture filing within 20 days of affixation. No one beats the construction lender.
When fixture filing unnecessary
An SP need not fixture file as to readily removable 1) factor or office machines or 2) equipment not primarily used or leased for use in the operation of the real estate or 3) replacements of domestic appliances which are consumer goods. Any method of perfection before such goods become fixtures entitles the secured party to priority.
Accessions
Goods that are physically united with other goods in such a manner that the identity of the original goods is not lost (tires on a car)
Perfection of accessions
If a security interest is perfected when the collateral becomes an accession, the security interest remains perfected in the collateral.
Priority rule for accessions
A security interest in an accession is subordinate to a security interest in the whole which is perfected by compliance with the requirements of a certificate-of-title statute
Removal and reimbursement for physical injury to the whole (accessions)
An SP may remove an accession from other goods if the security interest in the accession has priority over the claims of every person having an interest in the whole. The SP removing the accession is responsible for the cost of repair of any physical injury to the whole or other goods. A person entitled to reimbursement may refuse permission to remove until the SP gives adequate assurance for the performance of the obligation to reimburse