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65 Cards in this Set

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Security Interest
Definition
The right to keep or sell the collateral if the debtor defaults on his obligation to the creditor.
Purchase Money Security Interest (PMSI)
The creditor sells the goods to the debtor on credit, retaining a security interest in the goods, OR the creditor advances the funds to purchase the goods.
Collateral
Definition
Property subject to the security interest
Tangible Collateral (4)
Classification
1. Consumer Goods
2. Inventory
3. Farm Products
4. Equiptment
Consumer Goods
Defintion
Goods used or bought for personal, family or household purposes.
Inventory
Defintion
Goods held for sale or lease - or used short term.
Farm Products
Definition
Goods used or produced in farming in the hadns of farmer. Uniquely, the only category that can change in the same persons hands.
Equiptment
Definition
Goods used in Business - long term.
Primary Use Test
The primary use to which the debtor puts the property.
Original Use Test
The original use to which the debtor puts the property.
Intangible Collateral (8)
Classifications
1. Instruments
2. Documents
3. Chattel Paper
4. Accounts
5. Deposit Accounts
6. Investment Property
7. Commercial Tort Claims
8. General Intangibles
Instruments
Definition
UCC Article 3 instruments OR "promissory notes".
Documents
Defintion
UCC Article 7 commodity paper such as warehouse receipts, bills of lading, or delivery orders. Bills of lading is a receipt issued by a common carrier.
Chattel Paper
Defintion
Writing(s) evidencing:
A. Obligation (acknowledgement of debt); AND
B. Security Interest
Accounts (A/R)
Defintion
Right to payment with no writting or insufficent writing to be an instrument or chattal paper.
Deposit Accounts
Defintion
Accounts maintained with a bank. (i.e. savings, passbook, non-negotiable CDs)
Investment Property
Defitition
Certificated,uncertificated, or securities account. (i.e. stocks, bonds, mutual funds)
Commercial Tort Claims
Definition
Tort claims filed by and arising from business. NO After Aquired Tort Claims
General Intangibles
Catchall category for non-goods, including patents, trademarks, goodwill, copyright, and licensing.
Proceeds
Whatever is acquired under disposition of collateral.
As against a DEBTOR, rights are established by
CREATION and ATTACHMENT
As against THIRD PARTIES, rights are established by
CREATION, ATTACHEMENT and PERFECTION
STEP ONE - Creation
How? (3)
1. Possession
2. Security Agreement
3. Control
Security Agreement
Requirements (3)
- authenticated record
- signed by debtor
- reasonably identifying the collateral
NO SUPERGENERIC DESCRIPTION
Control
Definition
Power to deal with deposit accounts, electronic chattel paper, letter of credit right, or investment property
STEP TWO - Attachment
Requirements (2)
1. Secured party must give value (including pre-existing debt).
2. Debtor has rights in the collateral
Attachment
After Acquired Property Clause (AAPC w/2 exceptions)
Future collateral for a present loan EXCEPT
- commercial tort claims
- 10 day rule for additional security for consumer goods
Attachment
Future Advance Clauses
Present collateral for a future loan. No attachment until S gives value.
STEP THREE - Perfection
Methods of Perfection (5)
1. Filing (Financing Statement)
2. Possession
3. Control
4. Automatic
5. Temporacy (Grace)
Perfection by FILING
Record to Be Filed
Finacing Statement. Must contain:
1. Names of S/D (D-signature not required)
2. Addresses (not required if accepted)
3. Description (super generic is effective)
Filing
Seriously Misleading Test
Based on the filing office's search logic, a seriously misleading filing is ineffective.
Perfection by FILING
Where?
Where: Central location in the state of the debtor, but real estate collateral must be filed locally
Perfection by FILING
Time Frame?
Time: Last for 5 years, and amendments filed within 6 months of termination.
Perfection by POSSESSION,
Exceptions (5)
Possession, except
- Accounts,
- Deposit Accounts,
- Electronic Chattel Paper,
- Letter of Credit Rights
- General Intangibles
Secured Party Duty to Debtor regarding POSSESSION
Duty of Reasonable Care
Reimbursement for Reasonable Expenses
Simultaneous Satisfy Requirements for Attachement and Perfection (2)
1. Possession
2. Control
PERFECTION: Automatic
Main Type Only
PMSI in CONSUMER GOODS
Note: PMSI in inventory or equiptment must be filed.
PERFECTION: Temprorary
Four Months (2)
Four Months
1. Goods and debtor move to different state
2. Organization changes its name (not new legal entity)
PERFECTION: Temprorary
Twenty Days (2):
20 days from the debtors receipt of PROCEEDS, UNLESS
1. Same Office
2. Identifiable Cash Proceeds
3. Filing Perfected

20 days for instruments, negotiable documents, and certificated securities.
1. New Value
2. Delivery to Debtor for Disposition
Proceeds
I, ND, CS
Priorities: Secured Party v. Judicial Lein Creditor.
Key is Pefection. 20 day grace period for PMSI(E/I)

Exception: If value in STEP TWO was preexisting debt within 90 days of declaring Bankrupcy.
Priorities: Secured Party v. Purchaser. (5 Rules)
1. Garage Sale Rule
2. Business Purchaser
3. BOIC
4. HDC
5. Future Advance Purchaser
Garage Sale Rule
In Consumer to Consumer transaction, the purchaser prevails unless perfection. Automatic Perfection ineffective.
Business Purchaser Rule
If there is a business purchaser, the secured party prevails. Automatic Perfection Effective
Buyer In Ordinary Course (BIOC Rule)
Purchaser wins even if filing by secured party
Holder in Due Course Rule
HDC takes fee of personal defenses and claims (even over earlier perfected security interests)
Future Advance Purchasers Rule
COMPLEX: Forget unless come across this in practice.
Priorites: Secured Party v. Secured Party
First to file or perfect has priority in collateral.
Priorites: Secured Party v. Secured Party, Superpriority Exceptions
1. PMSI Inventory
- Notice
- No Grace
2. PMSI Equiptment
- Grace 20 Days
- No Notice
3. Puchaser of Chattel Paper (with Possession)over Secured Taking Proceeds
Priorites: Secured Party v. Secured Party, Investment Property
Securty property with control (or possession) prevails over filing
Priorites: Secured Party v. Secured Party, Proceeds
Filing Collateral: achieved by filing finacing statement
- First in time, same date as original if extends beyond 20 day temporary

Nonfiling Collateral: acheived by possession or control. Prioriity iff
1. Prioritiy in Original
2. Securitn in Proceeds Perfected AND
3. Proceeds are case or of same type as original collateral
Fixtures
Personal property which become real estate by affixation.
Priorites: Secured Party v. Secured Party, Fixtures (H)
Generally, first to file prevails.

ExCEPT:
1. PMSI secured party who makes fixture filing w/in 20 days will prevail over prior real estate filing

EXCEPTION, SUPER SUPER PRIORITY: A construction mortgagee prevails so long as recorded before goods became fixtures, and goods become fixtures before completion.
General Rule and Two Exceptions
Accessions
Added value to main property chattel
Priorites: Secured Party v. Secured Party, Assessions
First to file. PMSI Super Priority Apply

EXCEPT: Security interest in whole car has priorty in accession when TITLED
Rights on Default
Define Default
Usually failure to pay or maintain insurance; damage to chattel
Rights on Default
Include (2)
1. Sue on Debt
2. Take Possession, Sell by Disposition, Sue on Deficiency
Rights on Default
Posession
a. Self help (w/o breach of peace)
b. Replevin (TX: writ of sequestration) state involvement
Rights on Default
Disposition (H)
Commercial Reasonableness
Factors:
1. Advertising
2. Cleaning or Repair of Collateral
3. Convenieence of Time and Place of Public Auction
4. People in that market are contacted.
General Standard and Four Factors
Rights on Default
Notice, To Whom?
Unless the collateral is perishable or threatens to decline rapidly, the secured party must give notice to debtor, surety, and other secured parties before sale.
Rights on Default
Notice, Contents/Nonconsumer Goods?
Noncomsumer Goods:
1. Debtor / Secured Party
2. Collateral
3. Method of Disposition
4. Time and Place of Disposition
Rights on Default
Notice, Contents/Consumer Goods?
1. Liability for Deficiency Judgment
2. Telephone for Redemption
3. Telephone for Additional Info
Acceptance of Collateral as Satisfaction
Consumer Transactions: parties can agree to voluntary turnover for FULL satsifaction only

Nonconsumer Transactions: parties can agree for an agreed credit with debtor acknowledging deficiency.
Acceptance of Collateral as Satisfaction
Consumer Transactions: parties can agree to voluntary turnover for FULL satsifaction only

Nonconsumer Transactions: parties can agree for an agreed credit with debtor acknowledging deficiency.
Acceptance of Collateral as Satisfaction
Consumer Transactions: parties can agree to voluntary turnover for FULL satsifaction only

Nonconsumer Transactions: parties can agree for an agreed credit with debtor acknowledging deficiency.
Acceptance of Collateral as Satisfaction
Consumer Transactions: parties can agree to voluntary turnover for FULL satsifaction only

Nonconsumer Transactions: parties can agree for an agreed credit with debtor acknowledging deficiency.