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ST
| Question | Answer |
|---|---|
| Two kinds of Purchase Money Security Interests. | Seller Financed PMSI and Financer Financed PMSI |
| Seller Financed Purchase Money Security Interest. | 1) Secured party sells D collateral on credit AND 2) retains a security interest in the item sold. |
| Financer Financed PMSI | An enabling loan: 1) a loan to a D that enables the D to buy specific collateral, AND 2) the C takes a security interest in the specific collateral. 3) The credit/loan proceeds MUST actually be used to acquire the collateral. |
| After-Acquired Property Clause | SP obtains a security interest not only in D's present property, but also in property that D will obtain in the future. |
| Future Advance Clause | Future loans secured in the present security agreement. A new security agreement is NOT needed when a future advance is made. |
| Types of Collateral | Goods, AND Semi-intangible and Intangible property. |
| Goods | Tangible, moveable, personal property. |
| Classifications of Goods. | 1) Consumer Goods, 2) Equipment, 3) Inventory, 4) Farm Products |
| Consumer Goods | Used OR bought for use primarily for personal, family, or household purposes. |
| Equipment | Used OR bought for use primarily in business (default). |
| Farm products | Crops/livestock/supplies used OR produced in farming operations, products of crops, or livestock in their unmanufactured states, IF they are in the possession of a D engaged in farming operations. |
| Inventory | Held by a person who holds them for sale/lease OR to be furnished under service Ks; materials used or consumed in a business, in a short period of time. |
| Semi-Intangible and Intangible Property | 1) Instruments, 2) Documents, 3) Chattel Paper, 4) Investment Property, 5) Accounts, 6) Deposit Accounts, 7) Commercial Tort Claims, 8) General Intangibles |
| Consignment | O gives goods to Third-Party to Sale. |
| Attachment | 1) Security Agreement, 2) Value given, 3) D has rts in the Collateral |
| Form of Security Agreement (written) | Record of Agreement that shows intent to create a security interest, Authenticated by D, and containing a description of the collateral. |
| Reasonably Identify | Art 9 Categories or Normal Vocab specifically id'ing collateral. (supergenerics do not work) |
| General Rule in re After-Acquired Property | W/o an explicit A-A property clause in the security agreement, the SP's security interest ONLY reaches collateral that the D had rts in AT THE TIME the D signed the security agreement. |
| Exceptions to the After-Acquired Property General Rule | An A-A clause may be implied when the collateral is inventory/accounts; Sec-int does NOT attach under A-A clause to Consumer Goods UNLESS the D acquires rts in them win 10 days a/f SP gives value; A-A clause is ineffective as to commercial tort claims. |
| Proceeds | Whatever is received upon the sale, exchange, collection, or other disposition of collateral/proceeds. Unless otherwise agreed, a sec-int automatically gives the SP a rt to identifiable proceeds. |
| Identifiable Proceeds | SP can prove that those proceeds came from its collateral (e.g. trace back). |
| Commingled Cash Proceeds | Lowest Intermediate Balance Test: Look bank account at time proceeds are deposited to when apply test. Law deems the lowest balance during that time period the SP's identifiable proceeds (it cannot exceed value of the cash proceeds originally deposited). |
| Guarantee or Surety. | The attachment of a security interest in collateral also is an attachment of a security interest in a supporting obligation for that collateral. |
| Methods of Perfection | 1) Automatic Perfection, 2) Possession, 3) Control, 4) Notation of lien on certificate of title, 5) Filing a Financing Statement |
| General Rule of Perfection | Attachment + Extra Step |
| Automatic Perfection | PMSI in Consumer Goods (upon attachment). |
| Over what collateral can SP perfect by Control? | Investment property, electronic chattel paper, and non-consumer deposit accounts. |
| Control of Investment Property | SP has taken whatever steps are necessary to be able to have the investment property sold w/o further action from the O. |
| Control of Non-Consumer Deposit Accounts | (perfected ONLY by control) 1) Bank in which account is maintained is SP (automatic control); 2) SP puts name on account; OR 3) agreement in authenticated record w/ D and Bank that Bank will follow SP's orders w/o further consent by D. |
| Exception to Notation on Certificate of Title | If D is holding automobiles as Inventory, then a SP MUST perfect by filing a financing statement. |
| Contents of Financing Statement | 1) D's name, 2) Description of Collateral, 3) SP's name, 4) Real Property (if involved), 5) D's authorization of filing (e.g. Sec Agr) |
| Trade Name of an Individual | Non-legal name of D. Not sufficient to provide as name of D in Financial Statement. |
| Seriously Misleading Test | Search under the D's correct name, using the office's standard search logic, does not retrieve the erroneous financing statement. |
| If D changes its name so that a filed financing statement becomes seriously misleading… | The financing statement is effective before or within 4 months after the change. |
| Where to file a Financing Statement? | General Rule: with the Secretary of State. |
| Where to file a Financing Statement when multiple state transactions? | General Rule: in st where D is located; if D is individual, principal residence. If D is registered org, St where registered org is organized. If D is unreg'd org, D is located at place of business, if only one. If more than one, Chief Executive Office. |
| Grace period if D moves vs if collateral moves. | 4 months (D). 1 year (collateral). |
| Continuation Statement | A financing statement is effective for 5 years from date of filing. Continuation statement extends it, if filed within last 6 months of five years. |
| Exceptions to Perfection in Proceeds for up to 20 days a/f D receives them. | 1) proceeds are identifiable cash proceeds. 2) Sec int in original collateral was perf'd by filing, a sec int in proceeds would be filed in same place, AND proceeds were NOT purchased w/ cash proceeds of collateral (same office rule). |
| Secured Party v Secured Party | First to File OR Perfect has priority. |
| Unsecured Party v Unsecured Party | First to Attach has priority. |
| PMSI in Equipment (priority) | A PMSI in equipment has priority over conflicting sec int in the same goods/proceeds IF the PMSI is perfect at time D received possession OR w/in 20 days thereafter. |
| Special Priority Rules for Deposit Accounts | 1) sec int perf'd by control over sec int perf'd via proceeds; 2) both perf'd by control, rank according to time of control; 3) perf'd by putting deposit account in name over all by control; 4) bank over all w/ control, but SP w/ account in name. |
| Authorized Sales | If sale is authorized by SP, B takes free of sec int. Authorization may be expressed or implied, from type of sale or from S's conduct. |
| Unauthorized Sales | B in ordinary course of business takes free of sec int CREATED BY S even though the sec int isp erf'd and even though B knows of its existnece. |
| When is a B in the ordinary course? | When buys goods in good faith, w/o knowledge that the sale violates the rts of another person in the goods, and in the ordinary course from a person in the business of selling goods of that kind. |
| Buyers not in the ordinary course of business. (priority) | Take subj to perf'd sec int. Take free from unperf'd sec int, UNLESS know of sec int. (here knowledge matters) |
| Consumer to Consumer Sales | Exception to B NOT in ordinary course of business. B takes free of sec int even though perf'd, if buys w/o knowledge of sec int, for value, AND for own personal, family, or household purposes, UNLESS prior to purchase SP has filed. (Garage Sale Rule). |
| Lien Creditor | An unsecured Creditor who has obtained a judgment AND has levied on that judgment is alien creditor. |
| Secured Party v. Judgment Lien Holders | Look at time of perfection and time of levy. If sec int perf'd b/f sheriff levies, SP has priority. If levy precedes perfection, judicial lien has priority. |
| Priority Rule for SP v Judgment Lien Holder is that SP has priority, IF… | 1) SP perfected b/f the judgment lien holder got its lien; OR 2) SP obtained a security agreement and filed a financing statement b/f the judgment lien holder got its lien. |
| PMSI v. Lien Creditor | If SP files w/ respect to a PMSI w/in 20 days a/f D receives possession of the collateral, he takes priority over the rts of a lien creditor which arises between the time the sec int attaches and time of filing. |
| Priority for Future Advances | A future advance by a secured creditor has priority over a lien creditor if the future advance is made 1) w/o knowledge of the lien, OR 2) win 45 days of the lien arising, OR 3) pursuant to a commitment entered into w/o knowledge of the lien. |
| SP v. Statutory Lien Claimants | Statutory Lien beats even a perfected security interest. |
| Remedies for Default | 1) Self-help Repossession, 2) Retention of Collateral (Strict Foreclosure), 3) Resale of Collateral |
| Consequences of Breach of Peace | 1) SP loses authorization to repossess, 2) may be sued for conversion (and trespass, assault, etc), and 3) is liable for actual dmgs (punitive). |
| Breach of Peace | Any conduct by the SP that has the Potential to lead to Violence is a breach of the peace. Generally, physical presence by D plus verbal objection is enough to create a breach of the peace. (KNOW) |
| Retention of Collateral (strict foreclosure) | SP may propose retaining collateral in full or partial satisfaction of debt (only if nobody objects w/in 20 days a/f notice). |
Created by:
Sarah_Shore
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