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79 Cards in this Set
- Front
- Back
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When Repossession Finance Company declared a default and repossessed all the office equipment of attorney Portia Moot, as allowed by the security agreement, the company then did nothing with the collateral except let it sit in a storage room for 17 months. Finally it conducted a resale with appropriate notices and then sued Portia for the deficiency. She defended by arguing that actions speak louder than words and that, in effect, by doing nothing for such a long period, the finance company had constructively elected strict foreclosure and had forfeited any right to a deficiency.
Is this correct? |
No. But she could claim the creditor is not behaving in a commercially reasonable manner, which could
affect the right to deficiency. |
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If Dudley had made only one payment and then defaulted, causing AAI to repossess, could AAI
have sent him a proposal that it would keep the painting and forgive half the remaining debt only? |
. No.
§9-620: Acceptance of collateral in full or partial satisfaction of obligation—“in a consumer transaction, a SP may not accept collateral in partial satisfaction of the obligation it secures.” |
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After default, a secured party may sell the collateral ____
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In its present condition or following any commercially reasonably prep or processing.
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Who must you notify during the disposition of collateral?
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debtors, sureties, other creditors of record
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When must you provide notice of default?
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After default and a reasonable time before the date of disposition of collateral
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During Repo and Resale, after a default, the secured party may ____.
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Take possession of the collateral
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During Repo and Resale can a secured party proceed without judicial process?
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Yes if it proceeds without breach of the peace.
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What is the subjective test during Default?
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the creditor who in fact feels insecure may accelerate the debt even though no reasonable person in the creditors position would feel insecure
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What is the objective test during Default?
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doesnt allow repo unless the creditor has made a diligent and honest effort to check the grounds of insecurity and a reasonable person in the same circumstances would repo as well.
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Can a trustee avoid any transfer (including the creation of an art ( security interest) that is a fraudulent transfer?
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Yes
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During a floating Lien in Bankruptcy, the court must compare the debt:collateral ratio at what two points?
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90 days before the filing of the petition AND the date of the filing of the petition.
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When will a security interest that is neither fraudulent nor attackable by the trustee still be vulnerable?
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If the perfection of the security interest constitutes a preference
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What is a preference?
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a transfer of any property of the debtor made to or for the benefit of a creditor on account of an antecedent debt made by the debtor while insolvent
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Filing of bankruptcy petition creates an ________ of any further creditor collection activity.
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Automatic stay
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The strong arm clause allows the trustee to do what?
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acquire a lien on all the debtors property as of the moment of the filing of the bankruptcy.
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What is an accession?
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a good attached to another good. ex: a telephone installed in a car
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When does commingling occur?
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Occurs when goods are physically united with other goods so that their identity is lost
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What steps can a prior creditor take to protect its interest when it has notice?
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A prior creditor can take WHATEVER STEPS NECESSARY to protect its interest.
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What can a creditor do when it receives notice to ensure payment?
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it can do nothing at all, or it can call the loan (forcefully)
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What remedy does a prior creditor have if a Purchase money creditor gave notice and prevails to the inventory?
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As long as notice was given, the prior creditor has NO remedy
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What is a floating lien on inventory?
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A perfected interest in existing and after-acquired inventory.
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When does a Purchase Money Creditor receive super priority over other creditors?
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If the Purchase Money Security Interest is perfected at the time the debtor receives possession AND they file notice.
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What does priority decide?
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Which creditor gets what
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Who receives priority when the dispute involves an unperfected creditor vs another unperfected creditor?
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Whoever attached first
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Who receives priority when the dispute involves an unperfected creditor vs a perfected creditor?
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Perfected creditor
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Who receives priority when the dispute involves an unperfected creditor vs a buyer?
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Buyer
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Who receives priority when the dispute involves an unperfected creditor vs a lien creditor?
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Lien creditor
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Who receives priority when the dispute involves a perfected creditor vs another perfected creditor?
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First to file or perfect has priority
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What is the grace period if a new certificate of title is issued?
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4 months- only protects innocent purchasers (buyers, not used car sellers)
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What laws are the parties bound to during a multi-state transaction?
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Bound by the law of any state or nation bearing a "reasonable relation" to the transaction
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If a debtor's location changes, when is reperfection required?
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within 4 months after the change
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If a debtors identity changes, when is reperfection required?
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within 1 year
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Does a debtors location govern perfection?
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Yes! Individuals by domicile; corporations by state incorporation;
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How long is a financing statement effective for?
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5 years unless a continuation statement is filed
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How long must the filing office keep records of lapsed financing statements?
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For 1 additional year
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When is an assignment statement filed?
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If a secured party assigns the security interest to another creditor
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An argument that a "sale" hasnt taken place when owner keeps an ___ of ownership.
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Keeps an indicia of ownership.
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Does automatic perfection take place when the owner keeps some ownership of the good?
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No!, buyer must still take usual steps for perfection
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What does a transfer "with recourse" resemble? Sale or loan
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Loan
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What does automatic perfection mean?
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that the secured party need only make sure that its security interest has attached.
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Is a purchase money security interest automatically perfected?
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Yes- consumer goods are unlikely to be used as collateral twice
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What is perfection?
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Perfection is the process that the parties must go through to amke sure that the creditors security interest is good against other creditors
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What must happen before a security interest can be perfected?
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It must attach/be effective
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What two ways can a creditor perfect their security interest in tangible collateral?
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Possession or filing a financing statement
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What two ways can a creditor perfect their security interest in intangible collateral?
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Control or filing a financing statement
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How long does perfection by possession last?
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as long as possession is continued.
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What is attachment?
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the process by which the security interest in favor of the creditor becomes effective against the debtor
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What are the three requirements of attachment?
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1. an agreement
2. value must be given by the secured party 3. debtor must have rights in collateral |
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Are generic descriptions allowed in the security agreement? the financing statement?
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Not ok in security agreement; ok in the financing statement
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What must the security agreement always contain?
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a description of the collateral involved.
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What is a financing statement?
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a document filed in the appropriate public office by the creditor to perfect the creditors rights
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Who must sign the financing statement?
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No one needs to sign it. (Although debtor must authenticate it
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When does a change in the debtors identity force a refiling of the financing statement?
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any change that makes the financing statement seriously misleading.
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What is a security agreement?
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an agreement between the debtor and the creditor which the debtor grants to the creditor a security interest in the collateral.
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Is a written security agreement necessary when collateral is in the possession of the secured party?
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No.
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Goods (movables) include ____, ____, ____ and _____.
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Consumer goods, farm products, inventory, and equipment
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Consumer goods are used and bought primarily for ____.
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personal, family or household purposes
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Inventory is ____.
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goods held for sale or lease to others in the ordinary course of business
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Farm products include goods used or produced in farming operations including ____.
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crops; livestock; products of crops and livestocks as long s they are in their unmanufactured state (milk, eggs) and supplies used in farming operations (cattle feed)
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Equipment includes ____.
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anything not included in consumer goods, inventory, and farm products.
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Four types of indispensable paper include...
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1. documents (receipts, bills of lading)
2. instruments (notes and drafts) 3. chattel paper 4. investment property |
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Four types of intangibles include ....
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1. Accounts
2. deposit accounts 3. commercial tort claims 4. general intangibles (catch all category) |
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What two types of liens are excluded from Article 9?
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1. statutory lien
2. landlords lien |
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A ____ is an interest in the debtors property given by law to protect a creditor.
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Lien
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A consenual lien in personal property or fixtures is called a _____ and is governed by Art 9 of the UCC.
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Security interest
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A judicial lien arises from ___.
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a lawsuit/ judicial proceedings
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What type of lien is created by statute?
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a statutory lien.
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What is the strong arm clause?
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It is a provision of the Bankruptcy code that makes the trustee conclusively presumed to occupy the legal position of a judicial lien creditor who has levied on all of the bankrupts property.
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What is a pledge?
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When the debtor (pledgor) gives physical possession to the creditor (pledge) until the debt is paid.
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What are the drawbacks of a pledge?
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1. only for tangible items.
2. For some types of collateral the debtor needs to keep possession. (machines etc.) |
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In which 3 circumstances can an unpaid seller repossess?
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1. When §2-701 applies
2. when the buyer has specifically granted the seller a security interest in the object sold 3. when the seller sues, recovers judgment and has sheriff seize property |
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What is a security interest?
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an interest in personal property or fixtures which secures payment of performance of an obligation.
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When does Article 9 apply?
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To ANY transaction which is intended to create a security interst in personal property or fixtures.
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Who is the debtor?
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person with interest in collateral
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who is the obligor?
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person who owes the debt.
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What is a true consignment?
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neither a sale nor a security device, but a procedure where the owner (consignor) sends (consigns) them to a retailer (consignee) for sale.
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When is a consignment NOT a true consignment?
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when a security interest is intended, a true consignment has not occurred. It rather is a sale on credit.
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Are true consignments covered by Article 9?
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Yes.
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When is a lease covered by Article 9?
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When it looks like a lease but actually acts likes a secured transaction.
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