• (a.k.a. workers lien)
• a contract bailee who repairs or improves the property's value has a possessory lien on it if not paid for work
• with propper notice, bailee can sell property to satisfy lien

creditor must...

1. not have agreed to extend credit (cash only)
2. not voluntarily give possession back to the bailor (test driving car doesn't count)

and there must be

1. delivery with intent to create a security interest

1. artisan's lien had priority over a previously perfected statutorily filed lien in most states
2. any increase in value or profits derived from the pledged property can be retained by the pledgee as further security except cash (must be returned to reduce debt)
3. when stock is pledged, if pledgee registers in his name and holds in trust for pledgor, stock dividends and splits can be kept by pledgee but cash dividends must be turned over or used to reduce debt

1. statutorily filed lien by a creditor who has rendered services, labor, or material to repair or improve real estate and the creditor hasn't paid
2. needs to be filed within 60-120 days of the last date the services or materials were furnished
3. lien is on entire realty (whole thing can be foreclosed)
4. only surplus goes to the former owner
5. examples of creditors: materials supply store, subcontractor, general contractor, employee of contractors

1. usually a post-judgment remedy but can be a prejudgment remedy after hearing
2. garnishable property includes bank accounts and wages (usually limited to 25% for wages)
3. cannot garnish social security and employers can't fire employees because of garnishment

contract between the debtor and his or her creditors whereby the creditors agree to discharge the debtor's debts upon a payment of lesser sum

• debtor transfers property with specific intent to defraud
• creditor can secure a writ of execution and levy and set aside title transfer

1. due to the circumstances, there is a presumption of fraud, which can be rebutted
2. if 3rd party receiving property in the fraudulent act is a merchant, then act can NOT be fraud in fact
3. circumstances must indicated presumption of fraud and if they do, burden of proof (no fraud) is shifted to debtor and 3rd party

1. insolvent debtor voluntarily transfers certain assets to a trustee or assignee who is to liquidate the assets and tender to each creditor on a pro-rata basis in satisfaction of debt
2. creditors can accept or reject
3. creditor acceptance = complete discharge
4. credior rejection enables him to (a) go after nonexempt property not assigned, (b) receive surplus (if any) after participating creditors have been paid (c) petition creditor into bankruptcy

4 rules for loan from a creditor in a guaranty or surety relationship

1. money goes to principle debtor
2. surety is liable to creditor in a strict suretyship at time debt is due and is primarily liable
3. gurantor is liable to creditor in a guaranty upon principal debtor's default because guarantor is secondarily liable
4. any payment by surety or guarantor to creditor can be legally recovered from principle debtor

1. if guaranty is made by an express contract with the creditor (guarantor is secondarily liable) the contract must be in writing and signed by guarantor (or written memo)
2. exception: if main purpose of leading object docterine can be applied (if main purpose of agreement is that the guarantor will benefit financially or economically from it, then oral is enforceable)

1. proceed against principal debtor personally and/or his nonexempt property. if more then one debt outstanding between the two when payment is made, debtor can chose which to apply it to.
2. proceed against guarantor personally according to guaranty of contract. can even reduce claim to judgment and by writ of execution can go after guarantor's nonexempt assets
3. proceed against collateral of the debtor held either by the creditor or the guarantor. can sell collateral to satisfy debt and defualt costs (extra goes to debtor and so does collateral).

1. exoneration
2. reimbursement and indemnity
3. subrogation
4. right of contribution

• right is contractural if guarantor was requested to become guarantor by principal debtor
• if guarantor was not requested by the principal debtor, then right is based on quasi-contract theory of recovery (right to pursue value of partial performance performed)
• right is reduced if principal debtor had a defense against paying the creditor

upon payment, gurantor succeeds to any rights the credit has (stands in creditors shoes).  these rights include:

1. rights against the principal debtor including right to file a claim in bankruptcy
2. rights against debtor's collateral held by the creditor or the guarantor
3. rights against 3rd parties (ex: damagers of collateral)
4. rights against a cosurety

if cosureties become such by contract or consent, their agreement on amount of contribution is binding.  if no agreement, contribution is determined by a ratio of the proportionate maximum liability of each cosurety

amount of contribution entitlement=(max liability of cosurety/total max liability of all cosureties) x amount paid by cosurety seeking contributions

• general rule: defenses derived from principal debtor are available for guarantor (creditor's fraud, duress, failure of consideration, breach of loan, etc.)
• Exceptions: principal debtor's incapacity, bakruptcy, or statute of limitations running out on principal debtor's debt

1. guarantor's incapacity
2. guarantor's discharge decree into bankruptcy
3. statute of limitation runs out on guarantor's obligation (begins on date he becomes liable for debt)

1. release
2. refusal of principal debtor's tender
3. material alteration
4. failure to disclose
5. modification of contract (action of creditor and principal debtor)
6. surrender or impairment of debtor's collateral
7. guaranty of collections

• if principal debtor is released by creditor without guarantor's consent, guarantor is also released from liability
• collateral of the principal debtor held by either the creditor of the guarantor can still be used by the creditor to satisfy debt

agreement between principal debtor and creditor that is material and binding without consenting to the guarantor...

1. if gurantor is gratiuitous, then liability is discharged
2. if guarantor is compensated, then guarantor's liability is decreased to the extent of loss suffered by the guarantor from the modification