FL Secured Transactions

Methods of perfection

1. Automatic Perfection 2. Possession of collateral by secured party 3. Perfection by "control" 4. Notation of lien on certificate of title 5. Filing a financing statement***

Goods

"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

Property secured generally includes proceeds

"Proceeds" includes whatever 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 = CREDITOR CAN PROVE THOSE PROCEEDS CAME FROM IT'S ORIGINAL COLLATERAL -The problem is that cash proceeds are frequently commingled 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 lowest immediate balance 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). *At conclusion of test the court will deem some portion of that commingled bank account as identifiable

Special priority rules for investment property

(1) A security interest perfected by control has priority 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.

Special priority rules for deposit accounts

(1) A security interest perfected by control has priority over a security interest perfected via proceeds. (2) If conflicting interests each were perfected by control, they rank according to the time of obtaining control. (3) A secured party who has obtained control by putting the deposit account in its own name has priority over all other secured parties with control. (4) A bank that has control because it maintains 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 name. *Note: As a general rule, a bank with which a deposit account is maintained may exercise any right of recoupment 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.

Filing a Financing Statement***

** 17

Nonconsumer Deposit Accounts

- Business bank account (1) The bank in which a nonconsumer deposit account is maintained automatically 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 name, or (2) agreeing in an authenticated record with the debtor and the bank in which thedeposit account is maintained that the bank will follow the secured party=s orders without further consent by the debtor.

Secured Transaction

-A secured transaction is a transaction intended to create a security interest in personal property or fixtures. It generally involves a sale on credit or a loan in which the seller or the lender obtains a lien on some or all of the debtor's property as security for payment. -Look for: (1) a credit transaction (sale on credit or a loan) and (2) an agreement that creates a lien in favor of the creditor in the debtor's personal property to secure the debt.

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 levied 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 priority. If levy precedes perfection of the security interest, the judicial lien has priority. *NOTE: Technically, the priority rule for secured party v. judgment lien holder is that the secured party has priority (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.

What Constitutes a Breach of the Peace?

-Any conduct by the secured party that has the potential to lead to violence is a breach of the peace. Generally, physical presence by the debtor plus verbal objection is enough to create a breach of the peace. (or a rep of the debtor) -Commercial premises- less likely to be breach of peace -Note: If self-help is unavailable, the secured party can use judicial process (e.g.,replevin) to get the goods.

Property secured may include after-acquired property

-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.

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 for 20 days. 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 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).

Secured Party v. Statutory Lien Claimants

-Statutory lien beats even a perfected secured creditor -FL has statutes that will grant you a lien- e.g. auto mechanic statute

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 A security agreement" requirement. Such an arrangement is called a

Termination Statement

-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 termination statement 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.

Special rule: consumer to consumer sales

-aka garage sale rule -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.

Contents of a Filing Statement

1. Debtor's Name 2. Description of Collateral 3. Secured Party's Name 4.Real Property Related Financing Statements 5. No signature required, but debtor must authorize the filing 6. Authenticated security agreement itself may be filed: If it is filed, it must contain all of the elements discussed above.

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 Secured Transaction Registry.) 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 clerk of the circuit court. 3. Multiple State Transactions (probably not on exam- if interested pg. 20)

Priority- Accessions

1. 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. 2. 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.

Secured party v. secured party

1. General rule: As between two perfected secured creditors, the first to file or perfect, whichever occurs first, has priority. 2. As between two unperfected secured creditors, the first to attach has priority. 3. Special Rules: a. Purchase $ security interests in goods other than inventory or livestock b. Purchase $ security interests in inventory or livestock c. Conflicting purchase $ security interests (unlikely on bar) d. Special priority rules for investment property e. Special priority rules for deposit accounts f. Purchaser for chattel paper g. Purchaser for instruments (low priority)

Priority- Fixtures

1. General rule: By statute in FL, 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. 2. Exception (not likely on exam)

Secured Party v. Buyer of the Collateral

1. General rule: If you buy something with a security interest on it, the security interest stays on it. There are a few exceptions, discussed below. a. 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 implied from the type of sale or from the seller's conduct. b. Unauthorized sales: 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 free of a security interest created by his seller even though the security interest is perfected and even though the buyer knows of its existence

Types of collateral

1. Goods 2. Semi-intangible and intangible property (8 types)

Semi-intangible and intangible property (8 types)

1. Instruments 2. Documents (not on exam) 3. Chattel Paper 4. Investment Property 5. Accounts 6. Deposit Accounts 7. Commercial Tort Claims 8. General Intangibles

Reasonable Notification of Resale of Collateral

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 thesale (a question of fact). In nonconsumer transactions, notice is deemed to be sent within a reasonable time if it is sent 10 days 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 time and place of sale is required. (3) For a private sale, notice of the time after 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.

3 REQUIREMENTS FOR ATTACHMENT:

1. SECRUITY AGREEMENT 2. VALUE HAS BEEN GIVEN 3. DEBTOR HAS RIGHTS IN THE COLLATERAL *SUCH THING AS AN ORAL SECURITY AGREEMENT IF CREDITOR IS IN POSSESSION OF THE COLLATERAL (NOT COMMON- WEIRD) *THE SECURITY AGREEMENT IS IN WRITING. IT IS A K BETWEEN DEBTOR & CREDITOR

Buyer in the Ordinary Course

A buyer in the ordinary course means a person who buys goods in good faith, 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 selling goods of that kind.

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 claimants business or profession and does not include damages for personal injury or the death of an individual.

Documents (NOT ON EXAM)

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)

Continuation Statement

A financing statement is effective for 5 years from the date of filing. It can be extended by filing a continuation statement. To be effective, the continuation statement must be filed in the last 6 months of the 5-year "life" of the financing statement (i.e., between 4.5 and 5 years).

Secured party

A lender, seller or other person in whose favor there is a security interest

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 assignee. 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.

Purchase $ security interests in goods other than inventory or livestock

A purchase money security interest in such goods has priority 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 20 days thereafter.

Chattel Paper

A record or records which evidence both a monetary obligation and a security interest in or a lease of specific goods. A Arecord@ 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 Aelectronic chattel paper.

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.

Possession of collateral by secured party

A secured party may perfect a security interest in most types of collateral simply by taking possession 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. -When impossible? w/ items you can't take possession of (accounts, general intangibles) Note: Most often, possession by the secured party is not very practical. The debtor usually wants possession of the collateral.

Removal and reimbursement for physical injury to the whole- Accessions

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.

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, in which case a new security agreement is not needed when a future advance is made.

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 typically contain an after-acquired property clause

Priority for Future Advances

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 knowledge of the lien, OR (2) within 45 days of the lien arising, OR (3) pursuant to a commitment entered into without knowledge of the lien.

Scope of Security Interest

A. Debt secured may include future advances B. Property secured may include after-acquired property C. Property secured generally includes proceeds D. The attachment of a security interest in collateral also is an attachment of a security interest in a supporting obligation for that collateral.

Accessions

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., tires on a car).

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 "breach of the peace." 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 liable for actual (and frequently punitive) damages.

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 discharges 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.

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.

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 default , occurs, the property interest springs to life and the creditor has rights in the debtor=s collateral.

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.

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.

Scope of Article 9 (1 & 5 Most Important)

Article 9 applies to: (1) ANY transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract; (2) an agricultural lien; (3) a sale of accounts, chattel paper, payment intangibles, or promissory notes (unless the sale is for the purposes of collection only, or the sale is part of the sale of a business); (4) certain consignments; (5) a secured sale disguised as a lease.

Buyers Not in the Ordinary Course

Take subject to perfected security interests. They take free from unperfected security interests (and unperfected agricultural liens) unless they know of the security interest.

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.

Secured Party's Name

Because searches are not conducted under the secured party's name, an error 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).

Rights on Default- Fixtures

Can default. e.g. S sells central heating in home. S sells on credit, and retains security interest. If homeowner defaults, S can repossess even if it is February and the home will be uninhabitable.

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.

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.

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 public notice of the security interest to the world.

Financing statement

Document generally used to provide public notice of the security interest, and so to perfect the security interest.

Commercially Reasonable Sale

Every aspect of the sale (including the method, manner, time, place and terms) must be commercially reasonable. e.g. unreasonable=selling fine art in small town

Investment property

Includes items such as stocks, bonds, mutual funds, and brokerage accounts containing such items.

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.

Individual Names

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. 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.

Classification of Goods

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? [Debtor prospective/debtor focus test]

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. [In a short period of time]

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.

Perfection- Accessions

If a security interest is perfected when the collateral becomes an accession, the security interest remains perfected in the collateral.

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 amend the financing statement even if it knows that the description is seriously misleading.

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 4 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).

Special Rule: PMSI v. Lien Creditor

If the secured party files with respect to a purchase money security interest within 20 days after the debtor receives possession of the collateral, he takes priority over the rights of a lien creditor which arises between the time the security interest attaches and the time of filing.

Automatic Perfection

In certain situations, a security interest is automatically perfected. The most common such situation is: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 automatically perfected upon attachment.

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).

Perfection of the Security Interest

Perfection deals primarily with rights as between the secured party and 3rd parties. Perfection is not necessary to create a valid, enforceable security interest as between the debtor and the secured party.

Description of Collateral

Same test as for the security agreement: reasonably identifies test

Filing Office Error

Secured creditor not responsible for filing officer errors

Perfection by "control"

Security interests in investment property and electronic chattel paper may be perfected by control. Security interests in nonconsumer deposit accounts can ONLY be perfected by control. a. Investment Property b. Nonconsumer Deposit Accounts c. Electronic Chattel Paper

What is a Fixture?

The Code defines Afixtures@ 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 intent 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.

Conflicting purchase money security interests

The Code says that a seller financed purchase money security interest has priority over a fiancee financed purchase money security interest.

Security agreement

The agreement between the debtor (Hilda) and the secured party

Failure to Comply w/ Resale Requirements

a. Right to deficiency judgment? General rule: If the secured party fails to conduct a commercially reasonable sale, there is a rebuttable presumption that the sale proceeds equal the amount of the debt.

No Signature Required, Though Debtor Must Authorize the Filing

The authorization may be in any signed writing. In addition, the debtor automatically authorizes the financing statement if she authenticates a security agreement covering the same collateral.

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 not own. * Right is usually ownership

Notice Filing

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

Notation of lien on certificate of title

The only way to perfect a security interest in an automobile is for the secured party to note its lien on the certificate of title. -Exception: If the debtor is holding the automobile as inventory (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.

Debtor

The person who owes payment or performance of the obligation secured

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

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 failure to perform or pay the obligation when it is due. 1. Look for late or missed payments 2. Also look for a possible waiver by the secured party of late or missed payments

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 recognized market or is of a type which is the subject of widely distributed standard price quotations.

The secured party must have given value

The value definition is very liberal. Any consideration sufficient to support a simple k is enough. Even past 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. *DEBTOR HAS TO GIVE VALUE TO CREDITOR AND CREDITOR HAS TO GIVE VALUE TO DEBTOR. IMPLICITLY PROMISING TO PAY LOAN= DEBTOR VALUE. SAY "ALL DEBTORS GIVE VALUE" ON EXAM

Perfection- Fixtures

To perfect a security interest in fixtures, a "fixture filing" 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).

Consumer goods

Used OR bought for use primarily for personal, family or household purposes.

Equipment

Used or bought for use primarily in business. [Equipment is our default catch all category for goods]

Financing Statement Error

Valid as long as the error is not seriously misleading. To determine if a name error is seriously misleading, check whether a search under the debtor's correct 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.

Priority

We are now dealing with a situation where the secured party and some 3rd party are claiming the same collateral. The 3rd 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 specify which party is entitled to first satisfy its claim out of the collateral.

Agricultural Lien

When farm products are located in a state, an agricultural lien on those farm products should be perfected in that state.

Real property related financing statements

When realty interests are involved (timber, fixtures, minerals to be extracted), then the financing statement must describe the realty (must "reasonably identify" the real estate - 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).

Retention of collateral (strict foreclosure)

When there is a default #1 remedy of creditor is repossess & sell. If repossess and keep= strict foreclosure. Creditor can keep so long as debtor doesn't object and no other creditor w/ lien on item objects.

Purchase $ 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).

Compliance with Resale Requirements

a. Secured Party's Right to Deficiency

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; 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.

Form of Security Agreement (When Written)

a. The agreement must be evidenced by a record (written or electronically stored information) and must show an intent to create a security interest. (no magic language necessary) b. The agreement must be "authenticated" by the debtor. This usually means Asigned@ 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 a description of the collateral (and if the security interest covers timber to be cut, a description of the land concerned). *TEST TO WHETHER DESCRIPTION IS ACCURATE: The Code says that the security agreement must "reasonably identify" the collateral. *Normal vocabulary works. Art. 9 Categories also work (equipment, chattel, paper, inventory, etc). *Description that doesn't work: all of debtor's property/assets. Super generic description=invalid security agreement.