Analysis 1. Identify the players a. SCR b. Lien CR c. Buyer of Collateral d. Unpaid Seller e.

Bankruptcy Trustee, Mortgage Holder, Tax Lien, etc. 2. Determine what specific collateral each player is claiming a. Inventory, autos, fixtures, etc. 3. Determine each players status with that collateral a. Perfected/Unperfected b. Secured/Unsecured c. PMSI Creditor d. Buyer In Ordinary Course, etc. 4. Apply the correct Art. 9 rule to determine priority (different rules for different contests) a. Secured creditor vs. lien creditor9-317 b. Secured creditor vs. bankruptcy trustee9-317 c. Secured creditor vs. secured creditor9-322; 9-324 d. Secured creditor vs. buyer9-320 e. Secured creditor vs. unpaid seller2-403; 2-702 f. Secured creditor vs. real estate claimant9-334 g. Secured creditor vs. statutory lien creditor9-333 h. Secured creditor vs. government lien creditor 5. Distribute sale proceeds according to priorities Protective Measures for SCR Before lending SCR should: o Check UCC filing system, possession or control, certificate of title, etc. Bankruptcy filing o If necessary have DR submit request list of collateral and outstanding obligations (9-210) Only DR has right to request, SCR cannot Substance, not form K might be labeled lease but could still be treated like secured transaction and covered by Art. 9. Look for lease that allows lessee to own property outright at end of the lease by paying small amount (a nominal purchase option) Types of Collateral Look to see how DR is using collateral when trying to classify; see 9-102(cmt 4) Intangibles (Account, Deposit Account, General Intangible) Account (9-102(2)): Any right to payment for goods sold/leased or for services rendered which is not evidenced by an instrument or chattel paper. Also includes a right to payment under a real estate contract, credit card agreement (credit card receivable), health-care insurance, and other rights Deposit account: Account maintained w/ a bank (9-102(a)(29)) Can only be perfect by SP taking control (9-312(b)(1)) Requirements for control of deposit account (9-104): SP is bank where deposit is maintained; or DR, SP, and bank have agreed in authenticated record that bank will comply w/ instructions originated by SP; or SP becomes banks customer on that account (4-104(a)(5))

General Intangible (9-102(42)): Residual category that covers any personal property (including things in action) not included in other categories (accounts, chattel paper, deposit accounts, documents, goods, etc.). Includes computer software that is not embedded in goods. E.g., software embedded in goods = preloaded operating system on new computer Tangibles: Goods: All tangible things that are moveable, excluding chattel paper, instruments, certificated securities (9102(a)(44)). Can include consumer goods, farm products, inventory, equipment Cmt 4: Categories of goods are mutually exclusive, if category is questionable look to principal use Farm Products (9-102(a)(34)) Goods w/ respect to which DR is engaged in farming operation and are: Crops, livestock, supplies used/produced in farming operation, or products of crops and livestock in their unmanufactured states Inventory (9-102(a)(44); cmt 4) Goods, not farm products, that are: Leased, held for sale/leaseconsist of raw materials, work in process, or materials used or consumed in a business Must be in ordinary course of business (i.e., mfr who sells its equip..equip not inventory) Equipment (9-102(a)(33); cmt 4) Non-inventory goods used or bought for use primarily in business. (Equipment is also a residual category for goods not covered by the definitions of consumer goods, inventory, or farm products). Consumer Goods (9-102(a)(23)) Goods bought primarily for personal, family, or household purpose Quasi-Tangibles: Instrument: Writing that evidences right to payment and is of type that in ordinary course of business is transferred by delivery w/ any necessary endorsement/assignment (notes, drafts, checks) (9-102(a)(47)) Documents: Receipt evidencing person in possession is entitled to receive, hold, and dispose of goods it covers (warehouse receipt; bill of lading) (1-201(15); 9-102(a)(3)): Bill of Lading (1-201(6)) Doc evidencing receipt of goods for shipment issued by person engaged in business of transporting/forwarding goods. E.g., Carrier picks up goods from wholesalers warehouse. Wholesaler signs bill of lading. Carrier delivers to customer who signs upon receipt Chattel paper (9-102(a)(11)) Record that evidence both (1) monetary obligation and (2) SI in specific goods or lease of goods Instruments and chattel paper, like accounts, are debts owed by 3rd party to DR, and DR is using its right to that money as collateral Note, can perfect by possession (9-313) or control (9-312) Investment Property (9-102(a)(49)) Includes items such as stocks, bonds, mutual funds, and brokerage accounts containing such items Money: Government medium of exchange (cash) (1-201(24))

Unsecured Creditors What is an UCR? Cr didnt contract for secured status or wasnt given by statute Examples Judgment CR party obtained money judgment from court.

Problem? Money judgment doesnt order DR to pay No self-help option available to UCR Risk of tort liability for conversion/larceny However, setoff is permissible If both cr/dr owe each other, cr can set off the debt it owes to dr What action can UCR take upon DRs default? Lawsuit. Send demand letter; File lawsuit; Win lawsuit Locate non-exempt assets DR has affirmative duty to assert exemption Obtain garnishment/execution against assets Enforce order If necessary instruct sheriff to levy on chosen assets Sheriff sale, proceeds applied to debt; return writ to ct The Security Interest (SI)

What is a security interest? Security Interest (1) Interest in property (2) contingent on non-payment (3) of a debt Ask: Cr have interest in property? Obligation imposed on dr? As long as dr pays/abides by contract terms, cr cant repo/dispose Regardless of form 9-109 Art. 9 applies to transaction, regardless of form, that creates security interest in personal property or fixtures by contract Mortgage Security interest in real estate Cr lends dr $50k to purchase property, dr gives cr security interest in property to protect cr in event dr breaches lending agreement Crs interest is contingent on non-payment by dr; if dr pays, cr has no interest 2-401 Any reservation of title by seller in goods delivered to buyer = security interest Example: Car lessor agrees to sell car to dr in 1 year. During that time, if dr pays 1/12 of sale price per month, dr has right to use car, but until 1 year mark, cr retains title. Security interest. Crs interest = ownership (possessing title); right to repo car on nonpayment. Dr has obligation to pay. Cr cant take car back unless D fails to pay (contingent interest) 1-203(b): Lease intended as security interest Transaction in form of lease creates security interest if: Consideration to be paid by lessee for right to possession/use of goods extends for term of lease and isnt subject to termination by lessee; and Term of lease is equal to or greater than remaining economic life of goods; or Lessee bound to renew lease for remaining economic life or bound to become owner of goods; or Lessee has option to renew lease for remaining economic life for no or nominal additional consideration upon compliance w/ lease agreement; or Lessee has option to become owner for no additional consideration/nominal additional consideration upon compliance w/ lease agreement Sale of accounts w/ recourse = secured transaction With recourse if account debtor doesnt pay cr, dr will buy account back from cr at accounts face value Default, Acceleration, Cure Default: Triggers right of SCR to proceed against collateral

Breach of K required before CR may accelerate or DR may cure Not specifically defined by UCC, look to what constitutes default in the SA W/o a defn, ct may restrict to failure to pay obligation when due CR can waive specific default w/o waiving future defaults Waiver: Voluntary relinquishment of known right; actual or implied Waiver by estoppel: Misleading DR into honest/reasonable belief that CR intended waiver When is payment due? Varies per agreement Installment loans DR repays loan over period of time in regular intervals Single payment loans Loan payable on particular day Bank can roll the date into future if DRs finances satisfactory Loans may be payable on demand (calling the loan) Lines of credit Bank lends $ as needed by DR up to line limit Cure vs. Acceleration Acceleration If DR defaults, acceleration makes DR liable for entire loan rather than just the missed installment Provision in lending K Notice of intent to accelerate usually required, even if K is silent Limitations Waiver by estoppel (J.R. Hale: occurred where CR silent when under duty to speak) Acceleration based on insecurity must be in GF Cure After default, DR has right to cure by tendering arrearage Effect: Reinstate payment schedule Right terminated if CR accelerates beforehand States may permit reinstatement even after acceleration Problem of simultaneous elections: No mailbox rule No definitive mailbox rule to handle when acceleration and cure hit mail simultaneously If acceleration first, DR may redeem collateral only by paying full amount of loan If no acceleration, DR pays past due obligation Where DR mails cure before hearing from SCR & SCR subsequently rejects & sends notice of acceleration, DR should argue default was cured SCR has no grounds to proceed under 9-610(a) GF Test (1) Honest in fact (subjective) and (2) observance of reasonable commercial standards of fair dealing (objective). (1-201(b)(2); 9-102(a)(43)) Insecurity Clause If secured CR deems itself insecure (in GF), DR defaults. (1-309)

Redemption & Foreclosure Right to redeem DR has right to pay off obligation and own property free of SI (9-623(a)) Requirements (9-623(b)/(c)) (1) DR fulfills all obligations secured by collateral; and (2) pays reasonable expenses & attorneys fees (3) at any time before SCR collects collateral collects, disposes, contracts to dispose of, or accepts collateral SA may call for payment of SCRs attorneys fees and any repo costs as well Foreclosure termination of right to redeem and transferring ownership of collateral to cr Four Types 1. Judicial foreclosure (ct declares, sheriffs sale) 2. Power of sale foreclosure (no ct, by trustee, real estate) 3. UCC foreclosure by sale (no ct, by creditor, personal property)

 4. Strict foreclosure (ct declares, no sale, contract for deed) Procedure Secured cr files complaint against dr stating (1) details of loan, (2) nature of default, and (3) request to foreclose debtors redemption right Complaint served on dr and subordinate lien holders Dr responds w/ any defenses Ct enters final judgment, sets date of foreclosure sale Sheriff sells collateral, collects proceeds, applies to debt Writ of assistance to remove dr that wont give up possession Deed in lieu of foreclosure voluntary transfer of drs ownership/right to redeem to cr (merger doctrine) Deed in lieu = SI when SCRs right is contingent on nonpayment of debt Disposition of collateral after default (9-610) SCR can sell, lease, license, or otherwise dispose any/all collateral Every aspect of disposition must be commercially reasonable 9-627: Disposition commercially reasonable if made: in usual manner on any recognized market at price current in any recognized market at time of disposition otherwise in conformity w/ reasonable commercial practice among dealers in type of property Fact that greater amount could have been obtained if cr conducted UCC sale at diff time or manner is not sufficient to preclude disposition was commercially unreasonable Retrieving Collateral DR may voluntarily turn over Right to take possession (SCRs right to self-help w/o breach of peace (BoP)) 9-609: After default and w/o BoP SCR may Take possession of collateral; Disable and/or dispose of collateral on drs premises under 9-610 If possession will BoP, SCR must use judicial process (file replevin action; foreclosure) Self-help under 9-609 & Breach of peace BoP results in SCR losing authorization to repo and may result in liability for conversion If DR takes action indicating lack of consent, continuing w/ repo of collateral = BoP Look for violence, property damage, conduct that could be deemed unreasonable CR may employ repo agents CR cant delegate liability for BoP to repo agents Most entries by repo agent = trespass, but nature of borrower/lender usually creates privilege But see Salisbury Livestock below, entering 3rds property = fact sensitive inquiry CR may employ sheriff Sheriff repoing while not on duty and asserts himself = BoP What isnt BoP? Repoing at 2am Off-duty officer repoing w/o asserting himself Salisbury Livestock Co. Where repo agent entered 3rd partys secluded ranch property to repossess collateral vehicle, rational jury could conclude entry on to rural, secluded ranch yard w/o notice was unreasonable and breach of peace Self-Help Against Accounts as Collateral 9-607 Secured cr who knows identity of account debtor can send written notice to pay cr directly 9-406: account debtor who receives notice can only discharge obligation by paying cr directly Can request proof of assignment Judicial process Replevin action to regain possession of collateral (personal property only!) With / without notice If without notice, due process doesnt require notice/hearing before collateral repossessed. Satisfied as long as dr has hearing after repossession and before final judgment. (Dels Big Saver Foods)

Dr can regain possession of collateral if can prove to ct collateral will suffer irreparable harm Cr must post bond in event ct wrongfully granted pre-trial replevin Art. 9 Sale & Deficiency

Purpose: Determine value of collateral, convert to cash If DR has equity, deduct debt owed from proceeds of sale, send remainder to DR If balance remains after sale, deficiency Waiver Cant waive/modify requirement for sale of personal property after foreclosure in initial K (9-602(7)) Acceptance of collateral (9-620) Acceptance as full satisfaction is like deed in lieu/Avoids formal foreclosure Consumer Exceptions SCR cannot accept collateral as full or partial payment for consumer goods if (1) DR in possession; (2)DR has paid 60% or more (9-620(a)(3)/(e)) Procedure (post-default only) Notification of proposal to accept collateral (9-621) Full satisfaction: SCR sends unconditional proposal and DR agrees in authenticated record or doesnt receive any objection by DR or other SCRs w/i 20 days (9-620(a)&(c)(2)) Why take full? Among other reasons, no reasonable prospect of actually recovery deficiency Partial satisfaction: Allowed only if DR consents to terms in authenticated agreement and receives no objections w/i 20 days (9-620(a)&(c)(1)) Effect of acceptance of collateral 9-622 Note, 9-622(a)(3): subordinate SI = discharged Sale Procedure SCR may dispose of collateral in condition post-repo or after reasonable preparation (cf. judicial sale) CR determines method (public auction, private sale, contracts) + timing Requirements for disposition (9-610) Every aspect must be commercially reasonable (9-610(b); 9-627) Discrepancy in price actually sold vs. higher price could have result under diff sale conditions is not sufficient to render commercially unreasonable (9-627) Chavers: Aircraft collateral orig price $850,000 repod and sold for $450,000 one month later, only 9 days of advertising, for public sale, and no determination if needed maintenance. [italics = unreasonable actions by CR]. Therefore, SCR Not entitled to deficiency Note, sale @ blue book price isnt same as a recognized market price that allows price alone to render disposition commercially reasonable Required Notifications (9-611(c); 612-614) Notice to DR (9-611(c)(1)) Notice to any SCRs that has filed FS or notified SCR of its SI (not required for consumer goods) Notice must include time and place of any public sale or time after which private sale will be made (9-613(1)(E)) Notice not necessary where collateral is perishable/will decline rapidly in value, or of kind ordinarily sold on recognized market (e.g., stock) Additional notification requirements for consumer goods transactions 9-614 SCR buying collateral (9-610(c)) May do so at public auction; May do so at private sale only if collateral is type customarily sold in recognized market or subject of widely distributed standard price quotations DRs right of redemption extends only to point before SCR disposes of collateral DR must pay full price + attorneys fees Challenging the Article 9 sale:

If SCR fails to comply w/ repossession or sale rules, rebuttable presumption that collateral valued enough to pay off entire debt precluding SCR from recovering deficiency. SCR may be liable for any loss caused by failure to comply w/ Art. 9s rules (9-625; 9-626?) Irregular Sales Only way for DR to get sale set aside is if it wasnt commercially reasonable, but DR doesnt get collateral back from a GFP (9-617(b); see also commercially reasonable reqs 9-627) Insufficient sales (two types) DRs loss of equity (rare) Deficiency (9-615(d)) CR purchases collateral (9-615(f)) Sale doesnt comply w/ Art. 9 (9-626(a)(3)) Defenses to deficiency judgment Failure to sell collateral CR attempting to accept collateral w/o DRs consent (9-625(a)/(b)) Delay in sale commercially unreasonable (9-626(a)) Failure to provide notice of sale (9-611) If CR doesnt locate and give notice to other creditors against collateral, sale still good (9617), but deficiency % recoverable reduced In Re Downing: BMW failed to comply w/ 9-614 for disposition of collateral in consumer transaction when didnt inform DR of nature of sale; potential liability for deficiency; didnt inform of right to accounting. Result: BMW loses right to deficiency judgment

Attachment Creation of security interest Attachment is a requirement for perfection Key Requirements 9-203(a): Security interest attaches to collateral when it becomes enforceable 9-203(b): SI enforceable only if: (1) Value has been given; (2) DR has rights in collateral; and (3) DR authenticated security agreement that provides description of collateral, or collateral in SCRs possession/control Note, possession or control can satisfy enforceability w/o authentication or perfection Value Person gives value for rights if acquires them as security for pre-existing claim(or satisfies consideration for simple K)(1-204) 1-204(1) : person gives value for rights if acquires them in return for binding commitment to extend credit/extension of immediately available credit (i.e., commitments to make future advance) Rights in collateral DR doesnt need absolute ownership rights; partial/contingent will suffice Authenticate Sign, execute, or adopt record (9-102(a)(7)) Description of collateral (9-108(a)/(b)/(c)) Sufficient if reasonably identifies whats described Supergeneric descriptions prohibited (c) Like all of DRs property doesnt reasonably identify the collateral Record Info inscribed on tangible medium, or stored in electronic or other medium and is retrievable. (9-102(a)(69)) Security agreement Agreement creates/provides security interest (9-102(a)(73)) Security interest Interest in personal property that secures payment or performance of obligation (1-201(b)(35))

 In Re Schwalb: No magic words needed in K (pawn ticket) Composite Document Rule Applies in creating security interest, but financing statement alone isnt enough (Ace Lumber Supply) White & Summers approach: (1) Need signed writing indicating DR may have granted security interest (2) Factfinder looks at entire transaction to determine DRs intent Possession (9-203(b)(3)(B)/(C)) Required for certificated security under 9-313 pursuant to SA; delivery for certificated security 8-301 Control (9-203(b)(3)(D)) Deposit accounts, electronic chattel paper, investment property, letter of credit rights, electronic docs Proceeds Get SI in proceeds b/c replaces collateral as DR disposes of it SI automatically covers proceeds of original collateral Attachment of SI in collateral gives secured right to proceeds (9-203(f)) SI attaches to any identifiable proceeds of collateral (9-315(a)(2)) Collateralincludesproceeds (9-102(a)(12)) Proceeds Defined (9-102(a)(64)) Anything acquired upon sale, lease, other disposition of collateral Whatever collected on or distributed on account of the collateral Rights arising out of collateral (royalties) Claims arising out of loss of collateral or damage to collateral Insurance payable on loss/damage of collateral Tracing requirement SCR must trace proceeds to collateral SI in original collateral may still exist depending on if transferee took free or not Value of proceeds could exceed value of original collateral Identifying Proceeds: Commingled Goods Lower intermediate balance rule: If non-proceeds is spent and proceeds in account are then dipped into, followed by deposits into account, the amount of proceeds remains depleted Protections from proceeds doctrine Transferee of funds from bank account takes free of SI, unless acted in collusion w/ DR. (9-332(b)) Segregated account Separate account that contains only CRs collateral If youre CR, you want this Other value-tracing concepts besides proceeds As each comes into existence, value of original collateral decreases, arguably all are proceeds Product Profit Rents Offspring Non-value tracing concepts After Acquired Property Remember, AAP must fit description of original collateral Replacement, additions, substitutions, etc Non-value tracing b/c reach collateral picked up by DR w/ value not derived from previous-existing collateral CRs secured value actually increases w/ under this Liability of buyers of collateral If SI continues in collateral, new buyer takes subject to SI. (9-201) Floor Plan Financing What is it? Financing purchase of inventory that is on dealers showroom floor

Floorplan Agreement If lender finances purchase of inventory by dealer, vendor will buy back invenstory at full invoice price in event lender must repo inventory from dealer Ex: Bank agrees to pay vendor for boats purchased from vendor by dealer. Dealer forwards payments on boats to bank to pay off loan Safe transaction b/c (1) bank gets money back when dealer sells collateral (the boats); or (2) Bank gets money back from vendor when bank has to repo collateral (bank gets full purchase price regardless of condition of collateral at repo) Floor Checking Simulated repo; CR sends agent to inspect collateral on DRs property to ensure its in good condition and not being disposed of in unauthorized manner (i.e., being sold and proceeds going to other bills rather than loan) Perfection

Benefit of perfection: Priority Benefits against 3rd parties & in bankruptcy Unnecessary to create enforceable SI; unperfected SCR can still repo If two parties have SI in same collateral, one w/ priority gets paid in full before other entitled to any payment at all General Rule First to file effective FS or perfect by some other method has priority Priority in conflicting SIs in same collateral determined according time of filing/perfection. (9-322(a)(1)) Reasoning: Perfection gives public notice of claim so later lenders should be aware of first claim and adjust accordingly FS necessary to perfect SI unless otherwise stated (9-310(a)) Perfection SI perfect if it is attached and requirements for perfection in 9-310 thru 9-316 are satisfied. (9-308(a)). SI perfect when attaches if applicable requirements for perfection are satisfied before SI attaches. If attachment is first before requirements for perfection satisfied, SI is perfect when something else is done (i.e., filing financing statement) Note, 9-502(d): Financing stmt can be filed before SI is made or attaches Strategy for dealing w/ multiple filing systems Step 1. Identify type of collateral according to UCC definitions Step 2. Check for federal preemption. Make federal filing if necessary. (9-311(a)) Peregrine: for copyrights need to file federally (aircraft, railroads too) Pasteurized Eggs: for patents, file at state level Step 3. If no federal preemption, does state UCC filing perfect? If so, make filing in state where DR located. (9-501(a)) Usually state UCC filing done w/ Secretary of State; If land related, file in county where land is located Step 4. If UCC filing doesnt perfect, look for alternative method If covered by certificate of title, record on title. (9-311(a)/(b)) If CR can take possession/control, do it If not covered by Art. 9 (9-109), perfect by other means Step 5. If you do nothing, hope collateral covered by automatic perfect Perfection: Filing Perfection by filing is required (9-310) DR must authorize filing. (9-509), which SA does (b) o Does a narrow SA impliedly authorize a broad indication of collateral in FS? FS is good for 5 years o Filing of continuation statement extends for additional 5 years. (9-515(a); 9-102(a)(27)) Can only file w/i 6mos of expiration (9-515(d))

Filing late continuation stmt results in it being ineffective. (9-510(c)) After expiration, FS lapses and SI becomes unperfected (9-515(c)) If lapses, deemed never perfected against PFV (i.e., another SCR) 9-312: SI in chattel paper, negotiable documents, instruments, or investment property may be (but not recommended) perfect by filing o FS will be subordinate to competing SI perfected by control/delivery Cannot file for deposit account or letter of credit o Financing Statements: Information Deemed Sufficient

What needs to be in financing statement? 9-502(a). Financing statement sufficient (effective) only if it contains: 1. DRs name 2. Secured partys name (or representative); and 3. Indicates collateral covered by financing stmt DRs name is crucial Rules for determining DRs name set in 9-503(a) Errors not seriously misleading in financing stmt OK, but error in DRs name is usually not minor. (9506(a)/(b)) Exception: Error in DRs name allowed and filing OK if search under correct name will uncover financing statement filed under incorrect name. (9-506(c)) Naming Individuals Art. 9 doesnt define name. Amended 9-503 points to name on drivers license Common law: Name which DR is generally known in community, for non-fraudulent purposes In re Kinerknecht: Must use DRs legal name, no nicknames Why? If it were any other way, searchers would have to guess and take risk DRs trade name alone is insufficient. (9-503(c)) Naming Corporations For registered organizations (RO), use name of DR indicated on public record of DRs jurisdiction of organization (9-503) Public record could be (1) list of entities that appears on listing of names at Secretary of State Corporations Division or (2) name actually on articles of incorporation as filed If not a RO, FS must name all general partners. (9-503(a)(4)(B); see also (c)) Name Errors If search under DRs correct name, using filing offices standard search logic, finds financing statement that fails sufficiently to provide name of DR in accordance w/ 9-503(a), inadequate name doesnt render seriously misleading Pay close attention to search logic Think: harmless error standard Indication of collateral 9-504: Indication should reasonably identify (desc meeting reqs of 9-108 works); however 9-504(2) allows indication that FS covers all assets or all personal property so general categories will suffice FS can be broader in description required for SA, which allows FS to cover collateral SA doesnt Note, limitations on descriptions of consumer goods. (9-108(e)(2)) Practitioner's Tip: Always list specifically what you really want as security in the financing statement and then add in a catchall. See ramifications of being too specific in In Re Pickle Logging p320 Financing Statements: Other Information Filing office shall reject FS w/o 9-516(b) information. 9-516(b)..FS needs: (1) Mailing address of CR (b)(4) (2) Mailing address of DR (b)(5)(A)

(3) Whether DR = individual or corp (b)(5)(B) If organization also need (b)(5)(C): Type of organization DRs jurisdiction DRs organization ID # If office lets FS through w/o any of these 3, the filing is still effective Also note 9-509, DRs signature on FS unnecessary b/c by authenticating SA DR authorized SCR to file FS Minor errors OK as long as not seriously misleading. (9-506(a)) UCC doesnt authorize filing office to determine/consider the accuracy of the information. (9-516 cmt. 3) Mistaken rejections Filing is effective, accept against someone who checked records and relied on absence of filing on record. (9-516(d)). Mistaken acceptance Effective, except against someone who relied on incorrect/missing info. (9-520 cmt 3; 9-338) 9-338 renders SI w/ incorrect 9-516(b)(5) info on financing stmt subordinate to conflicting perfected SI in same collateral if latter party gave value in reasonable reliance on incorrect info Further, purchaser, other than secured party, takes collateral free of SI to extent gave value in reasonable reliance on incorrect info Terminating Financing Statement FS effective until TS filed or it expires When DR has no outstanding obligation and SCR has no obligation to make future advances, SCR upon receipt of written demand by DR must file or provide DR w/ termination statement (9-513(a), (c)) If FS covers consumer goods, w/i one month after no outstanding obligation, or w/i 20 days of receipt of written demand letter from DR, SCR must file termination statement (9-513(a)/(b)) Perfection w/o Filing Exceptions to filing requirement for perfect contained in 9-310(b): Automatic perfection UCC filing preempted by another system (i.e., federal system) Possession (9-313) Control (9-314) Other examples PMSI in consumer goods (9-309) Collateral not governed by Art. 9 Perfection w/o filing: Possession Possession (9-313) Undefined in UCC; Law of jurisdiction where collateral is located governs (9-301(2)) Possession-gives-notice theory Searcher will look at collateral and it will be in someone elses hands. Requirements (9-313(a)) SCR may perfect SI in tangible negotiable documents, goods, instruments, money, or tangible chattel paper by taking possession of collateral Physical possession or 3rd party holding for SCR Its permissible, not required, to perfect by possession However, Money can only be perfected by possession (9-312(b)(3)) SCR may perfect SI in certificated securities by taking delivery Examples where possession does not perfect General checking account and accounts are pure intangibles that cant be perfected by possession Automobiles (not inventory) cant be perfected by possession; lien notation only

Agent can hold collateral for SCR, but DR/agent solely of DR does not qualify (i.e., the latter wont perfect by possession) Collateral in possession of person other than DR (9-313(c)) Can be done but 3rd party in possession must authenticate record acknowledging it holds collateral for SCRs benefit Or, If bailee issued negotiable document of title (e.g., warehouse receipt) then SCR must perfect SI in document via possession or filing Perfection continues so long as possession is retained Slot machine hypo While slot machine = equipment, FS likely not good enough to reach money inserted/removed b/c perfection by possession is only way for money Perfection w/o filing: Control Control (of certain types of intangible property) (9-314; see also 8-106(a)(control) & cmt. 1) Perfection by control required for SI in Investment property (9-106), Deposit accounts (9-104), Letter-of-credit rights (9-107), Electronic chattel paper (9-105) Basically, SCR has control of item when SCR has taken steps necessary have item sold or disposed of w/o further action or permission from DR. Control = equivalent of possession when property is intangible Investment property (9-106): Certificated Securities: If security is represented by certificate, to perfect by control reqs possession of certificate. If certificate is not in bearer form (i.e., payable to a specific person rather than to bearer), must also be indorsed to SCR Uncertificated Securities: If security not represented by certificate, perfection by control reqs owner (DR) notify issuer to either (1) re-register stock in SCRs name, or (2) agree to follow SCRs instructions w/o further consent by owner. Securities Accounts: SCR can take SI in securities account & perfect by control by having owner of account (DR) contact broker/mutual fund company (securities intermediary) and instructing intermediary SCR has owners rights in account or intermediary should comply w/ SCRs orders w/o further consent of owner. Deposit account (9-104) If bank that maintains deposit acct = SCR, bank automatically has control. (9-104(a)(1)) SI in DRs deposit (bank) account can only be perfected by SCR taking control over account. Requires both DR and bank to agree that SCR can withdraw funds from account w/o further involvement/consent of DR. Note: control rule doesnt apply if money in account is proceeds of some other collateralcash proceeds are perfected if the interest in the original collateral was perfected Cmt 3: All CRs are on notice that bank that maintains DRs deposit account may assert claim against it Letter of credit rights (9-107) Issuer must consent to assignment of proceeds of letter of credit Perfection w/o filing: Automatic Filing not necessary if perfected when SI attaches (automatic)(9-310(b)(2)) SI that are perfected when they attach (9-309): PMSI in consumer goods, except 9-311 (statute preempts Art. 9; cert of title goods (cars, boats, etc.)) 9-103, PMSI = SI Retained by (1) seller of collateral to secure purchase price or by (2) 3rd party that loans money actually used to purchase goods Onus on 3rd party lender to ensure its loan money is spent by DR on collateral for PMSI

E.g., D borrows money from LoanCo to buy new dining room set for her home. LoanCo obtains SI in dining room set. D signs a SA at time of sale. SI automatically perfected as soon as it attaches. Automatic Perfection in Proceeds: 21st Day Rule (9-315(c)(cmt 4)) SI in proceeds is automatically perfected for 20 days if SI in original collateral was perfected. On 21st day after SI attaches to proceeds SI becomes unperfected (9-315(d)) Exception to 21st Day Rule: Same Office Rule (9-315(d)(1)) Proceeds are collateral in which SI may be perfected by filing in same office (i.e., SoS) in which FS was filed Exception doesnt apply to proceeds purchased w/ cash proceeds. (9-315(d)(1)(C)) In order to be perfected in this situation, the proceeds must fall under the description of collateral in the FS (section (d)(3)); i.e., sell inventory, use cash to buy new inventory, FS covered all inventory Note, still have to demonstrate that proceeds could be traced through bank account to purchase of new collateral. (lowest intermediate balance rule) Identifiable cash proceeds If FS covers original collateral, SI in proceeds under 9-315(d)(1) becomes unperfected at later of (1) filing of termination statement or (2) 21 day after FS lapses. (9-315(e)) Perfection w/o filing: Certificate of Title Statutes 9-311(a)(2) FS not necessary to perfect SI in property subject to statute. (9-310(b)(3)) Compliance w/ statute is equivalent to filing FS & only way to perfect. (9-311(b)) However, file FS when property is inventory. (9-311(d)) o E.g., dont write SI on cert of title for cars when you finance cars on dealers showroom floor Look for automobiles, boats, mobile homes and other large, expensive, mobile goods. Note: to perfect a security interest in an automobile (or boat, etc.) held by a dealer for sale to the public (the dealers inventory), the creditor of the dealer must perfect by filing a financing statement against the goods Maintaining Perfection: Changes of Name, Identity, Use

Continuous perfection. (9-308(c)) 3 Most Important Changes in Circumstances 1. (1) Change in DRs name; (2) change affecting collaterals description; (3) conversion of collateral into proceeds Change in Debtor's Name Ways new lenders can protect themselves: 1. 2. 3. Ways original lenders can ensure financing statements remain accurate 1. 2. 3. o o Insist debtor prove its incorporation Search records of that state/county for changes in debtor's name Once old name discovered, conduct new UCC search Periodically check corporate records of state debtor was incorporated in Pay attention to changes in letterhead on documents and checks sent by debtor If discrepancies are discovered, file an amended financing statement w/ correct information

Minor v. Seriously misleading changes. (9-506) Transfer to new DR usually seriously misleading 9-507(c): (4 months rule to fix FS) Even though change in DRs name renders FS seriously misleading, it remains effective w/ regard to (1) collateral owned by DR at time of name change and (2) collateral acquired by DR in first 4 months after the change

Seriously misleading FS not effective if acquired by DR 4mos after the change Effect of 9-507(c) SP financed purchase of specific item of collateral one time, no problem. SP engaging in continuing financing will have a problem b/c four months after name change, new SIs no longer effective if still using debtor's old name on financing stmts Searcher who searches under DRs new name may find no relevant findings but may fail to discover a filing against the collateral under the DRs old name that is still effective o Most Ks include failure to inform of these changes as part of breach New Debtors (9-508) o DR = owns the collateral; Obligor = owes payment o 9-203(d): New DR (9-102(a)(56) is person who becomes bound to terms of original SA. Person that steps into original DRs shoes and assumes and agrees to perform under SA Including AAP clause if original SA contained one o Effectiveness of FS if New DR becomes bound by security agreement 9-508(c): Treats transfer of collateral to new DR same as transfer to anyone else FS filed against original DR remains effective against collateral under 9-507(a) If new DRs name renders FS seriously misleading, 9-508(b) applies rule 4 months rule SCR must file new initial FS against New DR w/i 4 months of xfer, new initial FS is effective as of date of original filing (9-508(b)(2)) Original FS remains effective w/ respect to collateral acquired by new DR w/i 4 months Changes Affecting the Description of Collateral o Changes may prevent searcher from locating collateral/realizing its relevance o Two Kinds of Changes 1. Change in circumstances that didn't control the place of filing but that make collateral difficult for searcher to identify as covered by the filing 1. Eg., FS references "inventory, searcher looking to make a loan on "equipment" a. Searcher may not realize the significance. 2. UCC 9-507(b) a. If change renders FS seriously misleading, FS is nevertheless effective 2. Change sufficient to affect the method of perfection that would have been appropriate for the initial filing 1. Example: change in use of collateral like when a car at a dealership that was previously used as inventory is put to use by the dealership as equipment (latter use requires notation of certificate of title to perfect 9-311(b)), or vice versa. 2. While, 9-507(b): later changes that render FS seriously misleading do not cause FS to be ineffective, however, it's only effective as inventory (which it is no longer used for), it is not effective as equipment b/c a necessary step to perfect (notation on title) is missing Exchange of the Collateral (p396) o Security interest continues in identifiable proceeds after sale, exchange, collection, or other disposition of collateral. 9-102(a)(64); 9-315(a)(2) Barter Transactions Barter: exchange of one commodity for another w/o involvement of cash 9-315(d)(1) Three types 1. Proceeds, in exchange for collateral, received by DR that fall w/i desc of collateral already in FS i. 9-203(f): SI attaches w/o further action by SCR 2. Proceeds, in exchange for collateral, property not covered by desc in FS but are property in which FS could be perfected by filing in office where the secured creditor's financing statement is already on file i. 9-315(d)(1): SCR remains perfected w/o a new filing (same office rule) ii. Potentially problematic for searchers b/c any time DR has swapped collateral, FS may encumber property not described in it, and unless searcher knows DR didn't acquire collateral in question in a swap transaction, searcher can't rely on desc of collateral in any FS o

Proceeds, in exchange for collateral, are of a type in which filing in required in a filing office other than one in which original collateral was perfect by filing i. SCR doesnt get protection of 9-315(d)(1) here b/c FS for new proceeds must be filed in a diff filing office than original collateral ii. 9-315(d)(3): to be continuously perfected, SCR must make filing w/i 20 days from time DR receives proceeds (20 days to file) iii. Continuous perfection: perfection that relates back to time when SCR first became perfected iv. Addtl authorization to file new FS for proceeds not reqd. 9-509(b)(2). National Bank of Alaska v. Erickson: Barter exchanging UCC-covered collateral (here, accounts receivable) for real property (not covered by UCC) rendered SI ineffective. Collateral to Cash Proceeds to Noncash Proceeds If SCR can trace value of collateral thru sale of collateral for cash and purchase of new collateral w/ that cash, SI will reach new property as proceeds. 9-102(a)(12)/(64) 9-315(d)(3)/(cmt. 5) Where cash proceeds from sale of collateral are used to purchase new property covered by desc of collateral in original FS, interest remains perfected Where cash proceeds purchase new property that isn't covered by desc of collateral in orig FS, SCR must file amended FS covering new collateral w/i 20 days in order to be continuously perfected. If SCR files after 20 days, the filing is effective as of that date (i.e., there will be a gap where secured is not perfected until new filing) This includes changes in type of collateral (from equipment to inventory) that are covered by the same office rule as well as changes in collateral not covered by same office rule (example of barter #3 above) Collateral to Cash Proceeds (no new property) 9-315(d)(2): SCR has continuous perfection in identifiable cash proceeds If DR uses cash to later purchase new property, SCR still has SI in new property as proceeds, but will have 20 days to perfect Maintaining Perfection: Relocation of debtor or collateral

3.

Where to file and where to search: 9-301 to 9-307 o Rules governing effect of perfection, nonperfection, priority = same in all states b/c all adopted Art. 9 o Where to perfect initially? File in state where DR is located. 9-301(1) local law of state DR located in governs perfection of nonpossessory SI For possessory SI: law where collateral located governs perfection & priority. (9-301(2)) File w/ Secretary of State. (9-501(a)(2)) Where is DR located and how do you find filings against it? (9-307) Individual DR = individual's principal residence (undefined in UCC) (9-307(b)(1)) Registered organization = located in state where organization was organized (9-307(e); See def'n of registered organization 9-102(a)(70)) For ROs, location of offices/CEO irrelevant When searching for SIs against organization need only check st of incorporation Non RO located in state that contains CEO. (9-307(b)(3)) For real estate, check office that manages the real property records in county in which land is located. (9-501(a)(1)) For goods that are to become fixtures, filing w/ secretary of state is still proper. 9501(a)(2)) Note effect, DR can be in a different state/jurisdiction from which land at issue is located Where collateral is type that permits perfection by control (9-304; 9-306), no guarantee on proper place to file financing statement Maintaining continuous perfection after DR relocates How does individual DR relocate? Changes principal residence

To determine if change occurs, DR must sometimes be physically present in state to have principal residence there, and where DR physically present in two states, look to DRs intentions. 9-316(a)(2), (b): When DR changes St, SCR has 4 months to file in destination state or less if original FS would expire before then If no new filing, SI = unperfected, deemed never perfected against PFV Ways registered organizations can change state Merger into new corporation in diff state Transfer of ownership of assets of existing organization to new organization Finding registered organization 9-316(a): for timing limitations to discover Easy to discover if move was by merger b/c merger will be matter of public record For sale of assets, trickier b/c corporation will still exist in original filing jurisdiction Note, possibly no accompany change in location of biz/assets Collateral covered by cert of title statute. (9-316(d)) In event of relocation of collateral, SCR remains perfected in new state until would become unperfected in old state What happens if debtor transfers the collateral? 9-316(a)(3): SCR has 1yr grace period in which to discover collateral was transferred to someone else and to perfect in new jurisdiction Same effect as when DR relocates but problem is that search in state where current DR (transferee) is located won't find the collateral Filing against former DR remains effective (9-507(a)) What happens when SCR w/ possessory interest moves to another state? 9-316(c): Possessory SI remains continuously perfected if: New state allows perfection by possession as to the collateral and under law of that state possession is sufficient to perfect the SI; and SCR remains perfected under law of new state upon entry (automatic)

Priority Begins @ 9-317 Relationship b/w SCR and some other party besides DR 1. Another SCR, purchaser of collateral, LCR, etc. These battles govern which party is entitled to the first slice of the collateral pie to satisfy their claims against DR. 1. If not enough to satisfy all creditors, those left unsatisfied become UCR Remember, path taken to perfect against certain types collateral can be decisive 1. Investment property First to control beats filing, 9-328(1) 2. Deposit accounts First to control beats filing, 9-327 3. Registered securities First to take delivery beats all others besides control, 9-328(5) 4. Tangible chattel paper First to possess beats all others, 9-330(a) (merely as proceeds); 9-330(b) (directly) By relationship, control of electronic chattel paper could satisfy 9-330(a) or (b) Other special rules: 1. PMSI If SCR files FS w/i 20 days after DR receives delivery, SCR gets priority over competing SIs that arise during time b/w attachment and filing

Lien CR (LCR) v. SCR Priority b/w LCRs & SCRs 1. Rule (9-3179(a)(2)): Must become LCR before SCR either (1) perfects SI or (2) files financing stmt + meets one of conditions in 9-203(b)(3). 2. Remember, if judgment CR takes no steps to become LCR they lose even to UCR (Green) 3. Note, (2) really says that UCR that has done everything but given value before the lien attaches has priority over the LCR 4. Future advances by SCR after LCR levies (9-323(b)) Priority if made w/i 45 days of person who became LCR If made after 45 days, priority only if advance made (1) w/o knowledge of SCR; or (2) pursuant to commitment entered into w/o knowledge of SCR Priority b/w LCRs 1. Usually first come first served Dates to use: (1) date of levy when sheriff took possession; (2) date of delivery of writ to sheriff; (3) date garnishment writ delivered to garnishee; (4) date of recordation of judgment Purchase Money Priority 1. Rule (9-317(e)): if PMCR files FS before or w/i 20 days after DR receives delivery of collateral, takes priority over party who becomes LCR b/w time when PMSI attached and time of filing 2. Policy: facilitate sales of personal items on credit by giving PMCR time to file w/o worrying someone has levied on collateral after it was delivered to DR Who is a LCR? 1. 9-102(a)(52): Anyone who acquires lien on property involved by attachment, levy or the like Ways to become LCR 1. Judgment CRs lien must attach to collateral, which requires CR to levy on property 2. Garnishment, once garnishment order served on 3rd party owing debts to DR 3. Recordation of judgment for monetary damages in real property system (also reaches property after judgment lien perfected) 4. Filing notice of monetary judgment in Art. 9 system (minority states) Writ of Attachment vs. Execution 1. Attachment occurs before judgment; party obtains writ, delivers to sheriff who levies on DRs property 2. Execution is same thing but post-judgment entry 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 SCR v. SCR Rule (9-322): o (a)(1): Among conflicting SIs, First to FILE OR PERFECT; priority date is earlier of (1) filing or (2) perfection o (a)(2): Perfected SI beats conflicting unperfected SI o (a)(3): Among conflicting unperfected SIs, first to attach/effective wins Knowledge is irrelevant Remember 9-502(d) o FS can be filed before SA made/SI attaches Duties & Risks: o Party w/ priority must remain continuously filed/perfected (9-322(a)(1)) o SI may be perfected by method that won't show up in filing system (possession/control) so parties must (1) check filing system and (2) examine collateral Transfer of collateral (9-325)(see cmt 3, ex 1) o SI perfected against transferee = subordinate to SI perfected against transferor

Why? Examining transferee's property can easily determine if there is SI against property, but CR filing against transferor's property would have no way of knowing if/when it would lose priority based on particular transferee (p515) o 9-325 issues only occur where sale is unauthorized b/c if CR authorized sale of its collateral, it is giving up its SI Future advances on SI w/ priority covered against subsequent creditors. (9-323(a)) o General rule: Future advance pursuant to perfected SI perfected as of original date o Narrow exception for discretionary advances made pursuant to automatic/temporary perfection Special Rules o Priority of PMSI in non-inventory goods (usually equipment; special inventory rule is below): 9-324(a): PMSI in non-inventory goods, like equipment, has priority over conflicting SI in same equipment or its proceeds if PMSI perfected at time DR received possession of collateral or w/i 20 days thereafter. True even if another SCR filed an FS earlier covering DRs equipment Remember, PMSI in consumer goods is perfected upon attachment (9-309(1)) After-acquired property clause doesnt reach subsequent PMSIs Reason: PMSI wins b/c it encourages free flow of goods o Conflicting PMSIs (9-324(g)) o Priority of PMSI in Inventory: 9-324(b): PMSI in DRs inventory has priority over conflicting SI same inventory (or identifiable cash proceeds following sales of inventory) if, before DR receives possession of inventory, the SCR (1) perfects, and (2) gives written notice to holders of previously filed conflicting SIs, and (3) holder of conflicting SI receives notice w/i 5 years before DR receives possession of inventory NOTE: Person who places expensive goods (more than $1,000) on consignment (i.e., consignor) is treated like having a PMSI in consignees shop inventory. Thus, SCR of consignee will have priority in consigned goods unless consignor satisfies notice and filing rule set forth above PMSI in inventory o When bank = competing SCR & deposit account = collateral Control is only way to perfect SI in deposit accounts. (9-312(b)(1); 9-314) Party with control has priority over party that doesnt. (9-327(1)) If bank maintains deposit account thats collateral, bank automatically controls/perfected (9-104) Bank always wins under 9-327(3) unless competing SCR perfects by control by becoming banks customer (9-327(4); cmt. 4) Seller v. SCR

Owner of property can only transfer what rights it has (2-403(1)) o Void Title Rule: Thief has no rights so cant convey any rights Effect: bonafide purchaser of collateral from thief has no rights o Exceptions: 2-403(1): Goods transferred under transaction for purchase SCR is GFP even when claiming after-acquired collateral (1-204(2)) 2-403(2): Entrusting possession of goods to merchant who deals in goods of that kind gives merchant power to xfer all rights of entrustee to a buyer in ordinary course of business o Purpose of exceptions: GFP wins collateral here b/c owner in better position than GFP to check whether the merchant was legitimate Sellers tools against inventory lenders o PMSI Formalities: 9-324(b) Prohibited by some inventory lenders

Inventory lenders concerns: o PMSI in piece of property might cover proceeds from that property.

Retention of title Retention by seller of title in goods delivered to buyer is limited to a SI (2-401(1)) Problem: No retention of title, and likely weren't thinking that it was an SI, you likely didn't perfect it so you're a UCR Consignments Can they beat the inventory lender? Probably not 9-102(a)(20) True consignments (these are consignments that don't satisfy 9-102(a)(20) and are not relegated to SI's under Art. 9): o It's going to be a consignment shop that sells other people's consumer goods worth under $1,000 UCC Consignments o Don't beat inventory lender o 9-103(d): SI of consigner in goods is PMSI in inventory o 9-319(a): Consignee is deemed to have same rights and title to goods that consignor had or had power to xfer Right of reclamation from insolvent DR 2-702(2): Must be claimed w/i 10 days of receipt Subordinate to inventory lender anyways. 2-702(3) Express/Implied agreement b/w Seller and Inventory Lender Seller approach inventory secured lender to have lender disburse funds directly to seller Problem: Lenders may be weary of this if it's not customary in the industry b/c may mean DR is not financially stable Problem: Cant feed the lien under agreement By declining any agreement, SCR is secured against seller and can do what SCR in In Re Paolella did (wait for seller to give additional goods to DR on credit, which become collateral under SCR's SA rendering SCR even more secure) Equitable subordination Requirements Inventory lender must have engaged in some type of inequitable conduct o Fraud, illegality, breach of fiduciary duty o Lender purposefully undercapitalized DR o Use DR as "mere instrumentality" (basically taking control of DR and making decisions for it) Injury to CR's/conferred unfair advantage on inventory lender Not inconsistent w/ bankruptcy law Unjust Enrichment Feeding the lien 9-402: SCR not liable for torts/Ks of DR Exception: SCR is liable if initiates/encourages supplier and benefits Buyer v. SCR

Start w/ 9-401: Alienability of DRs rights o Art 9 doesnt interfere w/ DRs ability to in/voluntarily transfer rights in property; SCR cant contractually prohibit DR from creating otherwise valid SI o Even if it would be a breach under K, Art. 9 doesnt prohibit transfer General Rule: Buyer of encumbered property takes it subject to any SIs o 9-201: SA effective against subsequent purchasers o 9-315(a): Even w/o explicit K provision, SI continues in collateral notwithstanding [unauthorized] sale Exceptions to the general rule: o (1) 9-315(a)(1): SCR authorizes disposition of collateral (Authorized Sale)

May be express or implied based on type of sale or from sellers conduct (2) 9-320: Buyer-In-The-Ordinary-Course (BITOC) Take free of SI created by buyers seller even if SI perfected and buyer knows (9-320(a)) Ordinary course of the Sellers business Example: o Buyer buys widgets from widget-seller = ordinary course o Widget-seller buys spare widgets from a restaurant = not in ordinary course b/c selling widgets is not what restaurant is in the business of doing Doesnt take free if knows sale violates anothers rights in goods Ok to know SI exists; not ok to know sale violates rights Look for aware of buyer that sale violates terms of contract b/w seller & SCR Buyer not in ordinary course BNOIC = UCR if SCR repos If buyer not in ordinary course then sells collateral in ordinary course, 2nd purchaser only takes free of any SI created by buyer, SI by original seller still continues o 2nd purchaser is now DR under 9-102(a)(28) and original seller can file FS against him Take subject to any perfected SIs; expected to check filing system; take free of unperfected SI Daniel v. Bank of Hayward I: When does purchaser b/c BITOC under 9-320(a)? H: When goods become identified in purchase K Exception to BITOC exception: Goods in SCR possession 9-320(e) states provisions (a)/(b) dont protect BITOC where collateral is in SCRs possession o (3) 9-320(b): Consumer-to-Consumer Sales (Garage sale exception) Buyer of goods from person who used goods for consumer purpose takes free of SI, even if perfected, if buyer buys: (1) Without knowledge of SI; o Prevents fraud (DR sells collateral to friend at garage sale to ditch SI) (2) For value; (3) Primarily for buyer's consumer purpose; (4) Before filing of financing statement covering goods Note, must be consumer goods in hands of both buyer & seller w/o a filed FS Remember, notation of cert of title is equivalent of filing FS. (9-311(b)) Effect on PMSI in consumer goods While normally auto-perfected, for SCR to maintain perfection thru garage sale SCR must file FS as well 9-317(b) Buyer v. UCR o Buyer (any buyer, not just BITOC/consumer, cant be SCR) takes free of SI if: (1) gives value and (2) receives delivery of collateral (3) w/o knowledge of SI and (4) before it's perfected But note, 9-317(e), PMSI SCR that files w/i 20 day period beats buyer o Sections (b), (c), (d) protect buyers, lessees and licensees from unperfected SIs they dont know about by allowing them to take free of SI o SCR v. Statutory Lien Creditor (SLCR)

SLCR usually has priority over SCR so long as it has complied w/ state law on creating lien Does a statutory lien exist? o Check the statute

What does the statutory lien attach to? o Check the statute How is a statutory lien perfected? o Check the statute Agricultural liens require filing of UCC FS What is the lien's priority? o Check the statute Default rule for non-possessory lien: first in time Default for possessory lien: ranks first, 9-333(b) Possessory Lien Statutes o 9-333 (Gives effect to statutory liens for purposes of priority) o Possessory lien = interest, other than SI or agricultural lien: (1) which secures payment for services/materials furnished w/ respect to goods by a person in the ordinary course of the person's business; (2) which is created by statute or rule of law in favor of the person; (3) whose effectiveness depends on possession of the goods o Example Mechanics lien o Possessory lien on goods has priority over SI unless created by statute that expressly provides otherwise Consumers Treated Differently Consumer Goods (9-102(23)): Goods used/bought primarily for personal, family, household purpose o Consumer Goods Transaction: 9-102(24) o Consumer Transaction: 9-102(a)(26) Transaction where (1) individual incurs obligation primarily for personal, family, household purpose, (2) SI secures obligation, and (3) collateral held for personal, family, household purpose Descriptions by type insufficient(9-108(e)(2)) o In consumer transaction to cover consumer goods, securities account, etc. Attachment & Enforceability of SA o SI in after-acquired property (AAP) doesnt attach to consumer goodsunless goods purchased w/i 10 days of SCR giving value (9-204(b)(1)) o Description of collateral Cant use by type descriptions of collateral in consumer transactions E.g., all accounts, equipment, goods Fixtures

Fixture undefined in UCC o Indiana: Personal property = fixture if attached to real estate w/ intent it become a permanent part of real estate (e.g., central air conditioning, built in appliances, furnaces, elevators, etc.). The distinctive aspect of a fixture is that interests in it may arise under both UCC and real estate law. o Thus, competitions can arise b/w SCR and bank that has mortgage on the land. Perfection of Fixtures o Generally perfected by a fixture filing in real estate system (where mortgage would be filed) o FS must (1) state it is to be indexed in real estate records, (2) reasonably identify the real estate, and (3) show name of owner Priority in Fixtures o Perfected SI in fixture has priority over any real estate interest that arises after SI was perfected o Properly filed real estate interest has priority over subsequently perfected SI o PMSI Exception: PMSI in fixture takes priority over earlier in time real estate interest if perfected by real estate filing before or w/i 20 days after goods become fixtures Construction mortgage takes priority even over subsequently perfected by real estate filing PMSI

Fixture filing unnecessary when: Collateral = readily removable factory or office machines or readily removable replacements of domestic appliances that are consumer goods Any method of perfection (i.e., filing w/ SoS) before goods become fixtures entitles SCR to priority SCR doesnt have to perfect to get priority if: (1) real estate claimant consented in writing to SI or has disclaimed interest in goods as fixtures, or (2) DR has a right to remove goods as against real estate claimant

Accessions

Definition: Goods installed or affixed to other goods of DR o E.g., new tires on a car Generally, Art. 9 rules apply, including special rules like PMSI, to accessions o D owns office computer subject to a perfected SI in favor of SP-1. D acquires memory and grants perfected PMSI in memory to SP-2. D installs the memory in computer and SP-1s SI attaches to memory. So long as SP-2 perfects w/i 20 days after D takes possession of memory, then SP-2 takes priority in the memory over SP-1 Certificate of title goods o If goods covered by a certificate of title statute (e.g., a car), then perfected SI in entire item takes priority over competing SI in the accession (e.g., tires), regardless of when SI in accession was perfected, and even if SI in accession is PMSI. o Allows SCR to rely on title and not worry that parts of item are encumbered by another CR Right to remove accession. o If SCR has priority in accession, it has a right to remove accession after default. SCR who removes must reimburse other SCR (who SI in entire item) for any damage done to item caused by removal, but not for diminution in value of item caused by the absence of the accession