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American
o Has a security been created called Attachment?
3 elements: VCR
People
o Has there been perfection
5 ways to perfect
Pretending to be
o Who has Priority?
Retired
o What are the remedies?
3 types
CrAPPS
Creation:
A security interest is a contingent right, which cannot be used unless the debtor
defaults.
If the debtor does not default and continues to pay off the loan, then the
security interest never exercised. At the end of the loan the security interest will
expire and the collateral will be free of the security interest.
Attachment:
Accounts Filing
Fixtures (Trade Fixture recognizable by jurisdiciton) Fixture Filing
Money Possession
Deposit Accounts Control
Article 9 Perfection-Automatic:
Purchase made in Security Goods not subject to statute
If it is not subject to a certificate of title, then automatic perfection occurs.
Priority Contest (Ranks of security interests regardless of time):
League Principle/ Temporality rule sorts out if in same league
a. Perfected Security Interest First to file
b. Lean Creditor (Bankruptcy trustee)
c. Unperfected Security Interest First to Attach
Special Rules of Priority (Ask yourself is there a special Article 9 rule , 322
only applies if the specific rule is unavailable)
o Chattel Papers (Art. 9-330)
o Investment Property (9-328)
o Deposit Accounts (9-327)
o Fixtures (9-334)
o Other Collaterals
PMSI (Purchase made in security interest)
Lenders & Buyers (Article 9 was created to protect Creditors, Lenders, and
Buyers in a free market)
Survivability Thesis
o The security interest survives if the collateral is sold
o The buyer will be subject to the security interest of the collateral
Purchasers are Secured Parties (Absolute sale, Conditional Sale, and Secure
Transactions)
An Absolute sale of listed below are secured transactions: (Article 9 has special
rules)
Chattel Paper
Accounts
Payment Intangibles
Promissory Notes
Buyers are Secured Parties
Sellers are Debtors
How to sort out the ranking if the Seller sells something twice (Under
Article 9 you can sell accounts and sell them again)
If a Buyer buys an account of Chattel Paper, and another buyer buys the
account of Chattel Paper, how do we sort out the priority?
The 1st Buyer to perfect wins
Article 9 tells the Buyer that if they buy these then they better Perfect!
Give notice and you will be protected.
Proceeds Generated when collateral is sold (broad definition) Article 9
defines as whatever is generated by the disposition of the collateral, in fact
disposition is not necessary to generate proceeds. For example, the
collateral is destroyed instead of sold but the Debtor gets insurance money.
So disposition is not essential for proceeds to be generated.
When you enter into a secure transaction as a Lender you can put a
covenant in the Security Interest saying that the Debtor will not sell the
collateral. Debtor may face criminal charges if he/she sells the Collateral.
However, the Buyer can still buy it.
Cash Proceeds:
Money
Checks
Deposit Accounts
Or the like
Non-Cash Proceeds
Goods (Sell Red car and get blue car)
Accounts (Electric company sells electricity and accounts are created)
Instruments (Sell and get promissory notes)
Chattel Paper (Sell and leasing goods can produce chattel paper)
1. If security interest was attached to original collateral than it will be
considered automatic attachment to proceeds. (Pro-lender rule)
2. Automatic Perfection of Security Interest in Proceeds if original Security
Interest was perfected
3. Continuation of Perfection of Security in Proceeds
a. Cash proceeds continuation is indefinite
b. Non-Cash proceeds have 20 days
If default occurs, the Lender can go after the original collateral or proceeds
based on convenience but cannot collect on both.
Non-recourse secured transactions
The Lender is confined to the collateral, the Lender cannot go after the
assets of the Debtor
Recourse secured transactions
The Lender can get what they can from the collateral and then go to court
to get a money judgment.
***Secured Transactions allows for the avoidance of the Court
***Filing is the preferred matter of Perfection
You must understand the changes that occur after you have filed
Article 9 states that you file where the Debtor is located
o If the Debtor relocates? If Debtor Changes name?
o Article 9 Gives 4 months to the Creditors, Lenders, or Secured
Parties to re-file in correct location and name. Also, if the Debtor
merges with another, you have 4 months to re-file. *****See revisions
The name of the Debtor is the most important piece of information
(Debtors legal name)
If name is wrong, financing statement is ineffective, and security
interest will not be perfected
UCC Article 9 2001 vs. 2013 Some key provisions of the Article that have
been revised in the 2013 version:
1. UCC 9-102(a)(68). -- Considered by many to be the most important
amendment, the purpose of this revision is to provide increased certainty
that the debtor name on the financing statement is the correct name for
purposes of UCC 9.
2001 Version: States that the name on the "public record" is the correct name
of the registered organization in a financing statement.
2013 Version: States that the correct name is now the name on the "public
organic record", which is defined as any record available for public inspection,
including those filed with or by the state to form an organization, e.g. articles of
incorporation, articles of organization, limited partnership agreements.
difficult for secured parties to determine the proper name for a financing
statement.
2013 Version: For registered organizations, the correct name is as listed in 9102(a)(68). However, for individual debtors, there are two alternative provisions
provided. State legislatures can select the alternative that best meets the needs
of their constituents.
o "Only If" Option: If the debtor has a driver's license or other state
identification that has not expired, the name on that document may be
used for the financing statement. If the debtor does not have an
unexpired state ID, the secured party may use the debtor's first
personal name and surname.
o "Safe Harbor" Option: The debtor's name is sufficient for the
financing statement if it is (a) the debtor's individual name as
determined by state law, (b) the debtor's surname and first personal
name, or (c) the name on an unexpired driver's license or other state
identification.
5. UCC 9-516 revises the information required on the financing statement.
The Uniform Law Commission determined that the burden of providing the
information was not worth the benefit as it was relevant only to registered
organizations and the states already had laws precluding the use of
duplicate or deceptively similar names.
2001 Version: Required that the financing statement include the debtor's type
of organization, jurisdiction and organizational ID number.
2013 Version: Eliminated the requirement for these three pieces of
information.
There were also changes to three UCC forms:
National UCC Forms (UCC-1 and UCC-3)
New National Forms that incorporate the revisions to Article 9.