Term
| Under Art. 9 who has the priority between 2 secured parties with unperfected security interests? |
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Definition
| If both security interests are unperfected, then the first to attach has priority. |
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Term
| Under Art. 9 who prefails for priority between Unperfected and Perfected secured parties? |
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Definition
| Generally, a perfected security interest prevails over an unperfected security interest, even if the perfected secured party taked her interest with knowledge of the earlier unperfected secuirty interest. |
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Term
| Under Art. 9, who has the priority between perfected secured parties? |
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Definition
| The general rule is that the first to file or perfect whichever is earlier. |
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Term
| Generally the first to file or perfect rule governs priority questions regarding investment ppty. What security interest trumps filing? |
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Definition
| A security interest perfected by control has priority over a security interest perfected by any other means. |
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Term
| if certain conditions are met, what is the superpriority class of interest? |
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Definition
| Purchase Money Security Interest (PMSI)are superior to prior perfected security interst in the same goods if certain conditions are met. |
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Term
| PMSI in Inventory- has priority over a conflicting security interest in the inventory itself, proceeds that are chattel paper (or procedds from said chattel paper), proceeds that are instruments, and any identifiable cash proceeds that are received on or before delivery to a buyer if: |
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Definition
1) the PMSI in inventory is perfected at the time the debtor gets possession of the inventory (filing must occur beofre the inventory is delivered to the debtor); AND
2) any secured party who has filed a secuirty interest i the same inventory receives an authenticated notification of the PMSI before the debtor receives possession of the inventory, and the notification states that the purchase $ party has or expects to take a PMSI in inventory of the debtor described by kind or type. The notification is effective for deliveies of the same type of collateral for 5 years. |
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Term
| Before a security interest can be perfected, it must attach to the ppty. What are the requirements for attachment? |
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Definition
1) The parties agree to create a security interest as evidenced by either;
a) a security agreement signed by the debtor that describes the collateral (a signed financing statement generally is insufficent for this purpose) OR
b) the secured party's taking possession or control of the collateral pursuant to the agreement,
2) the secured party gives value for the collateral (loan proceeds); AND
3) the debtor has rights in the collateral (O's ownership interest in its machine) |
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Term
| What are some of the exceptions to the normal process for filing or perfecting a security interest? |
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Definition
1) as to owners of a vehicle, the security interest are perfected by notation on the certificate of title. Filing or possession under Art 9 is not required or effective.
2) Security interest on vehicles that belong to a DEALER for sale or lease are perfected by filing under the ordinary Code rules.
3) Aircraft and Railroad Rolling Stock are perfected by filing w/ appropriate fed agencies. |
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Term
| A secured party may perfect a security interest in most types of collateral simply by taking possession of the collateral. this is known as a "pledge". What types of collateral cannot be pledged? |
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Definition
A security interst in
1) Accounts
2) certificates of title goods
3) nonnegotiable documents
4) electronic chattel paper or
5) general intangibles |
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Term
| When a pledge has taken place, when does the perfection by possession occur? |
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Definition
1) Actual possession of the collateral attaches from the moment of possession and continues as long as possession is retained.
2) In the hands of a bailee- the secured party is deemed to be in possession from the moment the bailee authenticates a record acknowledging that it is holding the collateral for the secured party's benefit. |
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Term
| There are certain transactions where the security interest is perfected simply by the attachment of the interest without any additional steps. This automatic perfection occurs in what circumstances? |
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Definition
1) PMSI in CONSUMER goods (not motorvehicles nor something firmly affixed to real ppty)
2) small scale assignments of accounts (partial amount)
3) the SALE of payment intangibles or promissory notes
4) Assignment of a benefical interest in a decedent's estate
5) Investment ppty when;
a) the debtor is a securities intermediary (borrows money from a bank to buy securities and provides the bank with a daily list of the debtors holdings)
b) The debtor purchased the asset through a securities intermediary and has not paid the price, the intermediary has an automatically perfected interest; or
c) if a securities dealer purchases from another dealer under an agreement calling for delivery against payment the dealer delivering the asset has an automatically perfected secuirty interest to secure payment of the price.
2) |
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Term
| There is a mechanism where an security interst is temporarily perfected. What are the conditions where this happens? |
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Definition
| An interest in the proceeds from original collateral is continuously perfected for 20 days from the receipt of proceeds. This ends on the 21 day unless the statutory requirements are met. |
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Term
| What is the result under Art. 9 if a creditor has a possessory security interest in an instrument and the debtor temporarily reaquires the instrument to sell, exchange or present the instrument? |
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Definition
| The possessory interest remains perfected for 20 days after which the creditor must reperfect by filing or taking possession or lose the perfection status. |
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Term
| Under Art. 9 what is the result when collateral or the debtor moves from one state to another? |
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Definition
| Often the location of the collateral or debtor determines which state law applies and the the security interest will continue to be perfected for 20 days under temporary perfection under the new state. |
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Term
| If the debtor sells the secured interest, the creditor is secured in the proceeds for 20 days. The security interest will be perfected beyond the 20 days if what occurs? |
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Definition
1) the Sec Int in the original collateral was perfected by filing a finacing statement in the same placed as the financing statement for the original sec int;
2) the proceeds are identifiable cash proceeds; OR
3) the sec int is perfected within the 20 days period. |
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Term
| What are the priorities as to PMSI if more thaqn one party can claim that superpriority? |
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Definition
1) a secured party that has PMSI in collateral AS A SELLER has priority over a PMSI who has an interest in the same ppty as a lender.
2) Otherwise the first secured party to file or perfect prevails. |
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Term
| When is the PMSI in inventory perfected? |
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Definition
at the time the buyer gets possession of the inventory (the filing must take place before the inventory is delivered to debtor) and
2) any secured party who has filed a security interest in the same inventory receives an authenticated notification (effective for 5 years and states that the purchase money party has or expects to take a PMSI in inventory of the debtor described by kind or type) |
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Term
| When a party is a purchaser (or take a sec int in) chattel paper and instruments there are special rules. If the the purchaser in GOOD FAITH gives NEW VALUE and takes POSSESSION of the chattel paper in the ordinary course of business then the purchaser will priority over whom? |
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Definition
1) a security interest that arises merely as proceeds of INVENTORY (if the chattle paper doesnt indicate that it has been assigned to anyone other then the purchaser; and
2) any other sec int in the chattel |
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Term
| Under Art. 9, a chattel paper purchaser has priority in the proceeds of the chattel paper if what 2 conditions are met? |
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Definition
1) under the general priorty rules (1st to file perfect) or
2) the proceeds are the specific goods covered by the chattel paper or cash proceeds of the specific goods. |
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Term
| Under Art. 9, a chattel paper purchaser has priority in the proceeds of the chattel paper if what 2 conditions are met? |
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Definition
1) under the general priorty rules (1st to file perfect) or
2) the proceeds are the specific goods covered by the chattel paper or cash proceeds of the specific goods. |
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Term
| Under Art. 9, a chattel paper purchaser has priority in the proceeds of the chattel paper if what 2 conditions are met? |
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Definition
1) under the general priorty rules (1st to file perfect) or
2) the proceeds are the specific goods covered by the chattel paper or cash proceeds of the specific goods. |
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Term
| A purchaser of an instrument has priority over a perfected secuirty interest if the purchaser gives value and takes possession of the instrument in good faith and w/o knowledge that the purchase violates the rights of the secured party. What can the original Sec holder do to maintain their priority? |
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Definition
| Any notation on the instrument stating that the instrument has been assigned to a secured party is sufficent to give the purchaser knowledge. NOTE: unlike chattel paper, the purchaser does not have to give "new" value or take possession "in the ordinary course of business". |
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Term
| In determining the priority of proceeds what are the two disticntions made? |
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Definition
1) Filing collateral
2) non-Filing collateral |
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Term
| When does a secured party have priority in the proceeds of non-filing collateral? |
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Definition
1) has priority in the ORIGINAL collateral;
2) the interest in the proceeds is perfected; and
3) the proceeds are cash proceeds or proceeds of the same type as the original collateral.
NOTE: If the proceeds are proceeds of proceeds, all intervening proceeds MUST be either cash, proceeds of the same type as the original collateral or accounts relating to the collateral. |
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Term
| What exception to the rule for certain roceeds of non-filing collateral is triggered which changes the rule? |
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Definition
| If the original collateral (nonfiling) is perfected by a method other than filing, and the proceeds of the original collateral are FILING collateral then the first secured party to FILE a financing statement covering the proceeds has priority in the proceeds. |
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Term
| What is the general rule regarding fixtures? |
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Definition
| The first party to record and interest in the real ppty or file a fixture filing prevails. |
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Term
| Where is a fixture filing filed? |
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Definition
| Where ever a mortgage on the real ppty would be recorded |
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Term
| What are the exceptions to the general rule regarding fixture filings? |
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Definition
1) A PMSI who makes a filing within 20days after affixing will prevail over a real ppty interest in the same fixture that was recorded prior to affixation.
2)Readily removable collateral (office or factory machinery perfected BEFORE affixation will prevail over a real ppty interest if certain condtions are met
3)a SI in fixtures will prevail over prior real ppty interest if the real ppty encumbrancer in an authenticated record either consents or disclaims its interest
4) If the debtor has the right to remove the fixtures. |
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Term
| What are accessions under Art. 9? |
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Definition
| Goods that are attached with other goods in such a manner that the identy of the goods is not lost. e.g.-bike pedals, computer hard drive or vehicle motor. |
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Term
| Normally the rules of first to file or perfect, PMSI superpriority apply to Accessions. What is an exception? |
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Definition
| If the accession becomes a part of a whole that is subject to a security interest perfected by notation on a certificate of title (car), the security interest in the whole (car) has PRIORITY over the security interest in the accession. |
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Term
| What is the PMSI effect on crops when there is a perfected security interest in both the crops and on the real estate that the crops are being grown? |
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Definition
| The SI (perfected) on the crops has priority over a conflicting interest in real ppty REGARDLESS of the time of filing or perfection. |
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Term
| What is the general rule governing the priority of an unperfected secured party and a buyer or lessee of goods? |
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Definition
Buyer prevails if
1) gives value and recieves delivery
2) W/O knowledge of the SI
3) before the SI is perfected. |
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Term
| Generally a perfected SI in goods is good against subsequent buyers. In what cases will the buyer defeat even a perfected prior SI? |
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Definition
if the seller is;
1) Secured party consents
2) buyer is BIOC (the SI is created by the buyer's seller. If created by another, BIOC doesnt operate)
3) PMSI in Consumer goods
4) future advancements |
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Term
| What is the Buyer in the ordinary course (BIOC) rule? |
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Definition
| one who buys goods in the ordinary course of business from a seller who is engaged in the business from a seller who is engaged in the business of selling goods of the kind purchased normally takes free of a nonpossessory perfected security interest in the inventory even if the buyer knows of it unless the buyer knows the sale is in violation of the terms of the security agreement. |
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Term
| What are the priorities rank ordered in a nutshell? |
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Definition
1) buyers in the ordinary course of business w/o knowledge that the sale is in violation of the security interest
2) holders in due course of negociable instruments
3) Transferees of funds from deposit accounts
4) Certain purchasers of chattle paper or instruments who have possession or control
5) possessory lienholders
6) Art. 2 claimants w/ possession of the goods
7) PMSI
8) Perfected security interests and liens that have attached
9) Purchasers of collateral who buy for value and recieve delivery w/o notice of unperfected security interest
10) unperfected secuirty interests
11) the debtor |
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Term
| What is the most likely result of a default? |
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Definition
| Art. 9 is silent as to what constitutes a default and that is normally controlled by the secuirty agreement or in the case of crops, by the lien statute. The most important and most used at default is the taking of possession. |
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Term
| What are the methods of self help available when the debtor defaults? |
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Definition
1) Taking possession (w/o a breach of the peace)e.g. hotwiring a car in the driveway is ok, but not if it is in a locked garage.
2) Collection rights of secured party whereby the person owing the debtor is notified to make payment to the secured party.
3) replevy action in ct
4) Sale if it is commercially reasonable with notice to the debtor (unless time is really of the essence)
3) strict foreclosure (keep the collateral to fully or partially satisfy the debt) |
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Term
| If the debtor has defaulted and the SI is going to sell, lease, or license the collateral, what is the notice requirement? |
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Definition
The debtor must be sent notice w/i a reasonable amount of time. In a nonconsumer transaction, any notice greater than 10 days is deemed reasonable.
The notice must be in writing authenticated by the secured party unless it is perishable, threatens to decline rapidly in value or is of a kind ordinarily sold in a regognized market. |
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Term
| In a sale of collateral other than consuer goods the notice SHOULD contain what? |
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Definition
1) A description of the debtor and the secured party;
2) a description of the collateral;
3) the method of sale (public/private)
4) a statement that the debtor is entitled to an accounting for the unpaid indebtedness and the CHARGE for performing the accounting; and
5) The time and place of public sale or the time after which a private sale will be made. |
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Term
| If the goods are consumer goods, and the debtor is in default notice must be sent to the debtor. In addition to the information contained in the commerical notice, what must the consumer notice contain? |
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Definition
1) a description of the debtor's liabilty for a deficency;
2) a telephone number to call about the full cost of redeeming;
3) a telephone number OR address that the debtor can get more information about the sale. |
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Term
| What is the effect of the sale of collateral after the debtor has defaulted? |
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Definition
| Assuming no bad faith on the part of the purchaser, all junior claims are discharged. Any superior liens are still inplace. |
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Term
| If the secured party intends to retain the collateral in full or partial satisfaction of the debt then what must occur? |
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Definition
1) the debtor must consent by either agreeing to strict foreclosure in anauthenticated record after default or failing to make an authenticated objection w/i 20 days of the notice;
2) the secured party sends an authentic notice of intent to keep the collateral to a)the debtor b) any other secured party (if the forclosing party has notice of claim from them) and any other secured party who has a perfected security interest in the collateral by filing a financing statment or making a notation on a certificate of title; and
3) NONE of the notified parties objects w/i 20 days after the notice is sent.
NOTE: if there is an objection then the disposion must be by sale. |
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Term
| When there is a default of the debtor and the collateral in issue resulted from a consumer transaction and there is a defict (partial strict foreclosure) what result? |
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Definition
| There is NO defict. The Secured party may not keep the collateral in partial satisfaction AND seek a deficiency judgment. |
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Term
| What is the right to redeem? |
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Definition
| Until a secured party has sold the collateral or discharged the debt via retention the debtor, a surety, or ANY other secured party, lien holder (absent a post default agreement otherwise) may redeem by paying ALL obligations plus reasonable expenses incurred by the secured party in relation to the repossession including attorney's fees. |
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Term
| after a default, what is the secured party's liability for failure to comply with the codes default rules? |
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Definition
1) Consumer goods- the DEBTOR is entitled to a minium of 10% of the cash price of the goods PLUS an amount equal to all the interest charges paid over the life of the loan.
2)Nonconsumer- The rebuttable presumption rule applies. this rule operates to make the presumption of the collateral is equal to the debt unless the secured party can prove otherwise. So, a proper sale would a have generated enough to satisfy the debt in full. |
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Term
| The rights and remedies under default (Art. 9) are cumulative. What does this mean? |
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Definition
| This allows the secured party to pursue any remedy (foreclosure by sale, strict foreclosure or a judgment) until the debt is paid in full. NOTE: the creditor is only entitled to one satisfaction. |
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Term
| What is the general rule regarding which state law (and where filing must occur) should apply? |
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Definition
| The state where the debtor is located governs perfection of the secuirty interest. |
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Term
| What are the exceptions to the general rule that the location of the debtor governs perfection? |
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Definition
1)Possessory security interest and security interst in fixture & timber to be cut is in the state in which the collateral is located.
2) Goods covered by certificate of title are governed by the state issuing the most recent certificate of title.
3) Deposit accounts are goverend by the state has its chief executive office.
4) Investment ppty is governed by 3 options;
a) certificated security are governed by the state where the certificated security is LOCATED.
b)uncertificated securities is govern by where the issuer was organized
c) A securities account is governed by the state where the securites intermediary's CEO's office is located. |
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