Secured Transactions

Front 1

Definition of Sec. Trans.

Back 1

sec. trans. is a trans intended to create a security interest in personal property or fixtures.

Front 2

Debtor

Back 2

person who owes payment or performance for the obligation secured

Front 3

Secured Party

Back 3

lender, seller, or other person in whose favor there is a security interest

Front 4

Security Agreement

Back 4

agreement between the debtor and teh secured party which creates the security interest

Front 5

Security Interest

Back 5

interest in personal property or fixtures which secures payment or performance of an obligation. It is a contingent property interest in the debtor's collateral that the debtor grants the creditor.

Front 6

Collateral

Back 6

the property subject to a security interest

Front 7

PMSI (2 kinds)

Back 7

- secured party sells debtor collateral on credit and retains a security interest (seller finance)
- loan which enables the debtor to buy specific collateral and the creditor takes a security interest in that collateral (financer financed)

Front 8

Attachment

Back 8

those steps legally required to give the secured party a security interest in the collateral that is effective as against the debtor.

Front 9

Perfection

Back 9

those steps legally required to give the secured party an interest in the collateral that is effective as against the world

Front 10

Financing Statement

Back 10

document generally used to provide public notice of the security interest

Front 11

SCAP2

Back 11

- scope
- collateral
- attachment
- perfection
- priority

Front 12

Goods

Back 12

all things moveable at the time the security interest attaches and includes unborn livestock, growing crops, and fixtures

Front 13

Four types of Collateral

Back 13

- consumer goods
- equipment
- farm products
- inventory (can be office supplies)

Front 14

Eight types of Semi-tangible and intangible property

Back 14

- instruments
- documents
- chattel paper
- investment property
- accounts
- deposit accounts
- commercial tort claims
- general intangibles

Front 15

Documents (e.g.)

Back 15

bill of lading or warehouse receipt

Front 16

Chattel Paper

Back 16

record which evidences both a monetary obligation and a security interest in or a lease of specific goods

(e.g., car lease)

Front 17

Scope of Art 9 (5)

Back 17

- any transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract
- an agricultural lien
- a sale of accounts (unless part of sale of a business)
- certain consignments
- secured sale disguised as a lease

Front 18

Three steps to creating a security interest (attachment)

Back 18

- security agreement
- secured party must have given value
- debtor must have rights in the collateral

Front 19

Pledge (oral)

Back 19

Give article to person to hold until debt is paid

Front 20

Form of written security agreement (3)

Back 20

- evidenced by a record and must show an intent to create a security interest
- authenticated by the debtor (even smiley face)
- description which reasonably identifies the collateral

Front 21

After acquired property clause

Back 21

- collateral reaches after-acquired property and is common in inventory but does not attach to consumer goods unless the debtor acquires rights within 10 days after secured party gives value

Front 22

Proceeds

Back 22

includes whatever is received upon the sale, exchange, collection, or other disposition of collateral or proceeds.

Front 23

Comingled Funds

Back 23

Must track proceeds, if you cannot, then the proceeds are the lowest intermediate balance test

Front 24

Perfection

Back 24

gives notice to 3P of the secured interest

Front 25

Five methods of perfection

Back 25

- automatic
- possession of collateral by secured party
- control
- notation of lien on certificate of title
- filing a financing statement

Front 26

Automatic Perfection

Back 26

security interest in consumer goods

Front 27

When is possession impossible

Back 27

- account
- deposit account
- general intangible
- only way to possess $$$ is to hold cash

Front 28

Non-consumer deposit accounts (3)

Back 28

- bank which holds account automatically have a security interest
- gains control if put in banks name
- agreement between debtor and bank that it will follow bank's order

Front 29

Automobile Perfection

Back 29

only on certificate of title

Front 30

Contents of Financing Statement (6)

Back 30

- debtor's name
- description of collateral
- secured party's name
- real property if related (e.g., timber)
- signature not required, but debtor must authorize filing (authentication of security agreement ok)
- security agreement itself may be filed if it contains all above

Front 31

Filing of Financing Statement (GR)

Back 31

Secretary of State

Front 32

Filing of Financing Statement for timber, fixture, etc attached to land

Back 32

Register of Deeds

Front 33

Multi-State Transactions - Where to File?

Back 33

- debtor is located (principal residence)
- corporation (where organized)
- business with multiple addresses (where CEO is)

Front 34

Debtor Moves - how long to refile?

Back 34

4 months

Front 35

Collateral moves - how long to refile?

Back 35

1 year

Front 36

Life and Renewal of a Financing Statement

Back 36

5 years, may be renewed for 5 years if filed between 4.5 - 5.0 year

Front 37

When debtor may receive termination statement?

Back 37

20 days from demand

Front 38

When may debtor on consumer goods receive termination and liability if not timely received?

Back 38

1 month, $500

Front 39

Perfection as to Proceeds

Back 39

- secured party automatically has it for 20 days then must file unless
- proceeds are cash
- same office rule (filing)

Front 40

Priority:

Perfected Sec v Perfected Sec (GR)

Back 40

first to file OR perfect, whichever occurs first has priority

Front 41

Priority:

Perfected Sec v Perfected Sec
Special Rule - other than inv or livestock

Back 41

PMSI in goods other than inventory or livestock 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 within 20 days

Front 42

Priority:

Perfected Sec v Perfected Sec
Special Rule - inventory OR livestock

Back 42

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 security in collateral, he takes priority

Front 43

Special Priority Rules for deposit accounts (4)

Back 43

- sec interest perfected by control over a sec interest perfected by proceeds
- if conflicting interests each were perfected by control, they rank according to time of control
- sec party who has obtained control by putting the deposit acct in its own name has priority over all other 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 acct in his name

Front 44

Priority:

Sec Pty v. buyer of collateral

Authorized Sale

Back 44

if the sale is authorized by the secured party, the buyer takes free of the security interest

Front 45

Priority:

Sec Pty v. buyer of collateral

Unauthorized Sale (GR)

Back 45

buyer in the ordinary course of business 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

Front 46

Consumer to Consumer Sales

(Garage Sale Exception)

Back 46

buyer takes free of sec 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

Front 47

Priority:

Sec Pty v. judgment lien holder

Back 47

An unperfected security interest is subordinate to the rights of a person who becomes a lien creditor before the security interest is perfected. If the security interest is perfected before the person becomes a lien creditor, the security interest has priority

Front 48

PMSI v. Lien Creditor

Special Rule

Back 48

if the secured party files with respect to a PMSI within 20 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

Front 49

Security Pty v. Mechanics Lien

Back 49

Statutory lienholders > perfected security interests

Front 50

Steps for Retention of Collateral (2)

Back 50

- proposal to other creditors and no objection within 20 days
- debtor consents either by agreeing in an authenticated record or failing to make an authenticated objection within 20 days

Front 51

Who does RESALE Discharge?

Back 51

debtor and jr. lienholders

Front 52

Content of notice of sale (4)

Back 52

- statute provides safe harbor notice forms
- for a public sale - time and place
- for a pvt sale, notice of the time after which the sale will occur must be given
- extra info is required for consumer goods

Front 53

Commercially Reasonable Sale

Back 53

every aspect of the sale (including the method, manner, time, place, and terms) must be commercially reasonable

Front 54

Failure to comply with notice requirement results in ...

Back 54

discharge of debtor for any deficiency

Front 55

Definition of Fixture

Back 55

goods that have become so related to particular real property that an interest in them arises under real property law

Front 56

Perfection of Sec Interest in Fixtures

Back 56

fixture filing either before or 20 days after attachment

Front 57

Priority:

Secured Pty v. Subsequent Real Estate Interest

Back 57

security interest in fixtures has priority over any real estate interest that arises subsequently to the perfection of the security interest by fixture filing

Front 58

Priority:

Secured Pty v. Prior Real Estate Interest (GR)

Back 58

prior real estate interest that is properly recorded has priority over a security interest that subsequently arises

Front 59

Priority:

Secured Pty v. Prior Real Estate Interest (Exception)

Back 59

PMSI takes priority over an earlier in time realty interest if it is perfected by fixture filing before or 20 days after installation

Front 60

Priority of Construction Loans

Back 60

SUPERIOR

Front 61

When is a fixture filing not necessary? (3)

Back 61

- factory or office machines
- equipment that is not primarily used or leased for the use in the operation of the real estate
- replacements of domestic appliances which are consumer goods

Front 62

Definition of Accessions

Back 62

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)

Front 63

Priority of Accessions (GR)

Back 63

first to file (PMSI), etc

Front 64

Priority of Accessions (Exception)

Back 64

security interest in an accession is subordinate to a sec interest in the whole which is perfected by compliance with the requirement of a certificate-of-title statute

Front 65

Rules for Removal of Accessions (2)

Back 65

- priority
- responsible for repair

Front 66

What do we need to know about Secured Transactions?

Back 66

- categories of collateral
- 3 elements of attachment and sub rules
- 5 methods of perfection
- basic priority rules and special PMSI rules