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66 Cards in this Set

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Definition of Sec. Trans.
sec. trans. is a trans intended to create a security interest in personal property or fixtures.
Debtor
person who owes payment or performance for the obligation secured
Secured Party
lender, seller, or other person in whose favor there is a security interest
Security Agreement
agreement between the debtor and teh secured party which creates the security interest
Security Interest
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.
Collateral
the property subject to a security interest
PMSI (2 kinds)
- 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)
Attachment
those steps legally required to give the secured party a security interest in the collateral that is effective as against the debtor.
Perfection
those steps legally required to give the secured party an interest in the collateral that is effective as against the world
Financing Statement
document generally used to provide public notice of the security interest
SCAP2
- scope
- collateral
- attachment
- perfection
- priority
Goods
all things moveable at the time the security interest attaches and includes unborn livestock, growing crops, and fixtures
Four types of Collateral
- consumer goods
- equipment
- farm products
- inventory (can be office supplies)
Eight types of Semi-tangible and intangible property
- instruments
- documents
- chattel paper
- investment property
- accounts
- deposit accounts
- commercial tort claims
- general intangibles
Documents (e.g.)
bill of lading or warehouse receipt
Chattel Paper
record which evidences both a monetary obligation and a security interest in or a lease of specific goods

(e.g., car lease)
Scope of Art 9 (5)
- 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
Three steps to creating a security interest (attachment)
- security agreement
- secured party must have given value
- debtor must have rights in the collateral
Pledge (oral)
Give article to person to hold until debt is paid
Form of written security agreement (3)
- 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
After acquired property clause
- 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
Proceeds
includes whatever is received upon the sale, exchange, collection, or other disposition of collateral or proceeds.
Comingled Funds
Must track proceeds, if you cannot, then the proceeds are the lowest intermediate balance test
Perfection
gives notice to 3P of the secured interest
Five methods of perfection
- automatic
- possession of collateral by secured party
- control
- notation of lien on certificate of title
- filing a financing statement
Automatic Perfection
security interest in consumer goods
When is possession impossible
- account
- deposit account
- general intangible
- only way to possess $$$ is to hold cash
Non-consumer deposit accounts (3)
- 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
Automobile Perfection
only on certificate of title
Contents of Financing Statement (6)
- 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
Filing of Financing Statement (GR)
Secretary of State
Filing of Financing Statement for timber, fixture, etc attached to land
Register of Deeds
Multi-State Transactions - Where to File?
- debtor is located (principal residence)
- corporation (where organized)
- business with multiple addresses (where CEO is)
Debtor Moves - how long to refile?
4 months
Collateral moves - how long to refile?
1 year
Life and Renewal of a Financing Statement
5 years, may be renewed for 5 years if filed between 4.5 - 5.0 year
When debtor may receive termination statement?
20 days from demand
When may debtor on consumer goods receive termination and liability if not timely received?
1 month, $500
Perfection as to Proceeds
- secured party automatically has it for 20 days then must file unless
- proceeds are cash
- same office rule (filing)
Priority:

Perfected Sec v Perfected Sec (GR)
first to file OR perfect, whichever occurs first has priority
Priority:

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

Perfected Sec v Perfected Sec
Special Rule - inventory OR livestock
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
Special Priority Rules for deposit accounts (4)
- 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
Priority:

Sec Pty v. buyer of collateral

Authorized Sale
if the sale is authorized by the secured party, the buyer takes free of the security interest
Priority:

Sec Pty v. buyer of collateral

Unauthorized Sale (GR)
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
Consumer to Consumer Sales

(Garage Sale Exception)
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
Priority:

Sec Pty v. judgment lien holder
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
PMSI v. Lien Creditor

Special Rule
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
Security Pty v. Mechanics Lien
Statutory lienholders > perfected security interests
Steps for Retention of Collateral (2)
- 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
Who does RESALE Discharge?
debtor and jr. lienholders
Content of notice of sale (4)
- 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
Commercially Reasonable Sale
every aspect of the sale (including the method, manner, time, place, and terms) must be commercially reasonable
Failure to comply with notice requirement results in ...
discharge of debtor for any deficiency
Definition of Fixture
goods that have become so related to particular real property that an interest in them arises under real property law
Perfection of Sec Interest in Fixtures
fixture filing either before or 20 days after attachment
Priority:

Secured Pty v. Subsequent Real Estate Interest
security interest in fixtures has priority over any real estate interest that arises subsequently to the perfection of the security interest by fixture filing
Priority:

Secured Pty v. Prior Real Estate Interest (GR)
prior real estate interest that is properly recorded has priority over a security interest that subsequently arises
Priority:

Secured Pty v. Prior Real Estate Interest (Exception)
PMSI takes priority over an earlier in time realty interest if it is perfected by fixture filing before or 20 days after installation
Priority of Construction Loans
SUPERIOR
When is a fixture filing not necessary? (3)
- 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
Definition of 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)
Priority of Accessions (GR)
first to file (PMSI), etc
Priority of Accessions (Exception)
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
Rules for Removal of Accessions (2)
- priority
- responsible for repair
What do we need to know about Secured Transactions?
- categories of collateral
- 3 elements of attachment and sub rules
- 5 methods of perfection
- basic priority rules and special PMSI rules