Secured Transactions

• Identify the creditors
• Identify the fight rules – perfected v. perfected OR first to file v. perfected

• Goods
• Semi-intangible and intangible property (8 types)

• 1. Consumer goods
• 2. Equipment
• 3. Farm products
• 4. Inventory

Used or bought primarily in for personal, family, or household business

Used or bought for business

Things used or produced in farming

Held for sale or lease. Consumables in business are also inventory

Seller Financed and Third Party Financer Financed

Creditor has interest in all future property

Creditor takes interest in current asset for all future advances

Security interest against the debtor

Security interest against the world

Document used to file notice of security interest

• Security agreement
• Value has been given
• Description of collateral

financing statement – secretary of state for collateral, with the county clerk for fixtures on real property

(8)

• 1. Instruments – commercial paper
• 2. Documents – bills of lading
• 3. Chattel paper
• 4. Investment property – stocks, bonds, etc
• 5. Accounts
• 6. Deposit accounts ONLY BUSINESS
• 7. Commercial tort claims where Def. is a business
• 8. General Intangibles (Intellectual property)

Promissory note AND security agreement

Business only, not personal

• 1. For goods
• 2. For services
• 3. For real property
• 4. Secondary obligations
• 5. Energy provided or to be provided
• 6. Policy of insurance
• 7. For use or hire of a vessel
• 8. Arising out of the use of a credit card
• 9. Lottery winnings

• 1. Any transaction that creates a security interest in personal property or fixtures by contract
• 2. An agricultural lien
• 3. Sale of accounts or intangibles
• 4. Certain consignments
• 5. A sale disguised as a lease

• 1. When the lessor becomes owner the end of the lease period for little or no consideration
• 2. The lessee is bound to purchase the goods at the end of the lease
• 3. The lease is for the entire economic period of item (with or without renewal)

• 1. Security agreement
• 2. Value has been given
• 3. Debtor has a right in collateral

• 1. Intent to create a security interest – no magic language
• 2. Authenticated by the debtor
• 3. Description of collateral – general “all property not specific enough”

Secured party must have given value PAST VALUE OKAY

Unless otherwise agreed, a security agreement automatically gives the secured party a right to IDENTIFIABLE proceeds

• 1. Automatic
• 2. Possession
• 3. Control
• 4. Notation on title
• 5. Filing a financing statement

• 1. Automatic perfection – PMSI on consumer goods, possession of collateral by secured party
• 2. Perfection by control – controlling investment property, non-consumer deposit accounts, chattel paper
• 3. Notation of lien on certificate of title
• 4. Filing a financing statement

• 1. Debtor’s name
• 2. Description of collateral
• 3. Secured parties name
• 4. Real property related to financing statements
• 5. Ipso Facto authorization - No signature required, but debtor must authorize filing

When the debtor automatically authorizes the financing statement if he authenticates a security agreement covering the same collateral

Index is ordered by debtor name. Use unexpired driver’s license in state of financing statement.

If the name on financing statement is incorrect and not SERIOUSLY MISLEADING it is valid

Creditor is not liable for filing office errors that cause it to be seriously misleading

May not be general as to include all, but may be specific and include x, y, and z which together make up all

Where debtor is located or principle residence, corporations when organized, or chief executive office.

4 months

1 year

In order to keep original perfection date, continuation must be filed between 4.5 and 5 years or it resets perfection to new date and could change priority.

• When a Secured creditor has a perfected security interest in collateral, they have an interest in any new collateral exchanged for original for 20 days and must take action unless
• 1. Proceeds are identifiable cash proceeds
• 2. New perfection would be filed in the same office as original perfection (Sec. of State v. Index)

Does not change perfection if for example inventory becomes equipment

Debtor can request termination

General Rule – first to file has priority

The one who attached first

Automatically if debtor received possession of collateral in 20 days

Everyone else, except those with control

PMSI takes over others if perfects and sends notice to holders of previous conflicting security interests.

Other creditor must be notified 5 years prior to debtor receiving the property

Seller will have priority over financer

Control has priority over a security perfected by any other method (filing or automatic)

Whoever took control first

• 1. Controller put the account in their own name
• 2. Bank that has control by way of maintaining the account
• 3. The order in which they gained control
• 4. Priority over security interest perfected via proceeds

Good faith purchasers which give value and without knowledge of rights takes priority

General Rule - When you buy goods with a security interest the interest stays with the property

No implicit authorization, only for ordinary sales of inventory

When there has been no objection in the past from creditor, it is assumed to be okay to sell

• 1. A buyer who buys goods in GOOD FAITH
• 2. WITHOUT knowledge sale violates rights of another, and
• 3. the seller is in the business of selling goods of that kind

• 1. They take subject to perfected security interests, and
• 2. they take free from unperfected security interests and agricultural liens

• Unless financing statement is filed, consumer buying for household use takes free of all others.
• MUST BE GOODS TO BOTH BUYER AND SELLER

Whoever files or levies first

If secured party files within 20 days they get priority

Creditor has priority if the advance was made without knowledge of the lien OR within 45 days of lien arising OR Pursuant to enter commitment entered into without knowledge of the lien

Statutory lien beats even PMSI

All other parties don’t object within 20 days

Purchaser takes free of foreclosure’s lien and all subordinate, but subject to all superior security interests

10 days – must give time and place for PUBLIC sale, private sale notice after

Every aspect of the sale must be commercially reasonable – you can’t sell original masterpieces in little town of 25 people.

May buy at any public sale, but in private sale must be in recognized market with widely distributed price quotations

Assume.

Right to redeem ends when item is sold

Subsequent PMSI, even if filed within 20 days