Secured Transactions

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Secured Transactions
2014-07-02 17:40:25
Secured Transactions
MBE Secured Transactions - Prof. Moll
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  1. Secured transactions – how to handle
    • Identify the creditors
    • Identify the fight rules – perfected v. perfected OR first to file v. perfected
  2. Categories of Collateral –
    • Goods
    • Semi-intangible and intangible property (8 types)
  3. GOODS - tangible moveable personal property
    • 1. Consumer goods
    • 2. Equipment
    • 3. Farm products
    • 4. Inventory
  4. Consumer goods
    Used or bought primarily in for personal, family, or household business
  5. Equipment
    Used or bought for business
  6. Farm products
    Things used or produced in farming
  7. Inventory
    Held for sale or lease. Consumables in business are also inventory
  8. Two types of PMSI
    Seller Financed and Third Party Financer Financed
  9. After acquired property clause
    Creditor has interest in all future property
  10. Future advance clause
    Creditor takes interest in current asset for all future advances
  11. Attachment
    Security interest against the debtor
  12. Perfection
    Security interest against the world
  13. Financing statement
    Document used to file notice of security interest
  14. Elements of attachments and sub-elements
    • Security agreement
    • Value has been given
    • Description of collateral
  15. Which to file to perfect? With who?
    financing statement – secretary of state for collateral, with the county clerk for fixtures on real property
  16. Semi-intangible and intangible property How many types
  17. Semi-intangible and intangible property
    • 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)
  18. Chattel paper
    Promissory note AND security agreement
  19. Deposit Accounts
    Business only, not personal
  20. Accounts (9 types)
    • 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
  21. Scope of Article 9
    • 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
  22. 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)
  23. Attachment
    • 1. Security agreement
    • 2. Value has been given
    • 3. Debtor has a right in collateral
  24. Form of security agreement
    • 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”
  25. Value
    Secured party must have given value PAST VALUE OKAY
  26. Proceeds
    Unless otherwise agreed, a security agreement automatically gives the secured party a right to IDENTIFIABLE proceeds
  27. Methods of perfection
    • 1. Automatic
    • 2. Possession
    • 3. Control
    • 4. Notation on title
    • 5. Filing a financing statement
  28. Methods of perfection
    • 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
  29. Financing statement contents
    • 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
  30. Ipso Facto Authorization filing
    When the debtor automatically authorizes the financing statement if he authenticates a security agreement covering the same collateral
  31. Debtor Name
    Index is ordered by debtor name. Use unexpired driver’s license in state of financing statement.
  32. Wrong name
    If the name on financing statement is incorrect and not SERIOUSLY MISLEADING it is valid
  33. Filing office errors
    Creditor is not liable for filing office errors that cause it to be seriously misleading
  34. Description of collateral
    May not be general as to include all, but may be specific and include x, y, and z which together make up all
  35. Where to file for multistate transaction
    Where debtor is located or principle residence, corporations when organized, or chief executive office.
  36. How long to file when debtor moves?
    4 months
  37. How long to file when property moves
    1 year
  38. Continuation statement
    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.
  39. Proceeds
    • 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)
  40. Change in use of collateral
    Does not change perfection if for example inventory becomes equipment
  41. Debt paid, what happens
    Debtor can request termination
  42. Secure Party V. Secure Party
    General Rule – first to file has priority
  43. Special rules – PMSI = Automatically perfected over other secured creditors, not other PMSI if goods
  44. Neither perfected – Secured v. Secured
    The one who attached first
  45. PMSI Perfection
    Automatically if debtor received possession of collateral in 20 days
  46. PMSI takes over –
    Everyone else, except those with control
  47. Livestock PMSI
    PMSI takes over others if perfects and sends notice to holders of previous conflicting security interests.
  48. Other creditor – livestock PMSI
    Other creditor must be notified 5 years prior to debtor receiving the property
  49. Seller PMSI v. Finance PMSI
    Seller will have priority over financer
  50. Control
    Control has priority over a security perfected by any other method (filing or automatic)
  51. Control v. Control conflicting interest
    Whoever took control first
  52. Deposit account security priority (ranked from highest to lowest)
    • 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
  53. Purchasers of Chattel paper and other instruments
    Good faith purchasers which give value and without knowledge of rights takes priority
  54. Secured Party v. Buyer of Collateral
    General Rule - When you buy goods with a security interest the interest stays with the property
  55. Implicit authorization of sales
    No implicit authorization, only for ordinary sales of inventory
  56. Authorization by acquiescence
    When there has been no objection in the past from creditor, it is assumed to be okay to sell
  57. Buyer in Ordinary Course
    • 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
  58. Buyer not in the Ordinary Course
    • 1. They take subject to perfected security interests, and
    • 2. they take free from unperfected security interests and agricultural liens
  59. Consumer to consumer sale – secured interests
    • Unless financing statement is filed, consumer buying for household use takes free of all others.
  60. Secured Party v. Judgment Lien
    Whoever files or levies first
  61. PMSI v. Lien
    If secured party files within 20 days they get priority
  62. Future Advance v. Lien
    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
  63. Statutory Party v. Statutory Lien Claims
    Statutory lien beats even PMSI
  64. Foreclosure – foreclosing party may keep if
    All other parties don’t object within 20 days
  65. Resale of collateral – purchaser
    Purchaser takes free of foreclosure’s lien and all subordinate, but subject to all superior security interests
  66. Reasonable notification of the foreclosure sale
    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.
  68. Secured party buy collateral
    May buy at any public sale, but in private sale must be in recognized market with widely distributed price quotations
  69. Acceleration of loan
  70. Redemption
    Right to redeem ends when item is sold
  71. Construction mortgage takes priority over
    Subsequent PMSI, even if filed within 20 days