Reasons to take the course - on DE and many other Bars (not PA) - all about article 9 of UCC - good for small businesses or car repossession - covers personal effects and personal itsm - not for real estate - 

Relation to UCC vs non UCC law - if UCC is silent, then contract law applies, other standing law may also apply - comments on UCC are very close to law - articl 2 comments are not very helpful, article 9 comments are very good.  

Agreement is the text and description of the transaction - the bargain - does not mean that it is legally enforceable.  

Contract is a legally enforceable agreement based on mutual agreement to the UCC>   

Expressed and implied terms for each contract (implied warranty of merchantability) - implied sources are course of performance (two previous circumstances may be sufficient), course of dealing, usage of trade; 

1) Scope - does statute apply to the problem?

2) Deconstruct the statute - ID the elements.

3) Define terms - know what legal defintions are

4) Apply the statute to your facts

5) Linking up - see if other statutes are also affected - like UCC 2A for leases

Course of performance - same parties, same contract will continue premises of contract without explicit agreement unless there is an objection

Course of dealing - same parties different contract - previous contracts establishes common basis of understanding and interpretation of new contract. 

Usage of trade - Different parties, different contracts but common policies and procedures in trade agreements such as standard payment terms, etc..  

1) the UCC may displace other bodies of law - the UCC prevails 

2) unless displaced by a particular provision of the UC, the principles of law and equity (fair dealing) supplement the code

1) Is the transaction in the scope of Sec 9

2) What is the collateral for a secured tx

3) Has a security interest been created?

4) Has the security interest been perfrected?

5) Are thier priority disputes with 3rd parties for the same collateral

6) Is the debtor in default in reality (consumer law)

7) What are the secured parties remedies after the debtor default?

Graphic Organizer of Article 9

Scope of Art 9

Creation of Security Interest

1. Issues arising between debtor and secured party
   1. Default
   2. Remedies
2. Issue arising from competing claims for same collateral
   1. Perfection
   2. Priority disutes
   3. Bankrupty considerations

• What is applicable:
  • Security interests
  • Sale of accounts, chattel paper, promissory notes (even when secured by real estate)
  • Consignments
  • Agricultural Liens
  • Secured obligations
• What is not applicable
  • MORTGAGES OR Leins - landlord or statutory
  • Sale or Assignment of accounts, chattel papers, promissory notes
• Claims for wages, tort awards, "things in action"

Any mark intended to authenticate - initials or even just letterhead without signature qualifies as signed

Must be in writing and not typed

If the transaction creates a security interest (credit/secured transaction, UCC) by

1) not having a option of buyer to terminate (lease has option to terminate)

2) term of the lease not greater than economic life (lease has economical life left after lease)

3) buyer is bound to renew the lease to the end of economic life of the asset = security interest

4) Buyer has the option to buy the asset at end of lease for little or no consideration (only for first lease)

5) present value of obligation to pay is equal or more than fair market value DOES NOT AUTOMATICALLY MAKE A LEASE

Marhofer buys one sausage machine in a secured transaction and second one on a lease.  The lease for the second machine said could buy at end of first term for $9980 or renew lease for four years for 3000/year (in advance) and then have option to buy for $1 at end of second lease.  

Neither the $1 option at end of second lease nor option to buy for $9K at end of first lease made this a secured transaction or sale - this was a true lease.  

See UCC 1-203

The risk of loss in the interest in property in a secured transaction is the debtor - different than sales vs secured trans - different profile of risk - debtor takes the risk of default in secured transaction but the buyer takes the risk in a traditional sale agreement (where 

two kinds of UCC 9 disputes - default dispute (sec creditor vs debtor) and priority disputes (sec creditor vs other 3rd party)

Value can be:

(1) Extending credit even if not drawn upon;

(2) as security for, or in total or partial satisfaction of, a preexisting claim;

(3) by accepting delivery under a preexisting contract for purchase; or

(4) in return for any consideration sufficient to support a simple contract.

a)Description is ok if it reasonably identifies the item.

Needs to be objectively determinable

A description of collateral as "all the debtor's assets" or "all the debtor's personal property" or using words of similar import does not reasonably identify the collateral.

A security agreement is effective according to its terms between the parties, against purchasers of the collateral, and against creditors.

Other applicable law applies.  

In case of conflict between this article and a rule of law, statute, or regulation described in subsection (b), the rule of law, statute, or regulation controls. 

A security interest attaches to collateral when it becomes enforceable against the debtor unless another agreement

A security interest is enforceable against the debtor and third parties with respect to the collateral only if :

(1) value has been given;

(2) the debtor has rights in the collateral; and

(3) signed authenticated a security agreement that provides a description of the collateral OR

(B) certificated security and is in the possession of the secured party under Section 9-313 pursuant to the debtor's security agreement;

a security agreement may create or provide for a security interest in after-acquired collateral (house loan)

A security interest does not attach under a term constituting an after-acquired property clause to:

(1) consumer goods, other than an accession when given as additional security, unless the debtor acquires rights in them within 10 days after the secured party gives value; or

(2) a commercial tort claim.

A security interest in favor of a securities intermediary attaches to a person's security entitlement if:

(1) the person buys a financial asset through the securities intermediary in a transaction in which the person is obligated to pay the purchase price to the securities intermediary at the time of the purchase; and

(2) the securities intermediary credits the financial asset to the buyer's securities account before the buyer pays the securities intermediary.

(b) [Security interest secures obligation to pay for financial asset.]

The security interest described in subsection (a) secures the person's obligation to pay for the financial asset.

A security interest in favor of a person that delivers a certificated security or other financial asset represented by a writing attaches to the security or other financial asset if:

(1) the security or other financial asset:

(A) in the ordinary course of business is transferred by delivery with any necessary indorsement or assignment; and

(B) is delivered under an agreement between persons in the business of dealing with such securities or financial assets; and

(2) the agreement calls for delivery against payment.

The security interest described in subsection (c) secures the obligation to make payment for the delivery.

1) Tangible property such as Goods, consumer goods, equipement, farm products, inventory, money

2) Quasi tangible property - Instruments, Investment property, Documents, Chattel paper, letter of credit rights

3) Intangible Property - Accounts, health care insurance receivables, Deposit accounts, General intangibles

4) Proceeds - Cash proceeds or non cash proceeds - what the creditor gets when he sells repoed car. 

"Security interest" means an interest in personal property or fixtures which secures payment or performance of an obligation

Only key issue is to determine if it is a sale, a lease, or security interest - see 1-203 Lease vs Security Interest

"Account" means a right to payment of a monetary obligation, whether or not earned by performance,

Property

services rendered

insurance policy

arising out of the use of a credit or charge card 

Lottery winnings

DOES NOT INCLUDE

(i) rights to payment evidenced by chattel paper or an instrument, (ii) commercial tort claims, (iii) deposit accounts, (iv) investment property, (v) letter-of-credit rights or letters of credit

5) "Agricultural lien" is an interest in farm products:

(A) which secures payment for:

(i) goods and services for debtor's farming operation; or

(ii) rent on real property leased for farming operation;s

(B) which is created by statute in favor of a person that:

(i) in the ordinary course of its business of farming operation; or

(ii) leased real property to a debtor in connection with the debtor's farming operation; and

(C) whose effectiveness does not depend on the person's possession of the personal property.

 "Chattel paper" means a record showing both a monetary obligation and a security interest in specific bought or leased goods and/or software

The term does not include (i) charters or other contracts involving the use or hire of a vessel or (ii) records that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card. If a transaction is evidenced by records that include an instrument or series of instruments, the group of records taken together constitutes chattel paper.

Consignment means a transaction more than $1000, regardless of its form, in which a person delivers goods to a merchant (not auctioneer)  for the purpose of sale 

AND the merchant is not generally known to  engage in selling the goods of others (not a pawn shop)

(C) the goods are not consumer goods immediately before delivery; and

(D) the transaction does not create a security interest that secures an obligation.

(1) a transaction, that creates a security interest in personal property or fixtures by contract;

(2) an agricultural lien;

(3) a sale of accounts, chattel paper, payment intangibles, or promissory notes;

(4) a consignment;

(5) a security interest arising under 9-110; and

(6) a security interest arising under Section 4-210 or 5-118.

NOT landlord lein, assignment of claim for wages, sale of accounts as part of the sale of the business

A security interest arising under Section 2 or 2A is subject to this article. However, until the debtor obtains possession of the goods:

(1) the security interest is enforceable, even if Section 9-203(b)(3) has not been satisfied;

(2) filing is not required to perfect the security interest;

(3) the rights of the secured party after default by the debtor are governed by Article 2 or 2A; and

(4) the security interest has priority over a conflicting security interest created by the debtor.

1) Transaction regadles of form

2) security interest 

3) In Personal Property or fixture

4) by Contract

LIAS - Lease intended as security - disguised as a sale of goods - option to purchase, remaining economic life

CISD - Consignment disguised/intended as sale of good

True Consignment / Sectures transaction- 9-102(20) consigner definition - 9-109 scope indicates that consignments are covered under secured tx.  

True Lease - Article 2A - 1-203 defined

a secured party shall use reasonable care in the custody and preservation of collateral in the secured party's possession

When secured party is in possession, debtor is reasonable expenses for taxes, insurance; secured party can use or operate the collateral

Secured party can hold proceeds from collateral

When the debtor has fulfilled the debt to the secured party, 

Within 10 days of an authenticated demand of the debtor shall release the collateral or cause the release of the collateral from the controlling entity (bank, property lien, etc) 

This applies when there is no outstanding secured obligation and secured party is not required to give value

secured party must send notice within 10 days of an authenticated demand by debtor to release the account debtor from any further obligation to the secured party.  

After default, secured party has right to:

Reduce the claim to a judgement, foreclosure, etc. 

Operate as he owns the collateral per 9-207

Debtor or obligator may not waive or vary the rules stated in sections:

207- use and operation of the collateral by sec. party

210 - request for accounting demanded by debtor

607(c) - collection and enforcement of collateral

608 and 615 - payment of noncash proceeds of collection

610, 611, 613, 614 re disposition of collateral

620-621-622-acceptance of collateral in satisfaction of oblgi

9-623 - redemption of collateral

(a)The parties may determine by agreement the standards measuring the fulfillment of the rights of a debtor or obligor and the duties of a secured party under a rule stated in Section 9-602 if the standards are not manifestly unreasonable.

Subsection (a) does not apply to the duty under Section 9-609 to refrain from breaching the peace.

When there is both personal and real property and fixtures, this section allows for the secured party to proceed the same with all three types of propery when the collateral has any combination of personal or real propoerty or fixutures

Think of a car repossessed that had person property in it and new fixtures attached.  

A secured party does not owe a duty to:

the debtor unless the secured party knows that the person is a obligor, the ID of the person, and how to communicate with the person. 

If so agreed, the secured party after default may:

1) notify debtor to may payment 

2) take any proceeds entitled to the secured party

3) still obligate the debtor to make payments

4) take the balance of a deposit account, or instruct the bank to pay,  that was the collateral

Can also move to foreclose on a mortgage, 

Can also deduct the reasonable expenses from the collection 

Secured party shall apply cash proceeds to pay:

1) reasonable expenses for collection

2) Satisfy the obligation secured by the secured interest

If the underlying transaction is a sale of accounts, chattel paper, payment intangibles, or promissory notes, the debtor is not entitled to any surplus, and the obligor is not liable for any deficiency.

After default, a secured party:(1) may take possession of the collateral; and (2) may render equipment unusable and dispose of collateral on a debtor's premises under 

A secured party may proceed (1) pursuant to judicial process; or 2 proceed without breach of the peace.

(c)If so agreed, and in any event after default, a secured party may require the debtor to assemble the collateral and make it available to the secured party at a place to be designated by the secured party which is reasonably convenient to both parties.

After default, a secured party may sell, lease, license, or otherwise dispose of any or all of the collateral in its present condition or following any commercially reasonable preparation or processing.

Commercially reasonable disposition

Secured party can purchase collateral at public auction or if not commonly sold at auction, can privately buy

(a) [Reasonable time is question of fact.]

Except as otherwise provided in subsection (b), whether a notification is sent within a reasonable time is a question of fact.

b- 10-day period sufficient in non-consumer transaction.

In a transaction other than a consumer transaction, a notification of disposition sent after default and 10 days or more before the earliest time of disposition set forth in the notification is sent within a reasonable time before the disposition

Except in a consumer goods transaction, Notification of disposition must have: 

A) describes the debtor and the secured party;

(B) describes the collateral for intended disposition;

(C) states the method of intended disposition;

(D) states that the debtor is entitled to an accounting

(E) states the time and place of a public disposition 

(2) Jury is to decide if above question of fact is met

minor errors cannot be not seriously misleading.

In a consumer goods transaction, the notice must have:

 (A) the information specified in Section 9-613(1) AND;

(B) a description of any liability for a deficiency of the person to which the notification is sent;

(C) a telephone number from which the amount that must be paid to the secured party to redeem the collateral under Section 9-613 is available; and

(D) a telephone number or mailing address from which additional information concerning the disposition and the obligation secured is available.

A secured party shall apply proceeds of disposition in the following order to:

(1) the reasonable expenses of retaking, holding, preparing for disposition, reasonable attorney's fees 

(2) the satisfaction of obligations under which the disposition is made;

(3) the satisfaction of obligations secured by any subordinate security interest 

In a consumer-goods transaction the secured party shall:

(1) send an explanation to the debtor after disposition at or before the accounting of disposition and within 14 days after receipt of a request; or

(2) in the case of a consumer obligor who is liable for a deficiency, within 14 days after receipt of a request, send to the consumer obligor a record waiving the secured party's right to a deficiency.

Cary flitter leads the class - default - repossessions

video of police helping to reposess a car - same as in consumar law - state police tried to help with self-help of repo of car - Hyman case -0 $505K verdict against state police - no physical harm or economic loss from the state police actions - 

Three types of cases 1) 4th amendment and 1983 case, 2) breach of the peace case - altercation in repossession 3) notice cases where bank did not provide proper notice of repossession. 

Retail installment sale contract (RISC) security interest, defines default and rights on default - 9 times out of 10 the agreement is as RISC contract - combined sales and finance security document -  financed at the dealership - FIRST check to see if there an ACTUAL default under the agreement - normally a payment past due date or failure to keep insurance - maybe money went to wrong account, etc.  when can they repossess vehicle or accelerate and require the entire amount of loan is due) and repossession - 

13 PA 9609 a and b - Right to repo on default - can be judicial or nonjudicial process - nonjudicial process MUST NOT BREACH OF PEACE - nonjudicial process does not have a warrant from court to get the car/secured item - 

Giles vs 1st Virginia Credit - plaintiff lost, low bar for breach of peace - can even be raised voice or calling of police is a breach of the peace - most repo men will not leave when there is a breach of the peace - when police called, they normally act on the repo man side - 

Aticple 9610 - b - every aspect of the disposition of the collateral must be commercially reasonable -manner time, place and method - commercial reasonableness can be issue of law or fact - is selling price of the repoed car fair or was there competitive bidding at an auction -  how long did it take to dispossess the car, - can be an issue of law if the redemption (apy full amount) and reinstatement  (come into current payment and get car back) duration was consistent (15 days for PA and typical) with what the RISC said - 

In pari materia - reading of two statues concerning the same topic together - like UCC reasonable notice and state statue saying 30 days notice - which is controlling? - general rule is to read both together so that they do not disagree with one another (in pari materia) - if there is inconsistency then the specific statue fills in the gaps of the other one, and then when in conflict, state specific normally rules.  

PA 9611 - notice of disposition is required -ALWAYS CHECK TO SEE IF PROPER- reasonable and authenticated notice of disposition - promptly before the collateral is actually disposed/sold.  with all the details of how much is owed, when they can redeem, when will it be sold, etc. - by certified mail or personal notice required - phone number where to call to redeem, - info required is in code PA 9613and 9614 - three is a standard form that is required to comply - simple information needed and bank do not comply - 

Hyman vs Devlin - repo case we heard video - says that government or official/police CANNOT assist in the repo without due process which requires notice and hearing in court - also applies to eviction proceeding

Failure to conduct a repo in a commercially reasonable manner has consequences and can lead to an inability to collect deficiency and damages - IF BALANCE DUE AFTER REPO IS MORE THAN THE REMAINING MONEY DUE MAY NOT BE "COMMERCIALLY REASONABLE MANNER" - bank has to PROVE the deficiency balance - valid agreement, prove that payments are deficient, was repo correct, was collateral damaged, was notice provided correctly, etc. 

absolute bar (DE), if lender did anything improper then the finance company has no right to repo or deficiency - ANY FLAW - vs presumptive states (most states, PA NJ) - presumption is value of collateral satisfied the loan balance, burden shifts to lender to prove evidence to prove reasonable disposition - must be better than a simple tear sheet summary of the loan - 

agency is key - when is a company responsible for acts of employee or contractor - agency general rule is that employer is vicariously liable for employee actions that are related to employee actions - an independent contractor does not bear liability (is not an agent) back to the employer/person who hired them - does employer have right to control how the employee does his work - agency is key because if the priciple had right to control the agent - in repossession there is a highented rule of agency where a repo man even when an independent contractor repos the car - repo men will always be an agent for repo purposes and cannot be classified an independent contractor - the finance company cannot get out of liability because repo is done by an "independent contractor" - strict liability to bank/finance company.    

Statutory damages under UCC:

9-625(b) - liable for damages for ANY LOSS associated with failure to comply -0 including 

up to page 84 in class - need to do scwalb case in txt fo next class.  

section 620-622 - strict repo where the collateral is kept by the financing group rather than selling the collateral - normally keeping the collateral as full satisfaction of debt as it hard to prove what is the value of the collateral.  can be done in partial or full satisfaction

Look at handout of strict foreclosure summary - 1) creditor has to be allowed to make the proposal based on consumer vs commercial debtor, full or partial satisfaction of the deb, , 2) debtor must consent proposal to keep collateral as satisfaction of debt, 3) 

Also look at approach to classifying collateral handout

A secondary obligor becomes obligated to perform the duties of the secured party when

(1) receives an assignment of a secured obligation

(2) accepts to recieve a transfer of collateral from the secured party or

(3) is subrogated to the rights of a secured party 

An assignment, transfer, or subrogation described in subsection (a):is not a disposition of collateral under Section 9-610; and (2) relieves the secured party

A "transfer statement" is an record authenticated by a secured party stating: (1) that the debtor has defaulted

(2) that the secured party has exercised its post-default remedies with respect to the collateral; 

(3) that, by reason of the exercise, a transferee has acquired the rights of the debtor in the collateral

Effect of the transfer statement is the transfer of all rights of the debtor in the collateral

A secured party may accept collateral in satisfaction of the obligation if debtor consents in authenticate record, does not receive objection, consumer goods cannot be in possession of debtor

purported or apparent acceptance of collateral not OK

Notice of objection received by secured party must be within 20 days

collateral disposed when 60% of cash price has been paid

A secured party taking collateral in satisfaction of the obligation shall send its proposal to:

(1) anyone with a claim of an interest in the collateral;

(2) any other secured party that, 10 days before the debtor consented to the acceptance, held a security interest in the collateral perfected by statement that:

(A) identified the collateral;

B) was under the debtor's name as of that date; and

(C) was properly filed in appropriate office

A secured party's acceptance of collateral in full or partial satisfaction of the obligation it secures:

(1) discharges the obligation ;

(2) transfers all of a debtor's rights in the collateral;

(3) discharges the security interest and

(4) terminates any other subordinate interest.

A subordinate interest is discharged or terminated under subsection (a), even if the secured party fails to comply with this article.

A debtor, any secondary obligor may redeem collateral.

To redeem collateral, a person shall provide (1) fulfillment of all obligations secured by the collateral; and

(2) the reasonable expenses and attorney's fees 

A redemption may occur at any time before a party:

(1) has collected collateral under Section 9-607;

(2) has disposed of collateral ; or

(3) has accepted collateral in full or partial satisfaction of the obligation it secures under Section 9-622.

A debtor may waive the right to notification of disposition of collateral only by an agreement to that effect

A debtor may waive the right to require disposition of collateral only by an agreement to that effect.

Except in a consumer-goods transaction, a debtor may waive the right to redeem collateral only by an agreement to that effect 

A court may order or restrain collection or disposition

A person is liable for loss and damaages caused by a failure to comply with this article

Can include the loss of the rights to collateral

(a) [Greater amount obtainable under other circumstances; no preclusion of commercial reasonableness

Commercially reasonable disposition in the usual manner, price current in any recognized market

Commercially reasonable if ordered by courts

Secured party must know how to ID and communicate with the debtor, the secured party is not liable

Secured party is not liable to debtor unless the secured party know the person and how to contact

Giles defaults on auto loan assigned to First Virginia,   Car was repossessed and woke up one neighbor. 

Trial court ruled for bank as did appellate ct.  

The court adopts a five-factor balancing test: "(1) where the repossession took place, (2) the debtor's express or constructive consent, (3) the reactions of third parties, (4) the type of premises entered, and (5) the creditor's use of deception." In doing so, the court declined to require subjective analysis of every situation, which would have required jury determinations of breach. The court applied the balancing test, and upheld the trial court's determination that there was no breach of the peace as a matter of law.

Hicklin appeals from a Superior Court order affirming the repossession and sale of a car financed Onyx.

On appeal, Hicklin argues that trial court:  (1) applied an incorrect standard in determining the commercial reasonableness of a sale after repossession.  

In resale, Onyx sold at a private auction and had only one witness, car sold for $1500 when proper price was 2335. 

Commercially reasonable if in, 1) usual manner in a recognized market, current price in that market, or otherwise in conformity among dealers of the kind.  

A security agreement is enforceable if its language clearly indicates that the parties intended to create a security interest

 Schwalb got $4000 loan from Pioneer Pawn shop, signed pawn ticket for her infiniti car, if not paid in 120 days plus interest, clearly said "you are creating a security interest in the following property".  Schwalb defaults, argues that it was not a proper security agreement.  

 Pawn is a secured transaction

COurts side with Pioneer, security interest does not require specific language, just clear language, description of collateral, signed, value exchanged for sec. interest.  

Except as otherwise provided in Sections 9-303 through 9-306, the following rules determine the law governing perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral:

WHile a debtor is in a jurisdiction, the local law of that jurisdiction governs perfection and priority of the SECURED INTEREST

Rarely is the jurisdiction based on where the collateral is - except where there is a fixture filing or timber/crops.  

§ 9-303. LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN GOODS COVERED BY A CERTIFICATE OF TITLE

Goods become covered by a certificate of title when a valid application for the certificate of title and the applicable fee are delivered to the appropriate authority.

Goods cease to be covered by a certificate of title at the earlier of the time the certificate of title ceases to be effective under the law of the issuing jurisdiction or the time the goods become covered subsequently by a certificate of title issued by another jurisdiction.

Except as otherwise provided in this section, the following rules determine a debtor's location:

(1) A debtor who is an individual is located at the individual's principal residence.

(2) A debtor that is an organization and has only one place of business is located at its place of business.

(3) A debtor that is an organization and has more than one place of business is located at its chief executive office.

Except as otherwise provided in subsection (b) and Section 9-312(b), a financing statement must be filed to perfect all security interests and agricultural liens

The filing of a financing statement is not necessary to perfect a security interest that is perfected undre other sections, goods in possession of bailee, 

If a secured party assigns a perfected security interest or agricultural lien, a filing under this article is not required to continue the perfected status of the security interest against creditors

 the office in which to file a financing statement to perfect the security interest or agricultural lien is:

(1) the office designated for the filing or recording of a record of a mortgage on the related real property, if:

(A) the collateral is as-extracted collateral or timber to be cut; or

(B) the financing statement is filed as a fixture filing and the collateral is goods that are or are to become fixtures; or

Subject to subsection (b), a financing statement is sufficient only if it:

(1) provides the name of the debtor;

(2) provides the name of the secured party or a representative of the secured party; and

(3) indicates the collateral covered by the financing statement

If timber of fixtures, must also have ; 1) indication of this type of collateral, indicate its for real  property records, provide a description of real property

(4) if the debtor is an individual, the financing statement is only sufficient if it provides the neame of debtor:

(A) provides the individual name of the debtor;

(B) provides the surname and first personal name of the debtor; or

(C) subject to subsection (g), provides the name of the individual which is indicated on a [driver’s license] that this State has issued to the individual and which has not expired; and

A financing statement sufficiently indicates the collateral that it covers if the financing statement provides:

(1) a description of the collateral pursuant to Section 9-108; or

(2) an indication that the financing statement covers all assets or all personal property.

(a) [Use of terms other than "debtor" and "secured party."]

A consignor, lessor, or other bailor of goods, a licensor, or a buyer of a payment intangible or promissory note may file a financing statement, or may comply with a statute or treaty described in Section 9-311(a), using the terms "consignor", "consignee", "lessor", "lessee", "bailor", "bailee", "licensor", "licensee", "owner", "registered owner", "buyer", "seller", or words of similar import, instead of the terms "secured party" and "debtor".

A financing statement substantially satisfying the requirements of this part is effective, even if it has minor errors or omissions, unless the errors or omissions make the financing statement seriously misleading

Seriously misleading if name of debtor wrong ONLY IF AN SEARCH IN THE FILING OFFICE COMPUTER SYSTEM COMES UP WITH THE WRONG NAME - SEE 506(C) RULE

A filed financing statement remains effective with respect to collateral that is sold, exchanged, leased, licensed, or otherwise disposed of and in which a security interest or agricultural lien continues, even if the secured party knows of or consents to the disposition.

Change in debtor name requires a change in the filing statement within 4 months, 

(a) [Financing statement naming original debtor.]

Except as otherwise provided in this section, a filed financing statement naming an original debtor is effective to perfect a security interest in collateral in which a new debtor has or acquires rights to the extent that the financing statement would have been effective had the original debtor acquired rights in the collateral.

Have four months to correct the filing statement with new debtor

A person may file an initial financing statement, amendment that adds collateral covered by a financing statement, or amendment that adds a debtor to a financing statement only if:

(1) the debtor authorizes the filing in an authenticated record or pursuant to s

(2) the person holds an agricultural lien that has become effective at the time of filing and the financing statement covers only collateral in which the person holds an agricultural lien

 Uniform Commercial Code § 9-510. EFFECTIVENESS OF FILED RECORD.

§ 9-510. EFFECTIVENESS OF FILED RECORD

(a) [Filed record effective only if person authorized.]

(b) [Authorization by one secured party of record.]

A record authorized by one secured party of record does not affect the financing statement with respect to another secured party of record.

(c) [Continuation statement not timely filed.]

A continuation statement that is not filed within the six-month period prescribed by Section 9-515(d) is ineffective.

(a) [Secured party of record must be on initial filing statement.]

(b) [Amendment naming secured party of record also OK if filed.]

(c) [Amendment deleting secured party of record is OK if filed; only removed after amendment to delete party]

(a) [Amendment of information in financing statement.]

Subject to Section 9-509, a person may add or delete collateral covered by, continue or terminate the effectiveness of, or, subject to subsection (e), otherwise amend the information provided in, a financing statement by filing an amendment that:

(1) identifies, by its file number, the initial financing statement to which the amendment relates; and

(2) if the amendment relates to an initial financing statement filed [or recorded] in a filing office described in Section 9-501(a)(1), provides the information specified in Section 9-502(b).

(a) [Consumer goods.]

A secured party shall file a termination to the financing if the financing statement covers consumer goods and:

(1) there is no obligation secured by the collateral; or

(2) the debtor did not authorize the filing of the initial financing statement.

Within 1 month if obligation is satified or 20 days after demand from debtor

(a) [Assignment reflected on initial financing statement.]

Except as otherwise provided in subsection (c), an initial financing statement may reflect an assignment of all of the secured party's power to authorize an amendment to the financing statement by providing the name and mailing address of the assignee as the name and address of the secured party.

(a) [Five-year effectiveness.]

Except as otherwise provided in subsections (b), (e), (f), and (g), a filed financing statement is effective for a period of five years after the date of filing.

(a) [What constitutes filing.]

Except as otherwise provided in subsection (b), communication of a record to a filing office and tender of the filing fee or acceptance of the record by the filing office constitutes filing.

Filing does not occur with respect to a record that a filing office refuses to accept because:

(1) the record is not communicated by a method or medium of communication authorized by the filing office;

(2) an amount equal to or greater than the applicable filing fee is not tendered;

(3) the filing office is unable to index the record because:

The failure of the filing office to index a record correctly does not affect the effectiveness of the filed record

(a) [Statement with respect to record indexed under person’s name.]

A person may file in the filing office an information statement with respect to a record indexed there under the person's name if the person believes that the record is inaccurate or was wrongfully filed

(a) [Filing office duties.]

For each record filed, the filing office shall:

(1) assign a unique number to the filed record;

(2) create a record that bears the number assigned to the filed record and the date and time of filing;

(3) maintain the filed record for public inspection; and

(4) index the filed record in accordance with subsections (c), (d), and (e).

(b) [File number.]

A file number [assigned after January 1, 2002,] must include a digit that:

(1) is mathematically derived from or related to the other digits of the file number; and

(2) aids the filing office in determining whether a number communicated as the file number includes a single-digit or transpositional error.

(a) [Mandatory refusal to accept record.]

A filing office shall refuse to accept a record for filing for a reason set forth in Section 9-516(b) and may refuse to accept a record for filing only for a reason set forth in Section 9-516(b).

(b) [Communication concerning refusal.]

If a filing office refuses to accept a record for filing, it shall communicate to the person in no event more than two business days after the filing office receives the record.

(a) [Initial financing statement form.]

A filing office that accepts written records may not refuse to accept a written initial financing statement in the following form and format except for a reason set forth in Section 9-516(b):

(b) [Amendment form.]

A filing office that accepts written records may not refuse to accept a written record in the following form and format except for a reason set forth in Section 9-516(b):

(a) [Post-lapse maintenance and retrieval of information.]

The filing office shall maintain a record of the information provided in a filed financing statement for at least one year after the effectiveness of the financing statement has lapsed under Section 9-515 with respect to all secured parties of record. The record must be retrievable by using the name of the debtor and by using the file number assigned to the initial financing statement to which the record relates.

If a person that files a written record requests an acknowledgment of the filing, the filing office shall send to the person an image of the record showing the number assigned to the record pursuant to Section 9-519(a)(1) and the date and time of the filing of the record. However, if the person furnishes a copy of the record to the filing office, the filing office may instead:

(1) note upon the copy the number assigned to the record pursuant to Section 9-519(a)(1) and the date and time of the filing of the record; and

(2) send the copy to the person.

Delay by the filing office beyond a time limit prescribed by this part is excused if:

(1) the delay is caused by interruption of communication or computer facilities, war, emergency conditions, failure of equipment, or other circumstances beyond control of the filing office; and

(2) the filing office exercises reasonable diligence under the circumstances.

(a) [Initial financing statement : general rule.]

Except as otherwise provided in subsection (e), the fee for filing and indexing a record under this part, other than an initial financing statement of the kind described in subsection (b), is [the amount specified in subsection (c), if applicable, plus]:

(1) $ __[X]______ if the record is communicated in writing and consists of one or two pages;

(2) $ __[2X]______ if the record is communicated in writing and consists of more than two pages; and

(3) $ __[1/2X]___ if the record is communicated by another medium authorized by filing-office rule.

(a) [Adoption of filing-office rules.]

The [insert appropriate governmental official or agency] shall adopt and publish rules to implement this article. The filing-office rules must be (1) consistent with this article[; and

(2) adopted and published in accordance with the [insert any applicable state administrative procedure act]].

Was there an actual secured interest/transaction

Was there a default

Was default properly handled (notice, redemption right, repossession appropriate, etc)

Was the secured tx perfected  (filed)

Two types of disputes - default between debtor and creditor and 2) dispute between competing creditors for the same collateral - priority 

According to UCC § 9-203(b), an interest attaches when: (1) value is given in exchange for the interest; (2) the debtor has rights in the collateral; and (3) either the debtor signed a security agreement that sufficiently describes the collateral, or the secured creditor retained possession of the collateral pursuant to the agreement.

1) Value exchanged

2) Rights to collateral

3) Signed agreement or posession

SLIOOP Analysis for Priority Disputes

Security Interest?

Created Security Interest?

Perfected Security Interest?

Special tributes of security interests (such as purchase money - PIMSY with a priority status??

List Collateral and classify collateral

Identify competing parties (secured creditor 1 vs 2) 

One on One match up (3 disputes - Cred 1 vs 2, Cred 1 vs debtor, Cred 2 vs debor)

Prioirty analysis for all 3  

SLIOOP Analysis for Priority Disputes

Security Interest?

Created Security Interest?

Perfected Security Interest?

Special tributes of security interests (such as purchase money - PIMSY with a priority status??

List Collateral and classify collateral

Identify competing parties (secured creditor 1 vs 2) 

One on One match up (3 disputes - Cred 1 vs 2, Cred 1 vs debtor, Cred 2 vs debor)

Prioirty analysis for all 3  

1) FILE FILING STATEMENT (CHAPTER 7)

2) TAKE POSSESSION

3) AUTOMATIC PERFECTION

4) COMPLY WITH ANOTHER RULE

Perfection of security interest - most common and complex is filing financing statement.  Gives notice to others that you have sec interest.  2 types of req infro -502 (if erroneous causes serious problems) and 516 (addresses and individual or organization - less fatal if incorrect) - 

Omission in 502 or 516 info then filing office will reject the fin statement.  If it does accept without this infor then its effective is effective unless 502 is wrong (debtor name, collateral, secured creditor) . 

If there are errors (rather than ommissions) in the statement, the office MUST accept the filing.  The errors may or may not make the filing statement is effective - if name of debtor is wrong or seriously misleading (take proper name and then do a serach, if found, then statement is effective and not seriously misleading, if dont find, then it is not effective).  If secured creditor name or address is wrong, then this make no difference and statement is still effedtive.  Same for if the box is ticked wrong as indvidual (520c) vs croporation, then if the searcher RELIES on the searcher, it is ineffective.  Error in debtor address may or may not be effective based on if the search who is misled byt the incorrect information. 

Place of filing - which state and where in the state - general rule is that you file where debtor is located - 9-304 and 307 - except if collateral is GOODs then where the goods are located -not where the debtor is.  FIle centrally to the appropriate central filing, normally sec of state or fixture to real estate would be locally like property.  

Process to analyze problem

1) what is the collateral - analyze under article 9 - use his handout.  

2) what it created 308-a (value, rights in loan, security agreements signed with descrip of collateral) 

3) was sec int perfected for that type of collateral

4) are there exceptions in 310-b and 309 to see if you dont need to file (PIMSY) - almost 

Special requirement for certaintypes of collateral - timber, crops, real estate fixtures - timber, mineral are goods, 

Perfection interest in proceeds of collateral such as vending machines making money - rules in 315 - get 20 days to find out if they need more perfection, then they can file in state and then be continually perfected for new proceeds. 

Change of location, debtor name and new debtor. 

Change of location: if debtor moves from de to pa, the effect on the security interest go to 316 - if initially correct in the right state an the person moves to another state, then secured creditor has 4 months to file in correct state as soon as there is the move is the triggering event-

Change in debtor name - if married or legally change name look at 507 - is the new name seriously misleading per original standate where you search for name in state based system - most of the time will be seriously misleading - secured creditor has 4 months to refile under new name - 

If change in legal structure - look at 508 - GP to LLC or new debtor buys old entity - same search requireents if seriously misleading - secured creditor has 1 year (not 4 months).  Most of the time a change from LLC, inc, corp, GP, etc will not change the success of finding the depbot - but for merger will be serious misleading and will need to change.  

Properly filed financing statement is good for 5 years - if debt goes longer, need to file continuation statement within 6 months of 5 years expiration - get another five year - if earlier or later than this time then original expires and do not get continued perfection.  

513 - if debt lasts less than 5 years, debtor can demand secured party to file discontinuation statement - if consummer, secured interst must file in 30 days or get $500 fine paid to debtor - for commerical debtor must request the sec party to file the discontination memo. 

FOur

1) automatic - 309 or 312

2) possession by creditor 313

3) control of collateral 314

4) 311 - comply with other law

Then PMSI - special type of secured transaction automatically perfected if consumer goods, if commercial goods then PMSI of commercial still has priority over other perfected - - purchase Money Security Interest - defined in 9-103 but better described as following: PMSI only in goods and software purchased for use in goods (like software imbedded in car or phone)- when the secured interest has 1) extended credit specifically for 2) debtor to acquire goods - can be for a car loan either by automarker OR from bank to buy the car - maybe different for consumer vs non  -generally not for credit cards by cothe stores because they do not actively/realistically take a secured interest in the clothes but may be for best buy or sears appliances, etc.  Also for apple computers, or business loans for large equipment, etc.  Technically still PMSI for clothing stores but will not practically exercised by Macys or JCP, etc.  

PMSI in commercial goods not automatically perfected but PMSI can beat out other perfected creditors. 

AUTOMATIC PERFECTION - 9-203 - no public notice required - primarily 309 - LOOK AT FILE ON WEBSITE FOR AUTOMATIC PERFECTION - 14 kinds of transaction for automatic perfection -six kinds of transaction

1) PMSI in consumer goods EXCEPT for consumer goods covered by Certificate of Title Act 309(1) such as car or boat which are already covered in 311 where there are titles to vehicles and perfected via title liens, etc,

2) assignment of isolated account of payment intangible - covers someone who is unfamiliar with Article 9 - not normal business of secured interested in goods - 

3) sale of payment intangible or promissory note - buyer of secured 

4) security interests not under Art 9 code sections - mostly for B2B transactions where seller shipped under reservation - must be stated/NAMED in the transaction.  

5) security interest by broker in investment property - broker is the debtor - for stock markets where broker can buy and sell stocks - if drop in price is fast, the broker may not be able to sell as fast as he can - pre arranged lines of credits are drawn upon to do quick transaction by COB day of sale - must be able to pay quickly. 

6) assignment for the benefit of all creditors - for state bankruptcy which is uncommon (federal bankruptcy much more common).  

308-a - must create then do applicable steps (file, possess, title, etc). 

309 is primary provision forn automatic perfection

PMSY concept - most common option for consumer goods.  Normally temporal priority wins, but PMSY is an exception even if PMSY is not first. PMSY cite is 309-1 - NOTE THAT CREDITOR DOES NOT NEED TO KNOW WHAT IS BEING BOUGHT TO HAVE PMSI.  

313 - perfection by possession - possession not defined in UCC - go to common law to see who possesses the collateral - physical possession is great, or possession by agent (repo man) also fine, possession by title good - if 3rd party, then 3rd party must provide document - 

310 a says file unless 301b says otherwise per 313 (possession)  and 312 (temporary perfection)

311 - allows for title for cars, boats, etc .

314 - perfection by control - not common, put itself in position to sell collateral without debtor consent.  

Priority is secured creditor vs another 3rd party - not the debtor - sometimes bankruptcy trustee (but not part of this class requirement). 

LIOOP - priority anagram - List collateral, ID competing parties (one is a secured creditor - scope, creation, perfection), One on One- P is priority/perfection

SCIPPD -anagram for set up secured transaction - 

scope, creation, Interest, perfection, priority, D for default

Unsecured creditors have no interest unless judge ordered secured claim on collateral

Residual rule of priority - 9-201 - if second creditor has no specific claim, 

First to file wins, first to perfect does not win against first to file - even when the "bare filing" does not list the collateral, or exchange of value, etc.  

Page 144 - Analysis of Priority - 1) Scope (disguised or undisgised sec interest), 2) charaterize collateral, 3) creation? 4) Perfection, 5) Resolve priority dispute beased on perfection or 9-322 first to file

(1) "purchase-money collateral" means goods or software that secures a purchase-money obligation incurred with respect to that collateral; and

(2) "purchase-money obligation" means an obligation of an obligor incurred as all or part of the price of the collateral or for value given to enable the debtor to acquire rights in or the use of the collateral if the value is in fact so used.

SECURITY INTEREST PERFECTED UPON ATTACHMENT.

The following security interests are perfected when they attach:

(1) a purchase-money security interest in consumer goods, except as otherwise provided in Section 9-311(b) with respect to consumer goods that are subject to a statute or treaty described in Section 9-311(a);

310  - Filing required except for section (b) exception

311 - Perfection subject to others laws

312 - Perfection of chattle paper, accounts, misc

313 - perfection by possession

314 - Perfedtion by control

315 -Disposition of collateral and proceeds

316 - Effecdt of change in governing law (4 months)

PMSI takes priority over security interest

Time of filing beats time of perfection