!ucc Article 9 (Creation, Attachment, Perfection & A Few Priorities)

Front 1

Classification of goods as collateral

Back 1

When a debtor uses goods as collateral in a secured transaction, then the particular use of those goods in the hands of the debtor determines the mutually exclusive category (consumer goods, inventory, equipment, or farm products) to which the goods belong.

Front 2

Creation of a Security Interest

Back 2

When a party gives personal property or fixtures as collateral to ensure payment of an obligation and: (i) there is an intent to create a security interest in that collateral; (ii) the collateral is covered by Article 9; and (iii) the transaction is covered by Article 9, then we have a secured transaction and will apply the rules in Article 9.

Front 3

Determination of Attachment

Back 3

When a creditor gives value for collateral, and a debtor obtains rights in that collateral, and a security agreement is created concerning the collateral, then a security interest attaches to the collateral at the moment all three conditions are met regardless of the order in which the conditions are met.

Front 4

Determination of Perfection

Back 4

When a creditor has a security interest in collateral, then, unless perfection of that interest occurred automatically upon attachment, the creditor may, depending on the type of collateral, perfect that interest by filing a financing statement or obtaining possession or control of the collateral.

Front 5

Determination of Proper Filing

Back 5

When a creditor files a financing statement for the purpose of perfecting a security interest in collateral, then the financing statement must: (i) give the name, which cannot be seriously misleading, and address of the debtor; (ii) give the name and reasonable location of the creditor; (iii) provide an indication of the collateral covered and use of a super-generic description is permitted; and (iv) be authorized by the debtor in an authenticated record, which is assumed if the debtor signed a security agreement covering the collateral indicated in the financing statement.

Front 6

Secured Creditor vs. Secured Creditor

Back 6

As between two secured creditors the first to attach has priority. §9-322(a)(3)

Front 7

Perfected Creditor vs. Secured Creditor

Back 7

As between a perfected creditor and a secured creditor the perfected creditor has priority. §9-322(a)(2)

Front 8

Judicial Lien Creditor vs. Secured Creditor

Back 8

As between a judicial lien creditor and a secured creditor the judicial lien creditor has priority. §9-317(a)(2).

Front 9

Statutory Lien Creditor vs. Secured Creditor

Back 9

As between a statutory lien creditor and a secured creditor the statutory lien creditor has priority (§9-333(a)) unless the statute provides otherwise §9-333(b).

Front 10

Buyer Giving Value and Taking Delivery vs. Secured Creditor

Back 10

As between a buyer who gives value and takes delivery of collateral and a secured creditor the buyer takes free of the security interest. §9-317(b).

Front 11

BIOC vs. Secured or Perfected Creditors

Back 11

As between a buyer in the ordinary course of business (BIOC), regardless of whether they have knowledge of the security interest, and a secured creditor or perfected creditor the buyer takes free of the security interest. §9-320(a).

Front 12

Perfected Creditor vs. Perfected Creditor

Back 12

As between two perfected creditors the first to file or perfect has priority.§9-322(a)(1).

Front 13

The Non-inventory exception to the PMSI rule

Back 13

As between a creditor with a PMSI, who is perfected when the debtor takes possession or within 20 days thereafter, in collateral other than inventory or livestock, and any other creditor, the PMSI takes priority up the amount of purchase money. § 9-324(a)

Front 14

The Inventory exception to PMSI rule

Back 14

As between a creditor with a PMSI, who is perfected when the debtor takes possession, in collateral that is inventory or livestock, who gives notice via an unauthenticated record to other parties who filed a financing statement in the same type of goods covered by the PMSI, and the notice is received before the debtor takes possession of the collateral, and any other creditor, the PMSI takes priority up to the amount of purchase money. § 9-324(b)(1) and (2). The notice must describe the collateral, indicate the creditor either has or expects to have a PMSI in the debtor’s inventory, and is good for five years. § 9-324(b)(3) and (4).

Front 15

BIOC for Inventory

Back 15

As between a buyer in ordinary course of business who purchases inventory from a seller, gives new value, in good faith without knowledge the seller is violating his security agreement, and the security interest was created by the buyer’s seller, then the buyer takes free of the security interest. § 9-320.

Front 16

Buyer of Non-Inventory (Without Knowledge) vs. Secured Creditor

Back 16

As between a buyer of non-inventory (e.g., the buyer is not in the ordinary course of business), without knowledge of a security interest and a secured creditor, the buyer will take free of the secured creditor’s security interest unless during the 45 days after the buyer’s purchase the secured creditor: (i) makes a future advance without knowledge of the buyer’s purchase; or (ii) makes a future advance with knowledge of the buyer’s purchase but pursuant to a binding commitment entered into without knowledge of the buyer’s purchase. § 9-323.

Front 17

Garage Sale Rule

Back 17

As between a consumer buyer who purchases goods from another consumer without knowledge of a security interest in those goods or when financing statement has not been filed covering those goods, then the buyer takes free of the security interest. § 9-320.

Front 18

Bona Fide Buyer of Documents or Investment Property (with Control)

Back 18

A buyer of negotiable instruments, documents of title, or a buyer of investment property who takes control of that property, who qualifies as a holder in due course takes free of all Article 9 security interests. § 9-331.

Front 19

Statutory Lien Creditor in Possession vs. Prior Perfected Creditor

Back 19

As between a statutory lien creditor with possession and a prior perfected creditor, the statutory lien creditor takes priority unless the statute holds otherwise. § 9-333.

Front 20

Judicial Lien Creditor vs. Prior Perfected Creditor

Back 20

As between a judicial lien creditor and a prior perfected creditor the perfected creditor has priority. § 3-317.