Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
63 Cards in this Set
- Front
- Back
|
What type of collateral is "goods" under Art. 9?
What are the classifications of "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.
Classifications of goods include: 1. Consumer goods 2. Equipment 3. Farm products 4. Inventory |
|
|
Under Art. 9, what are "consumer goods?
|
Under art. 9, consumer goods are goods used or bought for use primarily for personal, family or household purposes.
|
|
|
Under art. 9, what is "equipment"?
|
Under art. 9, Equipment is goods used or bought for use primarily in business.
|
|
|
Under art. 9, what is 'farm products'?
|
Under art. 9, farm products are crops or livestock or suplies used or produced in farming operation or products of crops or livestock in their unmaufactured states if they are in the possession of a debtor engaged in farming operations.
|
|
|
What is "inventory" under article 9?
|
Under article 9, inventory are goods held by a person who holds them for sale or lease or to be furnished under a service contract. Materials used or consumed in a business.
|
|
|
Under art. 9, what is an instrument?
|
Under art. 9, an instrument is a negotiable instrument or 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 endorsement or assignment.
|
|
|
Under art. 9, what is a document?
|
Under art. 9, a document is a document which in the regulr course of business is treated as evidencing tht a person in possession of it is entitled to receive, hold, and dispose of the document and the goods it covers.
|
|
|
Under art. 9, what is "chattel paper"?
|
Chattel paper is a record or records which evidence both a monetary obligation and a security interest in or a lease of specific goods. A "record" is infomration that is stored in either a trangible medium or intangible medium.
|
|
|
What is "investment property?"
|
Investment property includes items such s stocks, bonds, mutual funds, and brokerage accounts containing such items.
|
|
|
What are accounts under art. 9?
|
An account is a right to payment (not evidenced by an instrument or chattel paper) that is 1. for goods, for services, for real property, for a policy of insurance to be issued, for a secondary obigaton incurred or to be incurred, for energy provided or to be provided, for the use or hire of a vessel, arising out of the use of a credit care, or as lottery winnings. Health-care-insurance receivables are included.
|
|
|
What are "deposit accounts"?
|
Deposit accounts are a demand, savings, passbook or similar account maintained with a bank. Simply, a bank account. Art. 9 now generally applies to deposit accounts as original collateral and deposit accounts that are claimed as proceeds of other collateral.
|
|
|
When does art. 9 not apply to a "deposit account?"
|
Art. 9 does not apply to
"an assignmnt of a deposit account in a consumer transaction." |
|
|
What is a "commercial tort claim?"
|
A claim arising in tort wrt which the claimant is an organization 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.
|
|
|
What is a "general intangible?"
|
Any person property not coming within the scope of other definitions.
|
|
|
To what does art. 9 apply?
|
Article 9 applies to:
1. Any transactions, regardless of its form, that creates a security interest in personal property or fixtures by K. 2.An agricultural lien 3. A sale of accounts, chattel paper, payment intangibles, or promissory notes (unless for the purposes of collection only, or part of business sale) 4.Certain consignments 5. A secured sale disguised as a lease. |
|
|
What is an article 9 consignment?
|
Article 9 applies where: 1. the consigned goods were worth no more than $1000, (ii) the cosignor did not use the goods as consumer goods, (iii) the cosignee deals in goods of the kind undera name other than the cosignor's (iv) the cosignee is not an auctioneer, and (v) the consignee is nt generally known by the creditors to be substantially involved in selling goods of others
|
|
|
What are the requirements for the attachment of an art. 9 security interest?
|
1. an authenticated security agreement showing an intent to create a security interest, signed or electronically marked with the present intent to identify the authenticting person and adopt the agreement, and a description of the collateral that reasonably identifies the collateral.
2. The secured party must have given value 3. The debtor must have rights in the collateral -- ownership or right to obtain possession of the collateral. |
|
|
May a debt secured by a security interest include future advances?
|
Yes. A debt secured may include future advances.
|
|
|
What is a dragnet clause, and how is it treated by courts?
|
A dragnet clause is a very broad future advances clause, that sttes something like "and all other obligations now or heafter owed to Bank." Generally, courts interpret these literally. In Ohio, future advances shouldbe of the same class as the primary obligtion and so related that the debtor's consent can be inferred.
|
|
|
May property that secures an article 9 security interest include after-acquired property?
|
Yes. A securty agreement can contain an after-acquired property clause except for consumer goods, unless the debtor acquires rights in the consumer goods w/in 10 days after the secured party gives value.
|
|
|
What are proceeds?
|
"Proceeds" includes whatever is received upon the sale, exchange, collection, or other disposition of collateral. Generally, a SI secured by collateral is also secured by the proceeds of the collateral( a security agreement gives the secured party a right to proceeds.)
|
|
|
How are proceeds traced?
|
Proceeds are the last money to leave the account.
|
|
|
What are the type of security interests that are automatically perfected?
|
1.A PMSI in consumer goods
2. an assignment of certain accounts or payment intangibles 3. A sale of a pmt intangible or a promissory note 4. A security interest created by the assignment of a health-care-insurance receivable to the provider of the health care goods or services 5. Some investment property 6. Supporting obligations |
|
|
What security interests may be perfected by possession?
|
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 w/out relation back to the time of attachment. Generally, perfection continues only so long s possession is retained. (see bailee exception, page 20 of lecture handout)
|
|
|
What may be perfected by control?
|
Security interests in investment property, nonconsumer deposit accounts and electronic chattel paper may be perfected by "control". A security interest in deposit accounts may only be perfected by control. A secured party has control when he can sell w/out consent of the debtor/owner.
|
|
|
How does one obtain "control" over a deposit account?
|
IF the secured party is not a bank, it can obtain control over the deposit account by either putting the deposit account in te secured party's name, or 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 order w/out further consent by the debtor.
|
|
|
How does one perfect a security interest in an automobile?
|
The only way to perfect a security interest in an automobile is by noting the lien on the certificate of title unless the debtor is holder the car as inventory for sale or lease.
|
|
|
What can be perfected by filing a financing statement?
|
A secruity interest may be perfect by filing as to all kind of collateral except deposit accounts and money.
|
|
|
What is required to be in a financing statement?
|
Filing a FS is "notice filing", meaning, it must contain enough info to put people on notice that there is a SI in the collateral. The FS must contain:
1. Debtor's name (corporate name; partnership name;) 2.Description of the collateral 3. Secured party's name 4. Debtor's authorization: debtor automatically authorizes FS by authenticating a security agreemnt covering the collateral. (Special requirements for Real property related FS) -- must include a descriptionof the realty and indicate that it is to be filed in the real property records. 2. |
|
|
Where is a financing statement to be filed?
|
Except as otherwise specifically provided in Ohio's art. 9, the FS is filed with the Secretary of state.
|
|
|
What is the rule for filing a Financing statement in a multiple state transaction?
|
The FS should be filed in the state where the debtor is located:
individual- principal residence corp/reg. org. - located where organized (registered) if not registered, then chief executive office. |
|
|
How long is a financing statement effective?
|
A FS is effective for 5 years from the date of filing. It can be extended by filing a continuation statement.
|
|
|
What is the process for termination of a FS?
|
When ther 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 30 days provide the debtor with a terminatin statement to the effect that the SP no longer claims a SI under the FS. If a FS covers consumer goods, then within one month after there is no outstanding obligation, or w/in 20 days of receiving an authenticated demand from the debtor, a termination statemnt must be filed by the secured party. The secured party is liable to the debtor for $500 and for any loss caused to te debtor for failure to comply with the above.
|
|
|
What is the rule as to perfection of proceeds
|
If a SP has a perfected security interest in collateral, a SP automatically has a perfected security interet in whatever proceeds the debtor receives for the collateral for 20 days. After that, the SP must take new action to perfect its interest unless the proceeds are identifiable cash proceeds.
|
|
|
What is the general rule for priority?
|
Generally, the first to file or perfect has priority in the collateral.
|
|
|
What is the rule for priority regarding a PMSI in goods other than inventory or livestock
|
A PMSI in such goods has priority over a conflicting security interest in the same goods or its proceeds if the PMSI is perfected at the time the debtor received possession of the collateral or w/in 20 day thereafter.
|
|
|
What is the rule for priority involving a PMSI in inventory or livestock?
|
A PMSI in inventory or livestock has priority over a conflicting security interest in the same inventory or livestock if, before the debtor receivs possession of the inventory or livestock, the secured party: 1. perfects and 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 w/in 5 years before the debtor receives possession of the inventory (notification is effective for deliveries of the same type of collateral for 5 years.)
|
|
|
What is the priority rule for conflicting PMSI's?
|
A secured party who has a PMSI as a seller has priority over a secured party who has a PMSI in the same collateral as a lender.
|
|
|
What are the special priority rules for investment property?
|
1. A security interest perfected by control has priority over a security interest perfected by any other method.
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. 4. Except as provided in the 1-3 above, the first to file or perfect governs priority questions. |
|
|
What are the special priority rules for deposit accounts?
|
1. A security interest perfected by control has priority over a security interest perfected by any other method.
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 puttting the deposit account in its own name has prioriity over all other secured parties with control. 4. A bank that has control b/c 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. |
|
|
What is the rule for priority of purchasers of chattel paper?
|
IF a purchaser of chattel paper in good faith gives new value nd takes possession in the ordinary course of business, the purchaser will have priority over :
1. someone claiming the chattel paper as proceeds, or 2. Any other security interest in the chattel paper, as long as the chattel paper purchaser acquired its interest w/out knowledge that its purchase violated the rights of the secured party. |
|
|
what is the rule for priority of the purchaser of instruments?
|
A purchaser of an instrument has prioirty 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.
|
|
|
What is the rule for "unauthorized sales" to a buyer in the ordinary course of buiness?
|
A BIOC of buiness 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.
A BIOC is a person who buys from a seller that typically sells merchandise of the sort sold. ** a buyer not in the ordinary course of business takes subject to perfected security interests. They take free from unperfected SI's unless they know of the SI. |
|
|
What is the rule for "authorized sales"?
|
If a sale is authorized, the buyer takes free of the SI. This authorization may be express or it may be implied from the type of sale or from the the seller's conduct.
|
|
|
What is the rule for consumer to consumer sales?
|
In the case of consumer goods (in the hands of the buyer and seller), a buyer takes free of a SI even though it is perfected if he buys w/out knowledge of the security interest, for value, and for his own personal, family, or household purposes, unless prior to the purchaase the secured party has filed a financing statement covering such goods.
|
|
|
What is the rule for priority and judgment lien holders?
|
An unperfected SI is subordinate to the rights of a person who becomes a lien creditor before the SI is perfected. If the SI is perfected before the person becomes a lien creditor, the SI has priority.
|
|
|
What is the rule for PMSI v. Lien creditor?
|
IF the secured party files with respect to a PMSI within 20 days after the debtor receives possession of the collateral, he takes prioirty over the rights of a lien creditor which arises between the time the security interest attaches and the time of filing
|
|
|
What is the rule for priority between a secured party v. statutory lien claimant?
|
A statutory lien beats out a previously perfected security interest
|
|
|
What is "default"?
|
Article 9 does not define the term "default." The right of a secured party to proceed against collateral is normally triggered by default. Typically, grounds of default are specified in the security agreement. In the absence of such specification, default has been restricted to failure to perform or pay the obligation when it is due. Look for :
Late or missed payments, or waiver by the secured party of late or missed payments. |
|
|
What are the rules for self-help repossession?
|
After default, the secured party is entitled to take possession of the collateral without judicial process if this can be done wihtout "breach of the peace." When a secured party breaches the peace, he loses the authorization to repossess, may be sued for conversion (and possible assault, battery, trespass), and is liable for actual and punitive damages.
|
|
|
What constitutes a "breach of the peace?"
|
Any action is a breach of the peace if it is likely to lead to violence. If the debtor objects in your presence, also likely a breach of the peace.
|
|
|
What is the rule for resale of collateral?
|
After default, the secured party may sell or lease the collaterl in its condition when repossessed or after reasonable preparation. The sale may either be 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 is still sujbect to superior security interests.
|
|
|
What must a secured party do before selling collateral?
|
The secured party selling collateral after default must give reasonable notice, authticated by the secured party 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. Notice must be sent w/in a reasonable time before the sale. (nonconsumer transaction-10days or more before sale) The notice should contain: 1. description of the debtor and secured party 2. a description of the collateral 3. method of sale 4. a statment that the debtor is entitled to an ccouting for the unpaid indebtedness and the charge for performing the accounting. 5) The time and place of ny public sale or the time after which a private sale will be made.
|
|
|
when does the secured party have a right to deficiency judgment when the secured party fails to give proper notice of the sale?
|
There is a rebuttble presumption that there is not a deficiency in non-consumer transactions. In consumer transactions, there is sometimes a bar to a deficiency judgment or a rebuttable presumption -- the caselaw is unclear.
|
|
|
What is the debtor's right to redeem?
|
Any tie before the secured party has resold the collateral or has entered into a K 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 obligation secured by the collateral. Because most security agreements contain an acceleration clause, the debtor typically must tender the entire balance in order to redeem.
|
|
|
What is a fixture?
|
The term "fixture" is not defined in the Code. Under Ohio law, personalty attached to real estate with the intent that it become a permanent part of the real estate is a fixture. THe distinctive aspect of a fixture is that interests in it may arise under both the Code and the law of real estate. ** no security interest can exist in ordinary buidling materials incorporated into an improvement on land.
|
|
|
How is a security interest in fixtures perfected?
|
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 include the name of the owner (if the debtor does not have an interest of record in the real estate.)
|
|
|
What is the rule for priority of fixture filings?
|
Generally, a security interest in fixtures has priority over any real estate interest that arises subsequent to the perfection of the security interest by fixture filing.
|
|
|
What is the rule for priority between a secured party v. a prior real estate interest?
|
General rule: A prior real estate interest that is properly recorded has priority over a security interest that subsequently arises. However, a PMSI takes priority over an earlier in time realty interest if it is perfected by a fixture filing before the goods become fixtures or within 20 days thereafter.
|
|
|
When is a fixture filing unnecessary?
|
A secured party need not fixture file as to readily removable (1) factor or office machines or (2) equipment that is not primarily used or leased for use in the operation of the real estate, or (3) replacements of domestic appliances which are consumer goods. Any method of perfection before such goods become fixtures entitled the secured party to priority.
|
|
|
What is an accession?
|
Accesions are goods that are physically united with other goods in such a manner that the identity of the origial goods is not lost.
|
|
|
How is an accession perfected?
|
If a security interest is perfected when the collateral becomes an accession, the security interest remains perfected in the collatera.
|
|
|
What are the rules for priority of security interests in accessions?
|
Same general rules apply. Also, A security interest in an accession is subordinate to a security interest in the whole which isperfected by compliance with the requirements of a certificate of title statute.
|
