Secured Transactions

B. Self-help repossession After default the secured party is entitled to take possession of the collateral without judicial process if this can be done without __________________ When a secured party breaches the peace, he loses the authorization to repossess, may be sued for conversion (and possibly assault, battery, trespass, etc.), and is __________ for actual (and frequently punitive) damages.

"breach of the peace." liable

B. Perfection 1. To perfect a security interest in fixtures, a ___________ must be made in the office where a mortgage on the real estate would be filed. In addition to the usual requirements for a financing statement, a fixture filing financing statement must reasonably identify the real estate, and must show the name of the owner (if the debtor does not have an interest of record in the real estate).

"fixture filing" (UCC-1)

Elvis, a music promoter, delivers compact discs worth $1500 by the band No Tolerance to CD Barn to be sold on consignment. If the compact discs are not sold, CD Barn (the consignee) may return them to Elvis (the consignor). Unless CD Barn is generally known by its creditors to be substantially engaged in selling the goods of others, Elvis must comply with the provisions of Article 9 to protect his interest in the compact discs against the creditors of CD Barn. (Note: Elvis does not need to comply with Article 9 if the goods are worth less than _________ or the consignor used the goods for personal, family, or household use).

$1000

What if Hilda's bank account had a $1000 balance (all non-proceeds) just before the $3000 from the inventory sale was deposited? The account balance never dropped below $4000. How much of the bank account is the secured party's identifiable proceeds?

$3,000

What if Hilda's bank account had a $1000 balance (all non-proceeds) just before the $3000 from the inventory sale was deposited? The account balance then dipped to $1000, increased to $7000, dropped to $50, increased to $2000, and dipped again to $750. How much of the bank account is the secured party's identifiable proceeds?

$50

b. Purchase money security interests in inventory or livestock: A purchase money security interest in inventory or livestock has priority over a conflicting security interest in the same inventory or livestock (as well as proceeds that are chattel paper, instruments and identifiable cash proceeds) if, before the debtor receives possession of the inventory or livestock, the secured party (1) perfects, and (2) sends an authenticated notification to holders of previously filed conflicting security interests in the collateral. The holder of the conflicting security interest must receive this notice within five years before the debtor receives possession of the inventory (i.e., the notification is effective for deliveries of the same type of collateral for 5 years). (1) On June 5, A obtains and perfects a security interest in all of D's inventory "now owned or hereafter acquired." On July 2, D buys inventory from B on credit and B retains a security interest in the inventory. On July 3, B files a financing statement and sends notification of the transaction to A. B delivers the inventory to D on July 6. D subsequently defaults on its obligations to A and B, and the value of the inventory is less than both these obligations. Who has priority? (a) What if B had failed to send a notification to A?

(1) B wins under the special rule (a) A wins under the general first to file rule

Failure to comply with resale requirements a. Right to deficiency judgment? (1) D owes S $20,000, and S has a security interest in D's inventory. D defaults and S properly repossesses the collateral. S holds a resale, but fails to give proper notice (or fails to conduct the sale in a commercially reasonable manner). The sale nets $15,000. Can S recover the deficiency? ___________________ General rule: If the secured party fails to conduct a commercially reasonable sale, there is a _________________ that the sale proceeds the amount of the debt.

(1) May not be able to get it b/c of rebuttable presumption of no deficiency rebuttable presumption

Compliance with resale requirements a. Secured party's right to deficiency (1) D owes S $20,000, and S has a security interest in D's inventory. D defaults and S properly repossesses and resells the collateral. The sale yields only $15,000. What are S's rights? __________________ (a) What if the sale had yielded $22,000?

(1) S gets a $5,000 deficiency judgment (a) S security interest would be satisfied and the remaining $2,000 goes back to D.

D. Priority 1. General rule: By statute in Florida, a security interest in fixtures generally is not valid against someone with a conflicting interest in the real property unless (i) the security interest was perfected by making a fixture filing, and (ii) the real property interest arose after either the goods were affixed or the security interest was perfected, whichever occurred later. (1) S loans D $10,000, taking a security interest in D's escalator (which has been installed in D's building) and perfecting by a proper fixture filing. L then makes a loan to D, taking a mortgage on D's building. Whose claim to the escalator has priority? _____________________ 2. Exception: A perfected security interest in fixtures has priority over a conflicting interest in the related real property if: (i) The security interest was perfected pursuant to Florida's certificate of title law; (ii) The security interest was created in a manufactured-home transaction; or (iii) The party with the real property interest consented to the security interest or disclaimed an interest in the fixtures.

(1) S wins under the general rule

Where to File a Financing Statement (1) General Rule: Except as otherwise specifically provided in a state's Article 9, the financing statement is ordinarily filed with the Secretary of State. (In Florida, the statute designates filing with the Florida ____________________.) (2) Where the collateral is timber to be cut or as-extracted collateral, or where the financing statement is filed as a fixture filing and the collateral is goods which are or are to become fixtures, the filing is made with the office of the ___________.

(1) Secured Transaction Registry (2) clerk of the circuit court

Example: Creditor loans debtor $1,000 for a television and takes a security interest in the television. Debtor actually uses the $1,000 from creditor to buy the television. (1) Is there a purchase money security interest? __________ (2) What if debtor had used the $1,000 from creditor to go to Las Vegas, and the debtor had instead purchased the television with $1,000 from the debtor's savings account? Does the creditor have a security interest in the television?________________ (3) Is it a purchase money security interest? _____________

(1) Yes (2) Yes (3) No

****Machines, Inc. leases a duplicating machine to Print Shop. The parties execute a 5-year lease. Whether this is a "true lease" outside the scope of Article 9, or it is a "disguised secured sale" governed by Article 9, must be determined on a case-by-case basis. Article 9 will apply if: (1) at the end of the lease period, the lessee (Print Shop) becomes the owner of the machine for little or no _________ (e.g., option to purchase for $1); or (2) the lessee is bound to ___________ the goods at the end of the lease or to renew the lease for the remaining economic life of the goods; or (3) the lease is for the __________ economic life of the leased goods, with or without renewal.***

(1) consideration (2) purchase (3) entire

How would you classify the following items of collateral? (1) A guitar purchased by Harry Homebody as a present for his son Marvin (2) The same guitar purchased by Sterling Studly, a professional rock musician, to be used on tour (3) Milk in the hands of a farmer (who got it from his cows) (4) Milk in the hands of a grocery store (or a restaurant) (5) Milk in the hands of the grocery store's customer who is buying for his family's consumption (6) Automobiles held by a local car rental agency (7) Pencils and other stationery supplies used by Sears or some other large retailer in its credit offices.

(1) consumer goods (2) equipment (3) farm products (4) inventory (5) consumer goods (6) inventory (7) equipment/inventory

For financing statement to be effective needs three (3) things: (1) name and mailing address of ________ (2) name and mailing address of the ________ (3) indication of _________ covered by financing statement

(1) debtor (2) secured party (3) collateral

How would you classify the following items of collateral? (1) A promissory note. (2) A stock certificate. (3) A receipt given to a farmer by a silo operator when the farmer stored her grain there. (4) A written contract in which a car buyer purchasing on credit promises to pay the car dealership for the car and grants the dealership a security interest in the car. (5) Big T sells tires on credit. What are its customers' obligations? (6) A hospital has patients who come in for treatment sign paperwork authorizing the hospital to seek payment from their health insurance coverage provider. Can the hospital use the monies due from the various health plans as collateral? (7) Credit Card Company issues millions of credit cards to cardholders, who use them in transactions with merchants. Merchants send the resulting paperwork to Credit Card Company for reimbursement (minus certain fees). Can Credit Card Company use these credit card transactions as collateral? (8) The checking account that you have at your bank. (9) Patent and trademark rights, copyrights, goodwill, a tax refund claim, a liquor license, a commercial clamming license, a right to the return of a security deposit held by a landlord. (10) A right to sue a corporation for wooing away a trusted employee. (11) A claim arising in tort that has been settled and reduced to a contractual obligation to pay. (12) A computer program.

(1) instrument (2) investment property (3) documents (4) chattel paper (5) accounts (6) accounts (7) accounts (8) deposit account (9) general intangibles (10) commercial tort claim (11) payment intangible/general intangible (12) general intangible - if embedded on computer, follows computer's classification

3. Priority for Future Advances a. A security agreement can secure present and future advances. A future advance by a secured creditor has priority over a lien creditor if the future advance is made (1) without ___________ of the lien, OR (2) within ______ days of the lien arising, OR (3) pursuant to a __________ entered into without knowledge of the lien.

(1) knowledge (2) 45 (3) commitment

***Special priority rules for deposit accounts (1) A security interest perfected by control has priority over a security interest perfected via __________. (2) If conflicting interests each were perfected by control, they rank according to the _______ of obtaining control. (3) A secured party who has obtained control by putting the deposit account in its own _______ has priority over all other secured parties with control. (4) A bank that has control because it ___________ the deposit account has priority over all other secured parties with control except a secured party who has obtained control by putting the deposit account in his __________.

(1) proceeds (2) time (3) name (4) maintains; name

a. Debtor needed money for his clothing business. He went to First Bank and Second Bank, asking each to loan him money and offering his inventory as collateral. They each made him sign a security agreement and a financing statement. First Bank filed first, on March 10, but did not loan Debtor any money (nor make any commitment to do so) until June 15. On April 20, Second Bank loaned Debtor the money and filed a financing statement. Debtor paid neither bank. (1) Did both banks have a perfected security interest, assuming they both filed in the proper place? (2) Which Bank has a superior right to the inventory? First Bank filed on __________. First Bank perfected on ____________. Second Bank filed on _____________. Second Bank perfected on ________________ (3) Is priority in any way affected by the knowledge that one may have of the other's interest?

(1) yes both attached and did one of 5 methods of perfection (aka filed) (2) March 10, June 15 April 20, April 20 (3) no

c. Special rule: consumer to consumer sales: In the case of consumer goods, a buyer takes free of a security interest even though it is perfected if he buys without knowledge of the security interest, for value, and for his own personal, family, or household purposes, unless prior to the purchase the secured party has filed a financing statement covering such goods. Note: The goods must be consumer goods in the hands of both the buyer and the seller. (1) Consumer buys a new television set on credit from S. S retains a security interest but does not file a financing statement. Consumer holds a garage sale and sells the television to Irma (who will use the television in her home). Does Irma take free of S's security interest? (2) What if Irma knows of S's security interest? (3) What if S had perfected by filing before the sale to Irma? (4) What if, instead of selling the television to Irma, Consumer had traded the set in to Distortion TV (a retailer) for some credit towards a new television? This is not a consumer-to-consumer sale, so the special rule does not apply. Consumer is not in the business of selling televisions, so Distortion is not a buyer in the ordinary course. Distortion takes subject to the automatically perfected security interest of S.

(1) yes, under the special rule (2) then she doesn't take free (3) then she doesn't take free (4) not a consumer to consumer sale, so rule not apply, so Distortion is not buyer in ordinary course and takes subject to ordinary security interest of S

Contents of financing statement (1) Debtor's name: Financing statements are indexed by the debtor's name. If the debtor is an individual, the individual's name should be given. If the debtor is a corporation, the corporate name should be given. If the debtor is a partnership, the partnership name should be given. (a) (1) What name should be used on the financing statement if the debtor is Mike Sabbath operating under the trade name The Sabbath Commeth? _________________ (2) For individual names, the rule in the majority of jurisdictions is the following: if the debtor has an unexpired driver's license issued by the state where the financing statement is to be filed, the financing statement must include the name as indicated on the license. (3) If the debtor does not have such a license, then the financing statement may include the debtor's individual name, which Article 9 does not define, or the debtor's personal name and surname. NOTE: A financing statement that provides only the debtor's trade name does not sufficiently provide the name of the debtor. (b) Suppose a secured loan is made to Michael Sabbath. The financing statement mistakenly shows the name as Michael Sadbath. Is the financing statement effective? Yes, as long as the error is not ______________. To determine if a name error is seriously misleading, check whether a search under the debtor's _______________ name, using the filing office's standard search logic, would retrieve the erroneous financing statement. If it does, the name error is not seriously misleading. If it does not return the erroneous financing statement, then the error is seriously misleading. (c) Suppose that the filing officer mistakenly files the financing statement so that the index shows the secured party as the debtor. Is the filing effective? _____________

(a) (1) do not file under a trade name: what's a trade name -- non-legal name of the debtor (2) assuming he has an unexpired driver's license in Florida, file under his name on license (3) under common law, the name by which you are known in the community (b) seriously misleading correct *spelling errors are fatal (c) yes, secured creditor not responsible for filing office errors

(2) Description of collateral - same reasonably identifies test as with the security agreement (a) Will a security interest in Hilda's hats be perfected by a properly filed financing statement that describes the collateral as "inventory?" Hats? (b) Will a security interest in Hilda's hats be perfected by a properly filed financing statement that describes the collateral as "all assets" or "all personal property?"

(a) Yes, Article 9 categories work Yes, normal language works, too (b) valid here (not valid in security agreement)

Form of the security agreement (when written) (a) The agreement must be evidenced by a record (written or electronically stored information) and must show ________________. no magic language is necessary (b) The agreement must be ____________ by the debtor. This usually means "signed" by the debtor. Any symbol, including an electronic symbol, that is made with the present intent to authenticate the record will work (e.g., an "X," a smiley face). (c) The agreement must contain _____________(and if the security interest covers timber to be cut, a description of the land concerned). The Code says that the security agreement must "reasonably identify" the collateral.

(a) an intent to create a security interest (b) "authenticated" (c) a description of the collateral

Multiple state transactions (a) Your client takes a security interest in D's equipment which is located in North Carolina. D is a Delaware corporation with its chief executive office in Ohio. In which state should you file a financing statement? The general rule is that you file in the state where the debtor is _____________________. If the debtor is an individual, she is located at her ______________. If the debtor is a registered organization (a business organization that is only created by filing a specified document with the state, such as a corporation, a limited partnership, or a limited liability company), the debtor is located in the state where the registered organization is ________________. If the debtor is an unregistered organization (e.g., a general partnership, including a limited liability partnership), the debtor is located at its place of , if only one. If more than one place of business, the debtor is located at its ____________________________________. (b) What if a financing statement is properly filed in Delaware where the debtor is located (assume the debtor is an individual)? The debtor then moves to North Carolina. Is it necessary to file a financing statement in North Carolina? The secured party will become unperfected ___________ after the debtor's move unless it files a financing statement in the new jurisdiction before that ___________ period is up. (c) What if a financing statement is properly filed in Delaware where the debtor is located? The collateral is then transferred to a new debtor who is located in North Carolina. Is it necessary to file a financing statement in North Carolina? The secured party will become unperfected __________ after the collateral moves unless it files a financing statement in the new jurisdiction before that ___________ period is up. When farm products are located in a state, an agricultural lien on those farm products should be perfected in that state. A financing statement is effective for _________ years from the date of filing. It can be extended by filing a ___________. To be effective, the continuation statement must be filed in the last 6 months of the five-year "life" of the financing statement (i.e., between 4.5 and 5 years).

(a) located principal residence organized chief executive office (b) 4 months 4 months (c) 1 year 1 year five continuation statement

An enforceable security interest can be created in a deposit account where the (i) party signs a security ________ granting the lender/bank an interest in the account and (ii) the debtor has __________ in the account and (iii) the lender/bank extended ___________ to the debtor.

(i) agreement (ii) rights (iii) value

Other means (besides being bank holding deposit account) to gain control over a non consumer deposit account are: (i) putting the deposit account in the secured party's _______; or (ii) agreeing in an authenticated record with the debtor and the bank in which the deposit account is maintained that the bank will comply with the secured party's orders regarding the deposit account without the debtor's _____.

(i) name (ii) consent

E. Debtor's right to redeem Any time before the secured party has resold the collateral or has entered into a contract for its disposition, or the obligation has been discharged by the secured party's retention of the collateral, the debtor may redeem the collateral. To do so, the debtor must tender fulfillment of all obligations secured by the collateral. Because most security agreements contain an acceleration clause, the debtor typically must tender the entire balance in order to redeem. 1. D buys a car from S on credit, with S retaining a security interest in the car. D is to make 60 monthly payments of $200 (a total of $12,000). After making five monthly payments (a total of $1000), D defaults and S repossesses. How much will D have to pay to redeem? ___________________

1. Assuming S accelerates, $11,000

Methods of perfection Usually, a security interest is "perfected" when it has attached and when some additional step (possession or filing) is taken. ***1. Automatic perfection: In certain situations, a security interest is automatically perfected. The most common such situation is: ________________________ a. Purchase money security interest in consumer goods: D borrows money from S Loan Company to buy a new dining room set for her home (the money from S Loan Company is used to buy the dining room set). S obtains a security interest in the dining room set. The security interest is ______________ perfected upon attachment.

1. PMSI in consumer goods a. automatically

Types of collateral Classification of the collateral is important because many provisions of Article 9 (particularly those dealing with perfection and priorities) make legal distinctions based on the type of collateral. 1. Goods Definition: "Goods" include all things which are movable at the time the security interest attaches, and include the unborn young of animals and growing crops. Goods also include fixtures (which we will discuss later). __________________________________ Classification: Goods are further classified as either (1) consumer goods, or (2) equipment, or (3) farm products, or (4) inventory. In classifying the collateral, look to see how the debtor is using the collateral. What is the collateral in the hands of the debtor? __________________________________ (1) Consumer goods: Used or bought for use primarily for personal, family or household purposes. (2) Equipment: Used or bought for use primarily in business. Equipment is the default or catch-all category for goods (3) Farm products: Crops or livestock or supplies used or produced in farming operations or products of crops or livestock in their unmanufactured states (such as ginned cotton, wool-clip, maple syrup, milk and eggs) if they are in the possession of a debtor engaged in farming operations. (4) Inventory: Held by a person who holds them for sale or lease or to be furnished under service contracts; materials used or consumed in a business.

1. tangible, moveable, personal property

2. Special Rule: PMSI v. Lien Creditor a. If the secured party files with respect to a purchase money security interest within ________ days after the debtor receives possession of the collateral, he takes priority ____________ the rights of a lien creditor which arises between the time the security interest attaches and the time of filing.

20 over

Debtor's name change: If the debtor so changes its name that a filed financing statement becomes seriously misleading (i.e., a search under the debtor's correct name, using the filing office's standard search logic, would not retrieve the financing statement with the debtor's former name), the financing statement is effective to perfect a security interest in collateral acquired by the debtor before or within ________- months after the change. It is not effective to perfect a security interest in collateral acquired by the debtor more than 4 months after the change (unless an amended financing statement is filed within the 4 months that renders the financing statement not seriously misleading).

4

Which of the following would be considered equipment when used as collateral for a secured transaction? A The display shelves and cash registers in a retail store. B Gasoline used to fuel lawnmowers at a lawn care business. C The take-out boxes, paper plates, and paper napkins at a pizzeria. D A farmer's goats, from whose milk she makes cheese for sale at a roadside stand.

A Display shelves and cash registers in a retail store would be considered equipment when used as collateral for a secured transaction. When used as collateral, equipment is defined as goods that are not consumer goods, farm products, or inventory, and includes durable goods used in a business - not only store furnishings such as display shelves but other durable goods used in the store as well. Equipment does not include materials that are used up quickly or consumed in a business, such as fuel; these are classified as inventory. Livestock are not equipment, but are classified as farm products.

What are the requirements for the attachment of a security interest? A The parties must agree to create the security interest, using collateral in which the debtor has rights, and value must be given by the creditor. B The debtor must transfer actual possession of the collateral to the secured party, and value must be given by the secured party. C. The parties must agree to create the security interest, using collateral in which the debtor has present or future rights. D The parties must agree to create a security interest, and the secured party must give value to the debtor.

A For a security interest to attach: (i) the parties must agree to create a security interest; (ii) value must be given by the secured party (i.e., the creditor); and (iii) the debtor must have rights in the collateral. Actual possession of the collateral by the secured party is not required, although such possession may be evidence of an agreement. Value must be given by the secured party, but any consideration that will support a simple contract is sufficient. A debtor may not offer as collateral anything in which he has no rights.

Debt secured may include future advances 1. In the Hilda hypothetical on page 1, First Bank loans Hilda $20,000 on the date of the transaction, March 5. On May 10, First Bank lends Hilda an additional $5000. No new security agreement is signed. What is the amount of debt secured?

All $25,000 because of the future advance clause.

D rents a stall at Ark Self Storage and stores his goods there. The rental agreement provides that Ark has "a contractual lien" on the contents of the stall, and that if D defaults in his rental payments, Ark has the right to enter the stall, seize the contents and sell them to satisfy the rental obligation. No mention is made of the creation of any security interest. Nevertheless, a security interest has been created that is governed by ___________.

Article 9

(1) Instruments: Negotiable instruments and any other writing which evidences a right to the payment of a monetary obligation, and which are in the ordinary course of business transferred by delivery with any necessary indorsement or assignment (does not include investment property).

Article 9 Negotiable Instruments

A secured party may perfect a security interest in ____________________ by obtaining control of the collateral. A Consumer goods. B Investment property. C Computer hardware and software. D Livestock and other farm products.

B A secured party may perfect a security interest in investment property, nonconsumer deposit accounts, and electronic chattel paper by obtaining control of the collateral. For many types of collateral - including consumer goods, computer hardware and software, and livestock and other farm products - a security interest may be perfected only by filing, or by the secured party taking actual possession of the collateral. In contrast, security interests in investment property may be perfected by filing, possession, or by the secured party obtaining control over the collateral; a security interest in electronic chattel paper may be perfected either by filing or by obtaining control; and a security interest in a nonconsumer deposit account can be perfected only by obtaining control.

Usually, the general rules for priority apply to accessions. However, if the accession becomes a part of a whole that is subject to a security interest perfected by ____________________, the security interest in the whole has priority over the security interest in the accession. A Filing. B Possession. C Notation on a certificate of title. D Recordation with the county clerk.

C Accessions are goods that are physically united with other goods in such a manner that the identity of the original goods is not lost (e.g., new pedals on a bike). Usually, the general rules for priority (e.g., first to file or perfect, purchase money security interest ("PMSI") superpriority) apply to accessions. However, if the accession (e.g., a new motor) becomes a part of a whole that is subject to a security interest perfected by notation on a certificate of title (e.g., a car), the security interest in the whole (the car) has priority over the security interest in the accession (the new motor).

In Florida, a debtor that is a registered organization (e.g., a corporation, limited partnership, or limited liability company) must be identified in a financing statement by: A Name and IRS Employer Identification Number, without any seriously misleading errors. B Trade name or name, as it appears on the most recently filed, publicly available record that forms the organization, without any seriously misleading errors. C Name, as it appears on the most recently filed, publicly available record that forms or organizes the organization, without any seriously misleading errors. D Trade name, as shown on the public organic record, without any seriously misleading errors.

C For debtors that are registered organizations, Florida requires that the name on the financing statement match the name on the most recently filed, publicly available record that forms or organizes the organization (called the public organic record). Use of an organization's trade name is not required and is never sufficient; neither is use of any federal or state registration number required. Although minor errors in the debtor's name will not invalidate a filing, the financing statement must not contain seriously misleading errors.

A purchase money security interest (PMSI) in goods other than inventory or livestock has priority over conflicting security interests in the same goods and their identifiable proceeds only if: A The PMSI is perfected no later than 60 days after the debtor takes possession of the goods. B The PMSI is perfected and holders of conflicting security interests are notified of the PMSI before or within 20 days after the debtor takes possession of the goods. C The PMSI is perfected and holders of conflicting security interests are notified of the PMSI no later than the date on which the debtor takes possession of the goods. D The PMSI is perfected no later than 20 days after the debtor takes possession of the goods.

D A PMSI in goods other than inventory or livestock has priority over conflicting security interests in the same goods and their identifiable proceeds only if the PMSI is perfected before or within 20 days after the debtor takes possession of the underlying goods. The Uniform Commercial Code ("UCC") does not require that other holders of security interests be notified of the existence of the PMSI.

1. On April 5, S loans $5000 to D and obtains a non-purchase money security interest in D's equipment. On April 10, L tries to collect her $20,000 judgment against D by having the sheriff levy on D's equipment. S perfects its security interest by filing on April 13. The equipment is worth only $20,000. Who has priority?

L wins, levy before perfection.

Purchaser of chattel paper: If a purchaser of chattel paper in good faith gives new value and takes possession in the ordinary course of business (or takes control of electronic chattel paper), the purchaser will have priority over: (1) a security interest in chattel paper that arises merely as proceeds of inventory (as long as the chattel paper does not indicate that it has been assigned to anyone other than the purchaser), and (2) any other security interest in the chattel paper, as long as the chattel paper purchaser acquired its interest without knowledge that its purchase violated the rights of the secured party.

NO WAY

Purchaser of instruments: A purchaser of an instrument has priority over a perfected security interest in the instrument if the purchaser gives value and takes possession of the instrument in good faith and without knowledge that the purchase violates the rights of the secured party.

NO WAY

Semi-intangible and intangible property (8 types) a. Definitions (1) Instruments: __________ instruments and any other writing which evidences a right to the payment of a monetary obligation, and which are in the ordinary course of business transferred by delivery with any necessary indorsement or assignment (does not include investment property). (2) Documents: 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 (e.g., bill of lading, warehouse receipt). (3) Chattel paper: A record or records which evidence both a monetary obligation and a security interest in or a lease of specific goods. A "record" is information that is stored in either a tangible medium (e.g., written on paper), or an intangible medium (e.g., electronically stored). Chattel paper that is stored in an electronic medium also is called "electronic chattel paper." (4) Investment property: Includes items such as stocks, bonds, mutual funds, and brokerage accounts containing such items. (5) Accounts: A right to payment [not evidenced by an instrument or chattel paper] (1) for goods, (2) for services, (3) for real property, (4) for a policy of insurance issued or to be issued, (5) for a secondary obligation incurred or to be incurred, (6) for energy provided or to be provided, (7) for the use or hire of a vessel, (8) arising out of the use of a credit card, or (9) as lottery winnings. Health care insurance receivables are included. A contractual obligation arising from a loan of money is not an account - it is a general intangible (see below). (6) Deposit accounts: An account maintained with a bank. Note: Article 9 only applies to nonconsumer deposit accounts and deposit accounts that are claimed as proceeds of other collateral. (7) Commercial tort claims: A claim arising in tort with respect to which the claimant is an organization (e.g., partnership or corporation), or where the claimant is an individual and the claim arose in the claimant's business or profession and does not include damages for personal injury or the death of an individual. (8) General intangibles: Any personal property not coming within the scope of the other definitions (e.g., software, patent and trademark rights, copyrights, goodwill). A general intangible under which the account debtor's principal obligation is a monetary obligation is a payment intangible.

Negotiable

Perfected secured creditor fighting unperfected secured creditor, who wins?

Perfected secured creditor wins.

c. Conflicting purchase money security interests (1) B wishes to purchase a $10,000 piece of equipment from S. B borrows the $500 down payment from Finance Company and S extends credit to B for the remainder of the purchase price. Both Finance Company and S take a security interest in the equipment, and both file financing statements to perfect their interests within 20 days of B receiving possession of the equipment. Does S or Finance Company have priority to the equipment? The Code says that a purchase money security interest has priority over a purchase money security interest.

S

a. What if S's security interest had been perfected by filing on April 8?

S wins, perfection before levy.

Attachment: SA VG DR

Security Agreement Value has been given Debtor has rights in the collateral

D. Secured party v. statutory lien claimants 1. Bank has a perfected security interest in a car owned by D. D takes the car to Bubba's garage for repairs. Bubba makes the repairs, but D fails to pay Bubba. By statute (and common law) Bubba has a lien on the car. D also defaults on his loan to Bank. Who has priority to the car?

Statutory lien wins

C. Rights on default 1. S sells and installs central heating in a home. S sells on credit, and retains a security interest. If homeowner defaults, can S repossess even if it is February and the home will be uninhabitable? _____________________

Yes

Property secured may include after-acquired property 1. Assume that Hilda buys new inventory six months after her agreement with First Bank, using money supplied by Second Bank. Is the new inventory subject to First Bank's security interest? ____________________ General rule: Without an explicit after-acquired property clause in the security agreement, the secured party's security interest only reaches collateral that the debtor had rights in at the time the debtor signed the security agreement. Exception: Even when there is not an explicit after-acquired property clause, the courts will often imply an after-acquired property clause when the collateral is of a type that is rapidly depleted and replenished (e.g., inventory or accounts). The courts assume that the parties must have meant to cover after-acquired property, or the security interest will reach nothing. Another exception: A security interest does not attach under an after-acquired property clause to consumer goods unless the debtor acquires rights in them within 10 days after the secured party gives value. Yet another exception: An after-acquired property clause is ineffective as to commercial tort claims.

Yes because of the after-acquired property clause

First Bank has a security interest in Hilda's inventory. Hilda sells some inventory on credit. Does First Bank's security interest reach the accounts resulting from such sales?

Yes, if identifiable and likely identifiable here = proceeds

Hilda sells some inventory for $3000, which cash is deposited in Hilda's bank account. Does First Bank's security interest reach this money? ___________________ Yes, if the proceeds are still (meaning that the secured party can prove that all of the monies in Hilda's bank account are proceeds). The problem is that cash proceeds are frequently ____________________ with cash non-proceeds such that it becomes impossible to determine which part of the cash is proceeds. To determine which part of a commingled mass of cash is identifiable (such that the secured party has a security interest in it), apply the test. Look at the balance in a commingled bank account starting at the time the proceeds are deposited and ending at the time you are applying the test. The law deems that the lowest balance during that time period is the secured party's identifiable proceeds (but it cannot exceed the value of the cash proceeds originally deposited).

Yes, likely, but commingling ***lowest intermediate balance test***

Special rules ***a. Purchase money security interests in goods usually equipment (other than inventory or livestock): A purchase money security interest in such goods has __________ over a conflicting security interest in the same goods or its proceeds if the purchase money security interest is perfected at the time the debtor received possession of the collateral or within __________ thereafter. (1) On May 1, D buys equipment from A on credit, and A retains a security interest in the equipment. A delivers the equipment to D on May 5, but does not file a financing statement until May 12. In the interim, D borrows money from B, who obtains a security interest in the same equipment and files a financing statement on May 10. D defaults, and the value of the equipment is less than the amount owed to both A and B. Who has priority? (a) What if A had filed its financing statement on May 30 instead of May 12? _________________

a. (generally a PMSI in equipment) priority 20 days (1) A wins under special PMSI rule (a) B wins under the general first to file or perfect rule

1. Reasonable notification: Reasonable notice that is authenticated by the secured party (the notice cannot be oral) must be given to the debtor and any sureties on the debt, and (except in the case of consumer goods) to any other secured parties who have notified the secured party of their interests, and any secured parties who have perfected by filing a financing statement or making a notation on a certificate of title. This notice is not necessary when the collateral is perishable or threatens to decline rapidly in value or is of a kind ordinarily sold in a recognized market (e.g., stock). The debtor or the surety may, after default, in an authenticated agreement waive the right to notice. a. Timeliness: Notice must be sent within a reasonable time before the sale (a question of fact). In nonconsumer transactions, notice is deemed to be sent within a reasonable time if it is sent __________ or more before the time of sale. b. Content: The content of the notice depends on the type of sale and type of collateral. (1) The statute provides "safe harbor" notice forms. (2) For a public sale, notice of the ___________ and ___________of sale is required. (3) For a private sale, notice of the time __________ which the sale will occur must be given (e.g., the car will be sold at a private sale after January 1, 2006). (4) Extra information is required for consumer goods.

a. 10 days b. (2) time, place (3) after

***Purchase money security interest [2 kinds]*** a. _____________: Secured party sells debtor collateral on credit and retains a security interest in the item sold. b. ____________: An enabling loan (as in the hypo); a loan to a debtor that enables the debtor to buy specific collateral, 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.

a. Seller-financed PMSI b. Financer-finance PMSI

Change in Use of Collateral: If the debtor changes its use of the collateral (e.g., equipment to inventory), the filed financing statement (with the description of "equipment") remains effective to perfect the security interest. The secured creditor has no duty to monitor the collateral or to ___________ the financing statement even if it knows that the description is seriously misleading.

amend

For tax and other reasons (including the desire to avoid the requirements of article 9), parties may try to disguise what really is a sale with a security interest as a lease. A "true lease" is not covered by ___________, but a lease that is really a sale with a security interest is covered by article 9. To distinguish the "true lease" from the "disguised sale," ask whether the transaction is, in substance, a lease or a sale. In a lease (e.g., __________), the lessor is going to receive the item back at the end of the lease term when the item still has __________ economic value. In a sale, the buyer is the owner and is generally going to drain all of the economic value from the item. The relevant question is: at the time the parties entered into the transaction, was it reasonably likely that the "lessor" would get the item back when it still had meaningful economic value? If yes, it is a "true lease." If no, it is a sale with a security interest in substance, and it is governed by article 9.

article 9 a car rental meaningful

As between two unperfected secured creditors, the first to ______________ has priority.

attach

Attachment: Deals with those steps legally required to give the secured party a security interest in the collateral that is effective as against the debtor. Once a security interest attaches, it is effective against the debtor and the creditor has all of the rights of a secured creditor under Article 9. A creditor is not a secured creditor until ___________________. Attachment means __________________.

attachment the security interest has been created

The attachment of a security interest in collateral also is an attachment of a security interest in a supporting obligation for that collateral. 1. Sarah grants Finance Company a security interest in her accounts receivable. One of these accounts has a surety, who promised Sarah that she would pay the account if the account debtor did not. Finance Company's security interest _________ attaches to this supporting obligation.

automatically

(5) No signature required, though debtor must authorize the filing: The authorization may be in any signed writing. ***In addition, the debtor __________ authorizes the financing statement if she authenticates a security agreement covering the same collateral. ipso facto authorization. ***

automatically [debtor signed security agreement, but forgot to sign financing statement]

b. On March 1, A loans D $2000 and takes a purchase money security interest in consumer goods. No financing statement is filed. On April 1, B obtains a non-purchase money security interest in the same consumer goods. B files a financing statement on April 2. D is unable to pay A or B. Who has priority? ________________________________

b. (PMSI automatically perfected) A has priority -- A is first to file or perfect

b. Buyers not in the ordinary course of business take subject to perfected security interests. They take free from unperfected security interests (and unperfected agricultural liens) unless they _______ of the security interest. (1) Finance Company had a perfected security interest in Acme Manufacturing Company's equipment. Without the knowledge of Finance Company, Acme sold a piece of its equipment to Baker Manufacturing Company. Acme defaulted on its loan to Finance Company, and Finance Company seeks to repossess all equipment. Can Finance Company recover the equipment that Acme sold to Baker? Yes. Baker is _________________ a buyer in the ordinary course because Acme is not in the business of selling its equipment. Baker takes subject to the perfected security interest of Finance. (a) Would your answer be the same if Finance Company's interest were unperfected at the time of the sale?

b. know (1) not (a) no, then Baker would take free of the unperfected security interest

Stocks and _______ are examples of paper collateral. Another common form of papercollateral is chattel paper. Chattel paper is a writing that indicates that the holder is owed money and has a security interest in valuable goods associated with the debt. Promissory note and security interest = chattel paper.

bonds

Illustration: S loans money to D and takes a security interest in D's inventory. S perfects its security interest by filing a financing statement with the secretary of state. D sells some inventory for cash, and uses the cash to purchase some equipment. Unless the financing statement's description was ___________ enough to include the equipment, S would need to file a new financing statement within 20 days to be perfected as to the equipment.

broad Used cash to buy equipment, so after 20 days SI will be unperfected, unless before that 20-year period is up we add equipment to the Financing Statement (UCC-1)

(2) Equipment: Used or bought for use primarily in __________. Equipment is the default or catch-all category for goods

business

Deposit accounts: An account maintained with a bank. Note: Article 9 only applies to nonconsumer deposit accounts and deposit accounts that are claimed as proceeds of other collateral.

business bank account

(4) Notation of lien on certificate of title The only way to perfect a security interest in an automobile (car/truck) is for the secured party to note its lien on the _____________ of title. Exception: If the debtor is holding the automobile as ________________ (i.e., if the debtor is a dealer), then a secured party must perfect by filing a financing statement against inventory. Noting its lien on the certificate of title will not work.

certificate inventory

The secured party must have given value The value definition is very liberal. Any consideration sufficient to support a simple _______ is enough. Even _______________consideration is enough. The debtor always gives value because the debtor, at a minimum, promises to pay. So the question is whether the secured party gave value.

contract past

A security agreement for a nonconsumer deposit account is evidenced by ______.

control

The bank in which the non consumer deposit account is maintained automatically has _______ over a deposit account.

control

Classification: Goods are further classified as either (1) consumer goods, or (2) equipment, or (3) farm products, or (4) inventory. In classifying the collateral, look to see how the debtor is using the collateral. What is the collateral in the hands of the ___________?

debtor

A security interest may be perfected by filing as to all kinds of collateral except _______ accounts and _____.

deposit money

To raise money, Acme Manufacturing sold all of its accounts to Friendly Finance, which notified the customers that payments should be made ________ to Friendly. (Note: This is not a loan from Friendly to Acme with the accounts put up as collateral; it is an outright sale.) This sale is governed by Article 9.

directly

Resale of collateral: After default, the secured party may sell, lease, license, or otherwise dispose of the collateral in its condition when repossessed or after reasonable preparation. The sale may be either public (auction) or private, and may be by one or more contracts. The sale ______________ the security interest under which the sale is being made and all subordinate security interests. The purchaser, however, is still subject to superior security interests.

discharges

Illustration: S loans money to D and takes a security interest in D's inventory. S perfects its security interest by filing a financing statement with the secretary of state. D trades some of its inventory to X for some equipment. S remains perfected as to the ______________.

equipment

(3) Secured party's name: Because searches are not conducted under the secured party's name, an _______ in the name of the secured party will not be seriously misleading (though, in an appropriate case, this type of error may give rise to an estoppel in favor of a particular holder of a conflicting claim to the collateral).

error

A. Definition of default The right of the secured party to proceed against collateral is normally triggered by default. But Article 9 does not define the term "default." Typically, grounds of default are specified in the security agreement (e.g., failure to make payment when due, selling collateral without the secured party's permission, failing to keep the collateral insured). In the absence of such a specification, default has been restricted to _________ to perform or pay the obligation when it is due. Look for late or missed payments Also look for a possible waiver by the secured party of late or missed payments

failure

Secured party v. secured party 1. General rule: As between two perfected secured creditors, the first to __________, whichever occurs first, has priority.

file or perfect

Perfection as to proceeds: If a secured party has a perfected security interest in collateral, a secured party automatically has a perfected security interest in whatever proceeds the debtor receives in exchange for that collateral _____________. To remain perfected in those proceeds beyond 20 days, the secured party must take new action to perfect its interest unless: (1) the proceeds are identifiable cash proceeds; or (2) the security interest in the original collateral was perfected by filing a financing statement, a security interest in the type of collateral constituting proceeds would be filed in the same place as the financing statement for the original collateral, and the proceeds were not purchased with cash proceeds of the collateral (sometimes called the "same office" rule).

for 20 days

2. Unauthorized sales a. General rule: A buyer in the ordinary course of business (other than a person buying farm products from a person engaged in farming operations) takes _______ of a security interest created by his seller even though the security interest is perfected and even though the buyer knows of its existence. (1) What is a buyer in the ordinary course? A buyer in the ordinary course means a person who buys goods in ___________, without knowledge that the sale violates the rights of another person (usually the secured party) in the goods, and in the ordinary course from a person in the business of ________________ goods of that kind. (2) Carla Consumer buys a new refrigerator from Appliance World, a retail store. Several months later, a representative of State Bank came to Carla's home demanding that she turn over the refrigerator. The representative explains that State Bank has a perfected security interest in all of Appliance World's inventory, and that because Appliance World has defaulted on its loan, the bank was repossessing. What should Carla tell the bank's representative? ______________________ (a) Would it matter if Carla had known of the bank's perfected security interest when she purchased the refrigerator? _________________ (3) The Bogarts purchased a sailboat with money borrowed from State Bank, which took a security interest in the sailboat and promptly perfected. Three months later, the Bogarts sold the sailboat to Mabel's Marina, which sells new and used boats. A month later, the sailboat was sold to Nudnik. State Bank has tracked down the sailboat, and seeks to enforce its security interest in the sailboat which is in Nudnik's hands. Can it enforce its security interest in the sailboat? [Note: The security interest was created by the Bogarts and not by Nudnik's seller.] _____________________

free (1) good faith selling (2) buyer in ordinary course, bought in good faith. she takes free of security interest created by appliance world implied authorization, too (a) no, mere knowledge of the security interest is not a problem (3) yes, because buyer in ordinary course can only take free of security interest from their seller (N), but Bogart's was not the one it brought from and Bogart's created security interest.

(4) Inventory: Held by a person who ________ them for sale or lease or to be furnished under service contracts; materials used or consumed in a business in a short-period of time.

holds

(1) Consumer goods: Used or bought for use primarily for personal, family or ___________ purposes.

household

Use of a debtor's trade name for a financing statement is _______.

ineffective

A. What is a fixture? The Code defines "fixtures" as goods that have become so related to particular real property that an interest in them arises under real property law. In general, personalty attached to real estate with the ________ that it become a permanent part of the real estate is a fixture (e.g., central air conditioning, built in appliances, elevators, etc.). The distinctive aspect of a fixture is that interests in it may arise under both the Code and under the law of real estate. Note: No security interest can exist in ordinary building materials (e.g., bricks, lumber, shingles, etc.) incorporated into an improvement on land.

intent

Secured party v. judgment lien holders An unperfected security interest is subordinate to the rights of a person who becomes a lien creditor before the security interest is perfected. If the security interest is perfected before the person becomes a lien creditor, the security interest has priority. Article 9 defines a "lien creditor" as "a creditor who has acquired a lien on the property involved by attachment, levy or the like." While Article 9 does not clearly define the moment when the status of "lien creditor" arises, the lien obtained by judicial proceedings must attach to the collateral. An unsecured creditor who has obtained a judgment and has __________ on that judgment is a "lien creditor." KEY: Look at the time of perfection of the security interest and the time of the levy by the sheriff. If the security interest is perfected before the sheriff levies, the security interest has ___________. If levy ___________ perfection of the security interest, the judicial lien has priority.

levied priority precedes

(5) Accounts: A right to payment [not evidenced by an instrument or chattel paper] (1) for goods, (2) for services, (3) for real property, (4) for a policy of insurance issued or to be issued, (5) for a secondary obligation incurred or to be incurred, (6) for energy provided or to be provided, (7) for the use or hire of a vessel, (8) arising out of the use of a credit card, or (9) as _______ winnings. Health care insurance receivables are included. A contractual obligation arising from a loan of money is not an account - it is a general intangible (see below).

lottery

Future advance clause: A secured party often contemplates making future loans to the debtor and wants to secure these future advances in the present security agreement. This is permissible. Security agreements typically contain a future advance clause (as in the hypo), in which case a ________ security agreement is not needed when a future advance is made.

new

describe collateral NVW 9W

normal vocabulary works article 9 categories work also

The debtor must have rights in the collateral The debtor must have rights in the collateral because the debtor cannot grant a contingent property interest in property that it does ______ own.

not

Financing statement: Document generally used to provide public __________ of the security interest, and so to perfect the security interest.

notice

Filing a financing statement/UCC-1 a. Notice filing The financing statement is premised on the concept of "notice filing." The _______ must indicate merely that a person ___________ have a security interest in the collateral indicated. Further inquiry from the parties concerned will be necessary to disclose the complete state of affairs.

notice may UCC-1

Retention of collateral (strict foreclosure): After default and repossession, the secured party may propose retaining the collateral in full or partial satisfaction of the debt. (1) A secured party wishing to do so must send its proposal to any other secured party from whom the foreclosing party has received notice of a claim to the collateral, and any other secured party who has perfected a security interest in the collateral by filing a financing statement or noting its security interest on a certificate of title. If a notified party objects within 20 days after the secured party sent notice, the collateral must be disposed of by sale. (2) A secured party wishing to retain the collateral also must obtain the debtor's consent. The debtor consents by either: (1) agreeing in an authenticated record after default, or (2) in the case of a full strict foreclosure, failing to make an authenticated objection within 30 days after the secured party sent notice (a debtor cannot consent to a partial disclosure in this manner). (In consumer transactions, this notice must explicitly state that the debtor will be deemed to have consented if he does not so object.)

number one remedy is to take collateral and sell it, but you can keep as long as: (1) no other creditor with a lien objects (2) as long as debtor not object

(3) Perfection by "control": Security interests in investment property and electronic chattel paper may be perfected by control. Security interests in nonconsumer deposit accounts can ________ be perfected by control. Investment property: Basically, a secured party has control of an item of investment property when the secured party has taken whatever steps are necessary to be able to have the investment property sold without further action from the owner. ***Nonconsumer deposit accounts*** (1) The bank in which a nonconsumer deposit account is maintained _________ has control over the deposit account. (2) If the secured party is not such a bank, it can obtain control over the deposit account by either: (1) putting the deposit account in the secured party's ___________, or (2) agreeing in an authenticated record with the debtor and the bank in which the deposit account is maintained that the bank will follow the secured party's orders without further consent by the debtor (). c. Electronic chattel paper: A party has control over electronic chattel paper when a system showing the transfer of interests in chattel paper reliably establishes the secured party as the ___________. An example of a system that meets this standard is one in which the secured party has the authoritative copy of the records constituting the electronic chattel paper (e.g., a computer file), that copy identifies the secured party as the assignee of record, and any other copy of or amendments to the records are marked as such.

only (1) automatically (2) name control agreement c. assignee

Typical secured transaction: terminology Hilda borrows $20,000 from First Bank to buy some additional inventory for her retail hat shop. First Bank and Hilda execute a document that grants to First Bank a lien on the hats being purchased, and in addition on all other inventory now owned or hereafter acquired by Hilda to secure this loan and any future indebtedness of Hilda to First Bank. First Bank also files a form in the public records that indicates that First Bank has a lien on Hilda's inventory. Debtor: The person who owes _________ or performance of the obligation secured (here, Hilda). Secured party: A lender, seller or other person in whose favor there is a security interest (here, First Bank). Security agreement: The agreement between the debtor (Hilda) and the secured party (First Bank) that __________________. Security interest: An interest in personal property or fixtures which secures payment or performance of an obligation. It is a contingent property interest in the debtor's collateral that the debtor grants to the creditor. When the contingency, which is, occurs, the property interest springs to life and the creditor has rights in the debtor's collateral. Collateral: The property subject to a security interest (here, inventory). Collateral is property that the secured party can repossess upon default to insure that the debt is paid.

payment creates the security interest.

Generally a ________ security interest prevails over an unperfected security interest.

perfected

VIII. ACCESSIONS A. Definition of accessions Accessions are goods that are _____________ with other goods in such a manner that the identity of the original goods is not lost (e.g., tires on a car). Perfection: If a security interest is perfected when the collateral becomes an accession, the security interest remains perfected in the collateral. General rule as to priority: As a general rule, the rules for priority previously discussed (e.g., first to file or perfect, special PMSI rules) apply to accessions. Illustration: Bank has a perfected security interest in debtor's piece of equipment. Subsequently, Finance Company finances a new motor for this equipment and takes a security interest in the motor. Finance Company files a financing statement perfecting its security interest within 20 days of debtor receiving the motor. Finance Company would have priority over Bank with respect to the motor because of the special PMSI rule (had Finance Company not filed within 20 days, Bank would have had priority as the first to file or perfect). Special priority rule: A security interest in an accession is subordinate to a security interest in the whole which is perfected by compliance with the requirements of a certificate-of-title statute. Illustration: Debtor owns an automobile subject to a security interest in favor of Bank. This security interest is perfected by notation on the certificate of title. Finance Company finances a new motor for the automobile, taking a security interest in the motor, and perfects by filing a financing statement within 20 days of debtor receiving the motor. Bank would have priority as to the motor. Removal and reimbursement for physical injury to the whole: A secured party may remove an accession from other goods if the security interest in the accession has priority over the claims of every person having an interest in the whole. The secured party removing the accession is responsible for the cost of repair of any physical injury to the whole or the other goods. A person entitled to reimbursement may refuse permission to remove until the secured party gives adequate assurance for the performance of the obligation to reimburse.

physically united

A security agreement Unless the collateral is in the possession or control of the secured party pursuant to an agreement, a written (or electronically stored) security agreement is required. Most often, the debtor wants possession of the collateral, so a writing is necessary. If the collateral is in the possession of the secured party pursuant to an oral security agreement (e.g., I'll loan you $50 but we agree that I will keep your watch until you pay me back; if you don't pay me back, we agree that I can sell your watch), this meets the "security agreement" requirement. Such an arrangement is called a _____________________.

pledge

(2) Possession of collateral by secured party: A secured party may perfect a security interest in most types of collateral simply by taking ___________ of the collateral. The security interest is perfected from the moment of possession without relation back to the time of attachment. Perfection continues only so long as possession is retained. a. When impossible? Note: Most often, possession by the secured party is not very practical. The debtor usually wants possession of the collateral.

possession

1. What constitutes a "breach of the peace?" Any conduct by the secured party that has the _________ to lead to __________ is a breach of the peace. Generally, physical presence by the debtor (or a representative of the debtor) plus verbal objection is enough to create a breach of the peace. (a) Several burly men come to Wanda's house and inform her that they have come to repossess her dinette set. Wanda tells them to go away, but one of the men tells her: "get your butt out of the way if you don't want to get hurt." Wanda takes his advice, and the dinette set is repossessed. Has a breach of the peace occurred? _________________________ (b) While D is off at work, S enters an open window of D's home to repossess a stereo. S leaves through the same window, doing no damage to the premises. Has a breach of the peace occurred? ___________________________ (1) Would your answer be the same if the security agreement signed by D contained a provision granting S the right to enter onto the premises at any time to repossess the stereo? ______________ (c) While D is asleep in his home, S hotwires D's car and drives it from D's driveway. Has there been a breach of the peace? _____________________ (1) Would your answer be the same if the car was taken from an open garage? ____________________ (2) What if the garage door was closed, but unlocked, and S opened the door to get the car? ___________________ (3) What if the garage was a separate building, not attached to the residence? ______________________ (d) While D's restaurant is closed, S picks a lock to gain entry, and repossesses several pieces of equipment. Has there been a breach of the peace? __________________ Note: If self-help is unavailable, the secured party can use judicial process (e.g., __________) to get the goods.

potential; violation (a) peace has been breached (b) probably a breach of peace (1) answer would be the same (c) no breach of peace (1) attached garage more likely to be seen the resident's, more likely to be breach of peace; detached garage less likely (2) probably a breach of the peace (3) see above (d) commercial premises, less likely to be a breach of peace. If creditor picks locks and doesn't re-lock the debtor's premises on way out, it's a breach of the peace. replevin

NOTE: Technically, the priority rule for secured party v. judgment lien holder is that the secured party has _______ (1) if the secured party perfected before the judgment lien holder got its lien; OR (2) if the secured party obtained a security agreement and filed a financing statement before the judgment lien holder got its lien.

priority

Special priority rules for investment property (1) A security interest perfected by control has _______________ over a security interest perfected by any other method (filing or automatic). (2) If conflicting security interests each were perfected by control, they rank according to the time of obtaining control. (3) A security interest granted to a debtor's intermediary has priority over a security interest granted by the debtor to another secured party (unless the intermediary agrees otherwise). (4) Except as provided in (1), (2), or (3) above, the first to file or perfect rule governs priority questions.

priority

(3) Farm products: Crops or livestock or supplies used or produced in farming operations or ____________ of crops or livestock in their unmanufactured states (such as ginned cotton, wool-clip, maple syrup, milk and eggs) if they are in the possession of a debtor engaged in farming operations.

products

Perfection: Deals with those steps legally required to give the secured party an interest in the collateral that is effective as against the world. In general, perfection is the process of giving _____________ of the security interest to the world.

public notice

(4) Real property related financing statements: When realty interests are involved (timber, fixtures, minerals to be extracted), then the financing statement must describe the _________ (must "reasonably identify" the real estate B a metes and bounds description is not necessary), and must indicate that it is to be filed in the real property records (so that the filing officer sees that it gets to the right place).

realty

Commercially reasonable sale: Every aspect of the sale (including the method, manner, time, place and terms) must be commercially _______________.

reasonable

Secured party buying collateral: The secured party may buy at any public sale, but may buy at a private sale only if the collateral is of a type customarily sold in a ________ market or is of a type which is the subject of widely distributed standard price quotations.

recognized

Note: As a general rule, a bank with which a deposit account is maintained may exercise any right of ________ or set-off against a secured party that holds a security interest in the deposit account. If, however, the secured party has control of the deposit account by putting the account in its own name, then any set-off exercised by the bank based on a claim against the debtor is ineffective. Note also: If a debtor transfers money or deposit account funds (e.g., by writing a check or making an electronic funds transfer), the transferee of the funds takes free of a security interest in the funds unless the transferee acts in collusion with the debtor in violating the rights of the secured party.

recoupment

General intangibles: Any personal property not coming within the scope of the other definitions (e.g., ________, patent and trademark rights, copyrights, goodwill). A general intangible under which the account debtor's principal obligation is a monetary obligation is a payment intangible.

software

PRIORITY We are now dealing with a situation where the secured party and some third party are claiming the same collateral. The third party may be another secured party, a purchaser of the collateral, or a creditor who has obtained a judgment against the debtor. There are rules that ________ which party is entitled to first satisfy its claim out of the collateral.

specify

The state has enacted a _________ giving unpaid farmers who have delivered their crops to a middleman a lien on the inventory of the middleman. While Article 9 does not create such liens (they must be created separately by the legislature), when such a lien exists, Article 9 does regulate some of the legal issues that arise (e.g., where to perfect, some priority issues).

statute

Secured party v. buyer of the collateral General rule: If you buy something with a security interest on it, the security interest ________ on it. There are a few exceptions, discussed below. 1. Authorized sales: If the sale is authorized by the secured party free of the security interest, the buyer takes free of the security interest. This authorization may be express, or it may be ________ from the type of sale or from the seller's conduct. a. Bank extends credit to an appliance store and obtains a security interest in the store's inventory. The security agreement gave no express authority to sell any of this inventory. The appliance store sells a washer and dryer to Harry Homebody. Is this sale authorized? _________________ (1) Assume that the appliance store had sold its entire inventory to L, a liquidation sales company. Would this be authorized? b. Bank extends credit to D, a hog farmer, and obtains a security interest in D's hogs. The security agreement provides that D would not sell his hogs without written consent of the bank. Despite this provision, the bank acquiesced in over 100 sales of these hogs over a five-year period. Were these sales authorized?

stays 1. implied a. yes, implied authorization for inventory sold to an ordinary consumer when sale is not expressly prohibited (1) no, not an ordinary consumer b. yes, implied authorization by acquiescence

(4) Investment property: Includes items such as ______, bonds, mutual funds, and brokerage accounts containing such items.

stocks

When there is no outstanding obligation of the debtor and no commitment on the part of the secured party to make further advances, the secured party, upon receiving an authenticated demand by the debtor, must within 20 days provide the debtor with a _____________to the effect that the secured party no longer claims a security interest under the financing statement. If a financing statement covers consumer goods, then within one month after there is no outstanding obligation, or within 20 days of receiving an authenticated demand from the debtor, a termination statement must be filed by the secured party. The secured party is liable to the debtor for $500 and for any loss caused to the debtor for failure to comply with the above. Note: A financing statement can be filed even before a security agreement is entered into. When we discuss priorities we will see why you might want to do so.

termination statement

Perfection deals primarily with rights as between the secured party and ____________. Perfection is not necessary to create a valid, enforceable security interest as between the debtor and the secured party.

third parties

Commercial tort claims: A claim arising in _____ with respect to which the claimant is an organization (e.g., partnership or corporation), or where the claimant is an individual and the claim arose in the claimant's business or profession and does not include damages for personal injury or the death of an individual.

tort

After-acquired property clause: A secured party often will want to obtain a security interest not only in debtor's present property, but also in property that the debtor will obtain in the future. This is permissible. Security agreements ___________ contain an after-acquired property clause (as in the hypo).

typically

Property secured generally includes proceeds "Proceeds" includes ____________ is received upon the sale, exchange, collection, or other disposition of collateral or proceeds. If collateral is insured and money is received from the insurance company on account of loss or damage to the collateral, the money is a proceed of the collateral (up to the value of the collateral) unless it is payable to someone other than the debtor or the secured party claiming it. In addition, any claims arising out of the loss of, defects in, or damage to collateral are proceeds of the collateral (up to the value of the collateral). Unless otherwise agreed, a security interest automatically gives the secured party a right to identifiable proceeds. Identifiable means _____.

whatever the creditor can prove that those proceeds came from it's original collateral