Term
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Definition
| What process is due Definition 1 Utilitarian Three- Factor Balancing test |
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Term
| Purchase Money Security Inter est (PMSI) |
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Definition
| 1. Secured party sells debtor collateral on credit and retains a security interest in the item sold. 2. An enabling loan: A loan to a debtor that enbales the debtor to buy specific collaterla, and the creditor takes a security interest in the specific collateral. NOTE: The credit or loan proceeds must actually be used to acquire the collateral |
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Term
| After acquired Property Clause |
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Definition
| A security interest in Debtor's present as well as future property. |
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Term
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Definition
| A security interest in future advances made under the security agreement |
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Term
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Definition
Goods: Tangible, moveable, personal property Classifications:
1. Consumer Goods: Used or bought for user primarily for personal, family or household purposes
2. Equipment: Used or bought for use primarly in business (default cat)
3. Farm Products: Crops or livestock or supplies used or produced in farming operations or products of crops or livestock in their umanufactured states (milk, eggs, maple syrup, wool-clip) if they are in the possession of a debtor engaged in farming operations.
4. Inventory: Held be a person who holds them for sale or lease or to be furnished under service contracts; material used or consumed in a business in a short period of time. |
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Term
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Definition
| Negotiable instruments and any other writing which eveidences a right to the payment of a monetary oblgiation, and which are in the ordinary course of business transferred by delivery with any necessary indoresment or assignment (not investment property) |
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Term
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Definition
| A document which in the regular course of business is treated as evidencing that the person in possession of it is entitled to receive, hold and dispose of the document and the goods it covers (bill of lading, warehouse receipt) |
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Term
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Definition
| A record or records which evidence both a monetary obligation and a security interest in or lease of specific goods. A record is info that is stored in either a tangible medium (written paper) or an intangible medium (electronic) which is called Electronic Chattel Paper |
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Term
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Definition
| Includes items such as stocks, bonds, mutal funds and brokerage accounts containing such items |
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Term
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Definition
A right to payment (not evidenced by an instrument or chattel paper) for 1.Goods, 2. Services, 3.Real Property, 4. Insurance policy issued or to be issued 5. Secondary obligation incurred to be incurred. 6. Energy provided or tb provided 7. Use or hire of a vessel 8. Use of a Credit Card. 9. Lottery winnings. Health care-insurance AR is included. 1.GOODS 2.Services |
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Term
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Definition
| An account maintained with a bank. ART 9 only applies to nonconsumer deposit accounts and deposit accounts that are claimed as proceeds of other collateral |
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Term
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Definition
| A claim in tort with respect to which the claimant is an org (partnership or corp), or where the claimaint is an individual and the calim arose in the claimant's business or profession and does not included damages for PJ or the death of an individual |
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Term
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Definition
| Default Catagory- Any personal property not coming within the scop of the other definitions. (trademark, copyright, goodwill) A general intangible under which the account D's prinipal obligation is a monetary obligation is a Payment Intangible |
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Term
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Definition
1. Any transaction, regardless of its from, that creates a security interest in personal property or fixtures in a contract.
2. An agricultural lien
3. A sale of accounts, chattel paper, payment intangibles or promissory notes (unless for coll purposes only, or part of a sale of a business)
4. Certain consignments
5. A secured sale disgused as a lease
Focus only on 1 & 5 |
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Term
| Secured Sale disgused as a lease |
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Definition
True Lease Test: The lessor is going to 1.)receive the items back at the end of the lease term when the items 2) have meaningful economic value Elements:
1. At the end of the lease the lessee becomes the owner for little or no consideration.
2. the lesee is bound to purchase the goods at the end of lease or to renew the lease for the remaining economic life of the goods; or
3. The lease is for the entire economic life of the leased goods w/or w/out renewal |
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Term
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Definition
1. Security Agreement
2. Value has been given
3. Debtor has rights in the collateral
The moment the last of the element occurs there is attachment. The elements can occur in any order Attachment=between creditor and debtor |
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Term
| Attachment- element 1 security agreement |
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Definition
Unless the collateral is in possession or control a written SA is required. 1. The SA must be evidenced by a record and must show an intent to create the security interest. 2. The agreement must be authenticated by the debtor. A symbol that is made with the intent to authenticate will suffice. 3. The SA must contain a description of the collateral (if timber the land concernced) Test: must reasonably id the collateral Can use TV, Fridge or ART 9 catergory as the description |
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Term
| Attachment- element 2- Value |
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Definition
The secured party must have given value. Definition is very liberal. Any consideration sufficent to support a simple contract is enough, including past consideration. Value has to be on both sides. The Debtor always gives value b/c a promise to pay is value. The question will always be did the secured party give value. |
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Term
| Attachment- Element 3- Collateral |
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Definition
| The debtor must have rights in the collateral. Debtor cannot grant a contingent property interest in property that it does not own. |
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Term
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Definition
Rule:W/out an explicit after-acquired property clause in the SA, the secured party's security interest only reaches the collateral that the debtor had rights in at the time the D signed the SA.
Exceptions: The courts will imply an AAP clause when the collateral is of the type that is rapidly depleted and replenished. (AR/AP-inventory) Assumption is the parties meant to cover or the SA will reach nothing.
#2: A SI does not attached under an AAP to consumer goods unless the debtor acquires rights in them w/in 10 days after the secured party gives value.
#3: An AAPC is ineffective as to commerical tort claims |
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Term
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Definition
Includes WHATEVER is received upon the sale,exchange, collection or other dispostion of collateral or proceeds. If collateral is insured the money received due to loss or damage is the proceed of collateral (up to the amount of colleteral) unless it is payable to someone other than the D or the secured party. Any claims arising out of the loss of, defects in, or damage to collateral are proceeds. UNLESS OTHERWISE AGREED, A SECURITY INTEREST AUTOMATICALLY GIVES THE SECURED PARTY A RIGHT TO IDENTIFIBILE PROCEEDS
Can have proceeds of proceeds |
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Term
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Definition
| Proceeds are identifibile if the creditor can prove that the proceeds came from the original collateral |
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Term
| Lowest Intermediate Balance Test |
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Definition
| When cash proceeds are commingled: The balance in the commingled bank account starting at the time the proceeds are deposited and ending at the time you are applying the test. The law deems the lowest balance during that time period is the identifiable proceeds. (can't exceed the value of the cash proceed originally deposited.) |
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Term
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Definition
| Perfection= Between Creditor and Third Parties. Perfection is NOT needed to create a valid, enforceable SI as between the debtor and the secured party. |
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Term
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Definition
| When the collateral is in the possesion of the secured party pursuant to an ORAL security agreement. The oral security agreement still must be clear on intent to create a SA. |
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Term
| Methods of Perfection #1- Automatic Perfection |
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Definition
| PMSI in consumer goods. Has to be both PMSI and consumer goods for automatic perfection. The elements of attachment still must be met. PMSI in consumer goods will come before |
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Term
| Method of Perfection #2 Possession of collateral by SP |
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Definition
A SP may perfect a SI in most types of collateral simply by taking possession of the collateral. The SI is perfected at the moment of perfection w/out relation back to the time of attachment. Perfection continues only so long as possession is retained. Must be physical possession- an account or general intangible cannot be physically possessed and therfore cannot have perfection by possession. |
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Term
Methods of Perfection
#3- Perfection by Control |
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Definition
SI in investment property and electonric chattel paper may be perfected by control. SI in nonconsumer deposit accounts can ONLY be perfected by control.
1. Investment Property- A SP has control when the SP has taken whatever steps necessary to be able to have the
1. Investment Property- SP has control when they have taken whatever steps necessary to have the property sold w/out further action from the owner
2. Nonconsumer deposit accounts- ON A LOT
a. The bank in which a NDP is mainted automatically has control.
b. SP is not the bank in 1- control can be obtained by 1) putting the DA in the SP's name, or 2) an authecticated agreement with the D and the depository bank that the bank will follow the SP orders w/out consent by the Debtor |
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Term
Method of Perfection
#4- Notation of lien on certificate of title |
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Definition
The only way to a perfect a SI in an automobile is for the SP to note its lien on the certificate of title. Governmnet authority has to make the notation.
Exception- Autos are used for inventory, perfection is through a UCC-1 |
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Term
Method of Perfection
#5 Filing a Financing Statement (UCC-1) |
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Definition
| Notice filing- Provides notice that a person may have an SI to the collateral indictated. Puts parties on notice for further inquiry. |
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Term
Contents of financing statement
#1 Debtors Name |
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Definition
FS is indexed by the debtors name. If debtor is indvidual use individual name. Corporation use corporate name, partnership use partnership name.
Trade Name- non legal name party is using file under indviudal or corporate name.
Test for errors on the name: So long as the error is not seriously misleading. To determine search using the correct name using the filing office standard logic. If the erroneous name comes back then its not seriously misleading it if doesn't then it is.
Secured creditor not responsible for errors of the filing office. (Ex. filing under SP name instead of Debtor)
Name change- if name changes to become seriously misleading the UCC-1 is effective for 4 months after the change. Not effective to perfect a SI in collateral acquired 4 months after the change. |
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Term
Contents of Financing Statement
#2 Description of Collateral |
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Definition
| Test: Reasonably identifies the collateral to put a third party on notice. Can use ART 9 catagories and UCC-1 is okay to use "all assets" or "all personal property" |
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Term
Contents of Financing statement
#3 Secured Party Name |
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Definition
| Because searches are not conducted under the SP name, an error in the name will not be seriously misleading. (in an appropriate case, this error may give rise to an estoppel in favor of a particular holder of a conflicting claim) |
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Term
Contents of the Financing Statement
#4- Real property related to UCC-1 |
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Definition
| When realty intrests are involved (timber, fixtures, minerals) then the UCC-1 must describe the realty (must reasonably describe- metes and bounds are not necessary) and must indicate that is filed in the real property records (so the filing officer gets it to the right place) |
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Term
Contents of a Financing Statement
#5- No signature required |
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Definition
Debtor does not have to sign the UCC-1 but must authorize the filing.
1. Ipso Facto Authorization- D automatically authorizes the UCC-1 if she authenticates a SA covering the same collateral
2. Can be done expressly in seperate agreement.
3. Can file the SA but it must contain all the elements required for UCC-1 |
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Term
| Where to file a financing statement |
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Definition
General Rule: Except as otherwise specfically provided in MO ART 9, the financing statement is filed with the Secretary of State.
Real Property filing must be in the office where a mtg on the real estate would be filed. MO filed in the real estate records of the county were the real property is located. |
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Term
Where to file a financing statement-
Multiple state transactions |
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Definition
General rule: you file were the debtor is located. Individual is principle residentce.
Debtor is registered org (corp, LLC, etc)- located in the state where the Reg. Org is Org (inc.)
Unregistered Org- Debtor is located at its place of business, if more then one then the cheif executive office. |
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Term
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Definition
If the debtor moves states the SP will become unperfected 4 months after the move unless it file a new UCC-1 b/4 the 4 months is up.
If the collateral moves the SP will become unprefected 1 year unless if files a new UCC-1 in the state within that year. |
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Term
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Definition
UCC-1 is good for five years from the date of filing. It can be extended by filing a Continuation Statement (UCC-3). The CS must be filed in the last 6 months of the 5 year period to be effective. (between 4.5-5 years, has to be in this window)
No further outstanding obligation- the SP upon recvd an authenticated demand by debtor has 20 days to provide a termination statement to the debtor. If consumer goods, SP must file a termination statement at the filing office w/in 30 days or 20 (if notice from debtor) failure to do SP liable to debtor for $500 + any loss for failure to comply. Called a UCC-3 |
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Term
| Perfection as to proceeds |
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Definition
If SP has a perfected SI, the SP automatically has a perfected SI in the proceeds for the collateral for 20 days, to remain perfected need to amend unless:
1. The proceeds are identifiable cash proceeds; or
2. see Same Office Rule |
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Term
Pefection as to Proceeds:
Same Office Rule - NEED TO KNOW |
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Definition
DON'T NEED TO AMEND UCC-1 IF:
The security in the original collateral ws perfect by filing a UCC-1, a SI in the type of collateral constituting proceeds would be filed in the same place as the UCC-1 for the org. collateral, and the proceeds were not purchased with cash proceeds of the org. collateral.(ex. inventory procceds equipment- don't need to file for equipment) |
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Term
| Change in use of collateral |
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Definition
| If the Debtor changes its use of the collateral (eg inventory to equipment) the filed UCC-1 remains effective to perfect. The SP has no duty to monitor or amend the financing statement even if it knows the descrpition is seriously misleading |
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Term
Priority
Secured Party vs. Security Party |
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Definition
| General Rule: First to file or perfect, which ever occurs first, has priority. If neither party filed then the first to attach as priority. |
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Term
Priority-
PMSI in consumer goods |
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Definition
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Term
Priorty-
PMSI in goods other than inventory or livestock (equipment) |
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Definition
| If filed w/in 20 days from the date the debtor receives possession a PMSI has a priorty over a conflicting SI in the same goods or its proceeds |
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Term
Priority-
PMSI in inventory or lifestock |
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Definition
A PMSI will have priority over a conflicing SI in the same (as well as proceeds that are chattel paper instruments & identifiable cash proceeds) if, BEFORE the D recvs possession the SP:
1. Perfects, AND
2. Sends an authenticated notification to the holders of the previously filed conflicting SI within 5 years BEFORE the D recvs possession (ie. the notification is effective for delivers of the same type of collateral for 5 years) |
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Term
Priority-
Conflicting PMSI |
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Definition
| General Rule: A seller PMSI has priority over a lender PMSI |
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Term
Priority-
Investment Property |
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Definition
1. A SI prefected by control has priority over a SI perfected by any other method( filing or automatic)
2. If conflicting SI were perfected by control-priority is ranked to the time of obtaining control
3. A SI to a D's intermediary has priority over a SI granted by the D to another SP (unless intermediary agrees otherwise)
4. Except as in 1,2,3 the first to file or perfect rule governs. |
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Term
Priority-
Deposit Accounts |
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Definition
1. A SI prefected via control has priority over a SI perfected via procceds.
2. If conflicting interest both control, rank in time of obtaining control
2. A SP who has obtained control by putting the DA in its own name has priority over all other SP w/control.
4. A bank that has control because it maintains the DA has priority over all other SP w/control except for #2
Note: if D transfer money the transferee takes free of the SI unless they acted in collusion w/D to violate the rights of the SP. |
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Term
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Definition
If a purchaser of chattel paper in good faith gives new value & takes possession in the OCB (or takes control of elec. chattel paper), the P will have priority over
1. A SI in the chattel paper that arises merely as proceeds of inventory (so long as the paper does not indicate that it has been assigned), and
2. Any other SI the paper, as long as the P acquired its interest w/out knowledge of the violation of the SP |
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Term
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Definition
| A purchaser of an instrument has priority over a perfected SI in the instrument if the P gives value and takes possession of the instrument in good faith and w/out knowledge that the purchase violates the rights of the SP. |
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Term
Priority-
Secured Party v. buyer of the collateral Authorized Sales |
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Definition
| Authorized sales: If the sale is authorized by the SP the buyer takes free of the SI. MO has a non-uniform requirment of written authorizion (can't be inferred) |
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Term
Priority-
Secured Party V. Buyer of the Collateral Unauthorized Sales |
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Definition
General Rule: A buyer in the ordinary course of business (BOC)(other than a person buying farm products from a farmer) takes free of a SI created by his seller even though the SI is perfected and even though the buyer knows of the SI.
1. A BOC means a person who buys goods in good faith, w/out knowledge that the sale violates the rights of the SP in the goods, and in the ordinary course froma person in the business of selling goods of that kind.
2. Buyers not in the OCB take subejct to perfected SI. They take free from unperfected SI (and unperfected agricultural liens) unless they know of the SI
3. Garage Sale Rule: consumer to consumer sales: A buyer takes free of the SI if he buys w/out knowledge of the SI, for value, and for his own personal, family or household purposes, unless prior to the purchase the SP has filed a financing stmt covering such goods. The goods must be consumber goods in the hands of both buyer and seller |
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Term
Priority-
secured party v. judgment lien holders |
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Definition
An unperfected Si is subordinate to the rights of the a person who becomes a lien creditor b/4 the SI is perfected. If the SI is perfected b/4 the person becomes a lien creditor, the SI has priority. A lien creditor is a unsecured creditor who has obtained judgment and leived on the judgment.
Key: Look at the time of perfection of the SI and the time of the levy by the sherrif. If SI is perfected b/4 sheriff levies, the SI has priority and visa versa. |
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Term
Priority-
PMSI v. Lien Creditor |
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Definition
| If the SP files its PMSI w/in 20 days after the D receives possession of the collateral, he takes priority over the rights of a lien creditor which arises between the time the SI attaches and the time of the filing. |
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Term
Priority-
Future Advances |
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Definition
A SA can secure present and future advances. A FA by a secured creditor has priority over a lien creditor if the FA is made:
1. Without knowledge of the lien, OR
2. Within 45 days of the lien arising, OR
3. Purusan to a commitment entered into w/out knowledge of the lien. |
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Term
Priority-
Secured Party v. Statutory lien claimants |
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Definition
| Artisan's or Materialman's lien has priority over a SI so long as the goods or services were provided in the OCB and the collateral remains in the lein holder's possession (ex. mechanic for a car repair) |
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Term
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Definition
| ART 9 does not define default- normally defined in the SA. Look for late or missed payments - or possible waiver by the SP. Once default occurs the SP has the right to 1. sue on the debt itself; or 2. take possession (even w/out judical process) w/out breach of the peace, sell the collaral, and then sue for any deficiency. |
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Term
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Definition
Any conduct by the ssecured party that has potential to lead to violence. Generally, physical presence by the debtor plus verbal objection is enough to create a breach of the peace.
If self-help is unavailabe, the SP can use judical process (replevin) to get the goods. |
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Term
| Retention of the collateral (Strict Foreclosure) |
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Definition
Rule: After default and repo, the SP may propos retaining the collateral in full or partial satisfaction of the debt.
1. A SP must send propral to another SP that has interst in the collateral. If the notified SP objects w/20 days, the collateral has to be sold.
2. A SP wishing to retain the collateral also obtain the D's consent. The d consents by either 1) agreeing in an authenticated record after default or 2)in the case of full, failing to make an authenticated obj. w/in 20 days (can't agree this way for partial) |
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Term
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Definition
| The SP may sell, lease, license, or otherwise dispose of the collateral in its condition when repo or after reas. prep. Sale can be public or private. |
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Term
Resale of Collateral-
Reasonable Notification |
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Definition
Must be authenticated (can't be oral)by the SP to
1. Debtor and any surties on the debt; and
2. Any other SP (except in CG)that has notified SP of their interest
2. Another SP that has perfected by UCC-1 or SP that makes notation on the certificate of title.
Notce is not necessary for collateral that is perishable or threatens to decline rapidly in value or is of a kind that is ordinarly sold in a recongized market(stock) |
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Term
Resale of Collateral
Timeliness of notice |
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Definition
| Must be sent w/in a reasonable time b/4 the sale. In nonconsumer notice is deemed reasonable if 10 days or more b/4 the time of the sale. |
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Term
Resale of Collateral
Content of the notice |
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Definition
1. The statute provides "safe harbor" notice forms.
2. For a public sale, notice of the time and place is required
2. For a private sale notice of the time & date wich the sale will occur
4. Extra info is required for consumer goods. |
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Term
| Commercially Reasonable Sale |
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Definition
Every aspect of the sale (including method, manner, time, place and terms) must be commerically reasonable.
Done in the usual manner in a recognized market or at the market price in such a market at the time of sale. Also reasonable if it conforms w/reasonable commerical standards among dealers in the kind of goods sold. Low price does not mean unreasoanble and the fact that a better price could have been obtained is not sufficent to the establish the sale unreasonable. |
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Term
| Failure to comply w/resale requirements |
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Definition
General Rule: if the SP failes to conduct a commerically reasonable sale, there is a rebuttable presumption that the sale proceeds equal the amount of the debt.
Note: if complied then the SP made sue the Debtor for any deficency after the sale. |
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Term
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Definition
| Debtor has the right to redeem any time b/4 the SP has resold the collateral or has entered into a contract for disposition, or the obligation was discharged by the SP retention of the collateral. Debtor must tender fulfillment of all obligations secured by the collateral. |
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Term
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Definition
| Must be made in the office where a mtg on the real estate would be filed. In addition to the UCC-1 requirements a fixure filing must reasonably ID the real estate and must show the name of the owner (if the debtor does not have an interest in the real estate |
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Term
Fixture
Priority- SP v. subsequent R/E interest |
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Definition
| General Rule: A security interet in fixtures has priority over any real estate interest that arises subsequent to the perfection of the SI by fixture filing. |
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Term
Priority- Fixtures
SP v. Prior R/E interest |
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Definition
General Rule: A prior R/E interest that is properly recorded has priority over a security interest that subsequently arises.
Exception: A PMSI takes priority over an earlier time realty interest if it is perfected by a fixture filing B/4 the goods become fixtures or within 20 days thereafter
Note: A construction MTG takes priority over a subsequent PMSI in fixtures even if the security interest is perfected by a fixture filing w/in the 20 days. |
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Term
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Definition
A SP need not file as to readily removable 1) factory or office machines, or 2) equipment that is not primarly used or leased for use in the operation of the r/e, or 3) replacements of domestic appliances which are consumer goods. Any method of perfection b/4 they become fixtures entitles the SP to priority.
Don't need to perfect of the owner of the R/E has consented to the SI an authenticated record or disclaimed its interest, or if the Debtor has the right to remove against the R/E claimaint. |
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Term
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Definition
Goods that are physically united w/goods in such a manner that the identity of the original goods is not lost (eg. tires on a car)
Priority: As a general rule the same rules for priority (first of file or perfect, PMSI) apply to accessions. A SI in an accession is subordinate to a SI in the whole which is perfected by compliance w/the requirements of a certificate of title statute. |
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