Term
|
Definition
| Legal or K'l mechanism that enhances likelihood obligor will have reliable source of recovery of value. Creditor has identified items of prop. seized and sold to apply to debt or to seek pyment from 3rd |
|
|
Term
| 4 Types of Security Device |
|
Definition
Consensual/K'l in movable prop
Consensual/K'l & non consensual in immovable (mortgages)
Nonconsensual as a matter of law in movable/immovable (privileges/liens)
Agmts by 3rds to pay debtor's obl. (suretyship/guarantor) |
|
|
Term
| Categories of Art. 9 Collateral |
|
Definition
1. Corporeal Movables
2. Documentary Collateral (In-Between)
3. Incorporeal Movables |
|
|
Term
| Corporeal Movables (Goods) |
|
Definition
A. Consumer Goods
B. Farm Products
C. Inventory
D. Equipment |
|
|
Term
| Documentary Collateral (In Between) |
|
Definition
A. Instruments
B. Chattel Paper
C. Documents
D. Investment Property |
|
|
Term
|
Definition
A. Accounts
B. Deposit Accounts
C. General Intangibles
D. Tort Claims and J/ments |
|
|
Term
| Corporeal Movables (Goods) |
|
Definition
| Are valuable on their own |
|
|
Term
|
Definition
| any good that is used or bought for use primarily for personal, family, or household purposes |
|
|
Term
|
Definition
| Unprocessed agricultural goods. Includes crops (excluding standing timber), livestock, supplies used in farming - manure, fertilizer, herbicides, etc |
|
|
Term
|
Definition
Goods held for sale or lease (incl. manufactured agricultural products)
Raw materials and other non-farm supplies used up in course of biz: cleaning supplies, lubricant |
|
|
Term
|
Definition
| has corporeal form, but value of thing is in the rights that the thing allows holder to exercise |
|
|
Term
|
Definition
| Negotiable instruments - checks and promissory notes. |
|
|
Term
|
Definition
Any record (incl. electronic) that evidences a combination of 2 impt. rights:
1) pymt obl.
2) SI or lease in some good
examples: retail installment sales agmt (RISA) and lease of movable |
|
|
Term
|
Definition
| acknowledge that someone else has merchandise that belongs to holder of doc. (warehouse receipt) |
|
|
Term
|
Definition
Securities and Commondity Ks
-stocks and bonds
-brokerage accts |
|
|
Term
|
Definition
| have no physical form; pure rights with no physical embodiment other than maybe an informal paper record |
|
|
Term
|
Definition
promise to pay later for goods sold, leased, licensed or otherwise disposed of, or services rendered and promise isn't memorialized in a promissory note
-credit card balances
-ins. premiums due
also called accounts receivable/ accts payable |
|
|
Term
|
Definition
checking, savings and similar accts maintained w/ banking entitites. Promisor always a depositoary financial inst.
Outside La - SI only in comm'l dep. acct
La. - both consumer and biz accts can be used as SI |
|
|
Term
|
Definition
All other property not categorized under other law as immovable and not specifically categorized in Art. 9 :
-rights in intellectual prop
-goodwill
-choses in action – right to sue on conventional c/a
-right to operate under franchise agmt |
|
|
Term
|
Definition
Tort claim – potential recovery by tort victim – both consumers and biz
J/ment – judicially conf’d or establ. right to collect on any obl – conventional or delict
Actually gen’l intangible, but must be described more specifically than gen’l category name to be valid in La. |
|
|
Term
|
Definition
a. value – can be given to 3rd
b. rights in collateral – not retroactive
c. security agreement
-possessory
-non-possessory |
|
|
Term
| Possessory Security Interest (Pledge and Control) |
|
Definition
Creditor takes and keeps poss’n of collateral
Pledge – physical control (pawn shop) of
collateral pursuant to agmt (can be oral)
Control- collateral can’t be possessed:
Investment prop, life ins. policy, deposit acct. (oral agmt suffices to attach) |
|
|
Term
| Non-possessory SI (Authenticated) |
|
Definition
| For most SI, 3rd req’t is that “debtor has authenticated a SA that provides a description of the collateral” |
|
|
Term
| Description of collateral |
|
Definition
Gen’lly need not be specific and detailed;
-must “reasonably identify” collateral
-broad categories (inventory, equip, accts), but specify use of art. 9 definitions
-In consumer transactions –consumer goods and sub-categories insufficient
-tort claims, ins. policies, j/ments must also be described w/ specificity
-can’t say “all assets” or “all property” |
|
|
Term
| After-acquired collateral clauses |
|
Definition
Most comm’l SA grant these
-Consumer transactions – after acq. clauses only apply to consumer goods acq. w/in 10 days after secured value has been given
-Tort claims, ins., other collateral that must be specifically described not subject to after-acq. collateral clause |
|
|
Term
|
Definition
| Broad aft. acq. clause– “all of debtor’s present and aft. acq. (description) to secure any and all indebtedness owning from debtor to creditor now or at any point in future” |
|
|
Term
| Financing Statement - Perfection |
|
Definition
Prioritizes rights in collateral
Consensual secured creditors make SI effective against 3rds through perfection
-Can only occur when 3 steps for attachment and req’ts for perfection are met |
|
|
Term
|
Definition
-debtors signature no longer req’d so creditor can act unilaterally
-filing must simply be “authorized” in an “authenticated record” by debtor (usu signed writing, but can be electronic
-debtor’s authentication of SA acts as authenticated authorization to file FS covering collateral described in SA
-FS must provide at least names of debtor/secured party and descrip. of collateral |
|
|
Term
| Indexing and Searching on Debtor’s Name |
|
Definition
Name is most impt. info on FS- used for indexing and searching
Purpose – to put 3rds on notice
If name incorrect or inaccurate - ineffective |
|
|
Term
|
Definition
“exact full legal name”
-indiv – “indiv. name” – might allow for nickname, but should be same as BC or SS
-biz – name on organiz. docs: official name listed in public record of entity. Trade names insufficient |
|
|
Term
|
Definition
Minor errors or omissions, still effective so long as not “seriously misleading”
Subjective – based on ea. state’s searching system |
|
|
Term
| Description of collateral |
|
Definition
| Virtually, no restrictions. Usu. tracks descript in SA - Debtor may authorize a broader descript, doesn’t create more rights, but enhances creditor’s position |
|
|
Term
| Super-generic descriptions |
|
Definition
| OK in FS, but must be separately authorized in separate authenticated record |
|
|
Term
|
Definition
| Req’d for clerk to accept, but doesn’t affect effectiveness of FS: address, biz form, organizing jd, and ID # |
|
|
Term
| Component Parts and Fixture Filings |
|
Definition
-Conflict may arise if movable closely related to immovable. (O & G, standing timber, unharvested crops
-La. – called “component part” (CC 466), UCC calls fixtures (ordinary bldg materials affixed to immovable specifically excluded from UCC 9-344)
-Creditor should follow special rules re: “fixtures” |
|
|
Term
|
Definition
-component parts if owned free and clear by landowner
-if landowner granted SI to creditor or if owned by someone other than landowner, then not component, but “movables by anticipation” (CC 474)
-not considered under “land-related collateral” – see privileges |
|
|
Term
|
Definition
Trees not destined for harvest. Constitutes “goods” only if it is to be cut and removed by someone other than landowner and subject to a record timber conveyance recorded in proper parish of conveyance
Debtor is 3rd party to whom trees have been conveyed in advance. If landowner uses his own timber as collateral – mtg. law governs. Once cut, they become movable lumber subject to art. 9 rules |
|
|
Term
|
Definition
| O & G and minerals in ground; treated as immovable, but will become movable and attach when extracted. Special category in art. 9. Interest can be granted by owner or 3rd w/ mineral right. In La. “as extracted” includes “accts” arising out of sale at wellhead and royalties pd. May also qualify as inventory after extraction. SI contracted after extraction not subject to special rules, but for SI contracted in advance of being reduced to pss’n, special land related rules apply in as extracted. |
|
|
Term
| Specific La. law governing perfection of SI in standing timber, O & G, and fixtures |
|
Definition
| Creditor can perfect SI only by making fixture filing. Differs from normal UCC-1 filing – must describe not only collateral, but also related immovable; check box that says it’s a fixture filing, name of record owner (if other than debtor) must be indicated. Filed in same place as other normal UCC filings – any parish clerk of ct’s ofc, regardless of location. Outside La. file in land records of county where land located |
|
|
Term
| Specific La. law w/ respect to “component parts” |
|
Definition
| In La., CI in fixtures perfected only by fixture filling in La. 9:334(a), must be accomplished before movable is affixed; if u don’t, SI in fixture not perfected and doesn’t continue in fixture – unenforceable. Consumer goods that become fixtures are stripped of any SI. Outside La., can perfect fixture by normal non-fixture filing (of lmt’d value, e.g. TIB). |
|
|
Term
| Alternative Perfection Methods |
|
Definition
Filing in Clerk of Ct of any parish = default
a. Filing outside UCC system (incl. Certif. of Title Collateral)
b. Possession
c. Control
d. Automatic Perfection – PMSI |
|
|
Term
| Filing outside UCC System |
|
Definition
Fed law trumps UCC
-SI in intell prop – copyright ofc DC
-aircraft – FAA OK Ctiy
State Law –
-agric. products
-certif. of title – cars, trucks, boats |
|
|
Term
| Certificate of Title Filing |
|
Definition
Other states –
-submit origin. title to DMV, apply to have SI noted on title
La
-Gen’lly sec’d creditor has lien noted on face of title and
retain poss’n of certif. til debt is pd.
– can, but not necessary to note on title
-perfect by filing UCC-1 FS w/ DMV
-FS must incl. more specific info re: vehicle than gen’lly
req. (yr, make, model, body type, VIN)
Exception – cars, etc. held as inventory – use simples UCC inventory filing |
|
|
Term
|
Definition
If collateral has physical form or embodiment (stocks, negot. instr), can perfect by poss’n
Money or collateral mtg note – poss’n is only means to perfect
For other types of collateral, poss’n is alternative, oft better for doc-type collateral for priority reasons |
|
|
Term
|
Definition
Functional equiv. of poss’n for certain incorporeal “rights-type” collateral
Alternative or exclusive method of perfection (attachment) for only a few identified types of collateral
-deposit acct –only method of perfecting
-life ins. – only method of perfecting
-invest. prop – superior method |
|
|
Term
| Control over deposit accts |
|
Definition
3 ways:
-bank where acct is maintained – automatic
-other bank not depositary, “control agmt” tween bank, debtor
and secured:
-memorialized in “authenticated record” stating the bank
will follow creditor’s instructions re: disposition of $ in
acct w/out further consent of debtor
-add creditor as “security jt. acct. holder” w/ debtor on acct. – makes creditor banks customer, too; then he can direct bank to do as he wishes and bank obliged to listen |
|
|
Term
| Control over Life Ins. Policies |
|
Definition
Most states, life ins. policy as collateral not governed by art. 9
La. – special provisions -SA must describe policy specifically (policy #), and must establish control by:
-if ins. co. creditor – automatic
-if not, creditor has ins. co “authenticate a record
acknowledging notice of granting of SI to secured in
policy”.
May be other req’ts if bene. not the insured or his estate |
|
|
Term
| Control over Investment Prop |
|
Definition
| Stocks, bond, commodity Ks perfected by filing, but poss’n superior. Read précis re: certificated, uncertificated and indirect holdings. |
|
|
Term
| Control of Certificated Securities |
|
Definition
Take delivery – simple passage of poss’n
-if certif. is in registered form (listing specific named holder and req’ing endorsement to transfer rights) by getting certif.. properly endorsed or re-registered on co’s books in name of deliveree.
-perfection by control req’s secured creditor to take poss’n and have debtor endorse certif. (either specially or in blank)
-simply taking poss’n isn’t sufficient for securities that aren’t in “bearer” form |
|
|
Term
| Control of Uncertified Securities |
|
Definition
Req’s cooperation of issuing co. Secured can establ. control in one of two ways:
1-can take delivery of an uncertif. security by having issuing co. register creditor as the owner
2 –secured creditor can obtain a “control agmt” from issuer where he agrees that “it will comply w/ instructions originated by the secured w/out further consent by the regist. owner. Can be oral |
|
|
Term
| Indirect Holdings: Securities Entitlements and Securities Accts. |
|
Definition
| Rights to securities entitlement maintained through broker in indirect holdings similar to rights to funds maintained by bank in deposit acct.: if creditor is bank/broker, automatic; if not, get control agmt (need not be authenticated record, though good practice; become “entitlement holder” – added as jt acct. holder on securities acct or registered on broker’s books as owner of entitlements in acct. |
|
|
Term
| Automatic Perfection - PMSIs in Consumer Goods |
|
Definition
Purchase Money Security Interests - consumer goods are auto. perfected upon attachment
A loan used for multiple purposes is a PMSI only to the amt. actually used to acquire the collateral; any extra is not PMSI.
PMSIs in non-consumer goods must be perfected independently in every case
This rule doesn't apply to collateral subject to non-UCC perfection rules (cars) - things that need special methods of perfection |
|
|
Term
|
Definition
| Includes not only anything the debtor acquires upon the "sale, lease, license, or other dispositiono of the original collateral, BUT also anything collected on and/or distributed on acct. of collateral as well as any rights arising out of collateral |
|
|
Term
| clause in SA to include proceeds |
|
Definition
| "products, rents, profits, and offspring" of the collateral |
|
|
Term
| Automatic Attachment of Proceeds |
|
Definition
SI in collateral automatically attaches upon any idenitifable proceeds of that collateral.
Has to be identifiable - if commingled, (proceed $ w/ non-proceed $) law may presume a tracing mechanism
Good idea to req debtor to secregate collateral proceeds - traceable |
|
|
Term
|
Definition
security interests follows the collateral into the hands of the recipient (unless creditor authorizes the disposition free and clear of SI)
gen'l rule - following the dsiposition, creditor has SI in both original collateral in recipient's hands and proceeds in debtor's - coubles instantly.
If debtor defaults, crediotr might be able to take collateral from unsuspecting recipient, due diligence on lawyer to make sure there is no SI on collateral. |
|
|
Term
| Automatic Attachment of Proceeds |
|
Definition
SI in collateral automatically attaches upon any idenitifable proceeds of that collateral.
Has to be identifiable - if commingled, (proceed $ w/ non-proceed $) law may presume a tracing mechanism
Good idea to req debtor to secregate collateral proceeds - traceable |
|
|
Term
| 4 part test to see if SI will remain perfected |
|
Definition
If orig collateral perfected, auto perfected for 20-day grace period & will remain so if meet one of 4 conditions:
1.collateral description in orig UCC-1 covers proceeds (by type or specific description)
2. if orig FS doesn't describe proceeds, secured can file an amend.to describe proceeds w/in 20 day grace period (or perfect in some other way)
3. If proceeds are indentifiable "cash proceeds" SI in proceeds is auto and continuously perfected
4. If 3 part test is met, the SI in proceeds will auto and continuously follow:
a) orgin. collateral must be covered by filed FS
b) proceeds collateral in which SI can be perfected by filing in same ofc where orig. was filed
c) proceeds not acq w/ cash proceeds
d) doesn't apply when customer promises to pay later - "acct" if promissory note - SI auto perfected as proceeds of inventory; filed FS covers orig. inventory, accts are collateral in which SI can be perfected by filing in same ofc. and acct wasn't acq w/ cash proceeds. Thus, creditor's SI auto attaches to & is perfected in the acct. Doesn't matter under this test that the orig. doesn't mention accts |
|
|
Term
| Changes Affecting Perfection over Time |
|
Definition
a. Changes in Use of Collateral
b. Debtor Name Changes (Incl. post Merger)
c. Location of Debtor or Collateral Changes
d. Automatic Lapse of Filing Perfection, Continuation |
|
|
Term
| Change in Use of Collateral |
|
Definition
Change that renders description renders descript in FS inaccurate/misleading (take it out of inventory and begin using in biz as equip).
Change in use has no effect on effectiveness of filed FS, but must be filed in proper place
Problem - car inventory used in biz - not only change in descrip. but wrong filing ofc. Would have to re-perfect in proper ofc- no grace period in art. 9 |
|
|
Term
| Debtor Name Changes (Including Post-Merger) |
|
Definition
Might make FS "seriously misleading". Have no effect on filing of collateral acq before or w/in 4 mos after name change.
Same rule applies to collateral that remains subject to SI after transfer to 3rd (new owner is debtor)
Unless creditor amends the FS to reflect debtor's new name, the now-misleading UCC-1 will be ineffective to perfect the creditor's SI in any collateral acq. after this 4mos grace period
Merging biz - check Trahan's notes on this |
|
|
Term
|
Definition
Person and potentially all their prop bound by original SA. New debtor is potentially 2 types: a) bound by origin. debtor's SA to extent described in SA. b) accedes gen'lly to all orign. debtor's asseets and obl. as matter of K or law.
When new debtor becomes bound by orig. debtor's SA, FS naming orig. will become seriously misleading - effect is same as if orig. simply changed names (SI effective for 4 mos on new debtor's collateral, but ineffective in collateral acq beyond this pt. unless amended to name new debtor |
|
|
Term
| Changes in Location of Debtor |
|
Definition
| If debtor moves across state lines, creditor must file new FS in new jd w/in 4 mos. If he refiles, perfection continues back to date of orign. filing. If he fails, FS becomes ineffective in any of debtor's prop. FS deemed never filed, lose perfection retroactively. But those who obtain rights in D's prop w/out giving value (judicial lienholder TIB) lose perfection only from expiration of 4 mo period. |
|
|
