Consumer Goods

Equipment

Inventory

Farm Products

Fixtures

KEY: primary use in the hands of DEBTOR

Patents/Trademarks/Copyrights

Stocks/Bonds/Mutual Funds

Proceeds from sale of collateral

Accounts

Right to payment for good/services

Promissory Notes/Drafts

3 Requirements to ATTACHMENT

VCR!

1. value must be given by creditor

2. contract (security agreement) must evidence the secured transaction unless the secured party has taken possession of the collateral

-must be authenticated by debtor (signed/electronically marked)

-reasonably identifying collateral

3. rights in the collateral - DEBTOR must have

Are "after-acquired collateral clauses" enforceable?

Like: "all of staples inventory, whether now held or hereafter acquired"

YES

(floating lien)

Publicity Device

-puts the world on record or constructive notice of the secured party's existence

(protects secured party from competing creditors)

1. secured party takes possession of the collateral

2. automatic perfection for Purchase Money Security Interests (PMSIs) in consumer goods

3. secured party files notice of the security interest in the public records

-usually files a financing statement

What is a PMSI?

(purchase money security interest)

A security interest that enables the debtor to purchase the goods

aka an extension of value by a lender who takes as collateral a security interest in the very item that its loan enables the debtor to acquire

AUTOMATIC PERFECTION!!!!

What are the requisite contents of a financing statement?

(filing financing statement is the third way to attain perfection)

1. debtor's name and address

2. creditor's name and address

3. description of collateral

WHERE IS A FILING STATEMENT FILED?

(THIS IS RIPE FOR TESTING SO PAY ATTN!)

Centraly, with the state Secretary of State in the state where the DEBTOR is located

debtor is individual --> state of principal place of residence

debtor is registered organization --> state under whose laws it is organized

Priority is the purpose of collateralization, and the secured party seeks to subordinate, not to share

each claimant is entitled to satisfaction in FULL before subordinated claimant is entitled to take

AUPie

(attached unperfected creditor)

LC

(Lien Creditor)

PAC

Preferred Attached Creditor

NOCie

(Non-Ordinary Course Buyer)

Someone who purchases the collateral outside the ordinary stream of commerce

(like buying a guitar from an AUTO mechanic --> weird)

BIOC

Buyer in Ordinary Course

Someone who purchases collateral from a merchant's inventory

(guitar from the guitar shop)

GUC

General Unsecured Creditor

BIOC

^

PAC

^

LC

^

NOCie

^

AUPie

^

GUC

If there are two PACs who wins?

PAC v. PAC

PAC who filed first

First in time, first in right

YES!

If an early filer subsequently attaches, she is allowed the benefit of her early filing (priority relates back to early filing date)

AACF

After-Acquired Collateral Financier

A secured creditor who takes as collateral a security interest "in all of Debtor's [business equitment, inventory, etc.] whether now held or hereafter acquired"

Comes with any after-acquired collateral clause (obviously)

i.e. Macy's first grants bank an interest in all equipment hereafter acquired and THEN buys cash registeres from office depot giving them a PMSI

PMSI HOLDER MUST FILE PROPERLY WITHIN 20 DAYS after macy's takes possession of cash registers

AACF collides with PMSI holder and the collateral is INVENTORY:

i.e. macy's borrows from bank and gives interest in inventory hereafter acquired, and then acquires armani's spring line on credit

PMSI holder must:

1. file properly BEFORE debtor Macy's takes possession

2. must NOTIFY bank before debtor Macy's takes possession

reason for additional safeguards: to prevent debtor fraud

Buyer In Ordinary Course!!!

takes free of a perfected security interest in seller's inventory

REASON: to promote commerce and honor buyer's expectations

Yes, so long as creditor does not breach the peace

Breach of peace --> secured party's actions are likely to cause violence

NOTE: a repossession made over any protest by the debtor constitutes a breach of the peace

(if repossessor misuses color of law [pretends to be POPO, this is constructive force])

*criminal and civil pentalties attach to creditor's misconduct

When collateral is in debtor's HOME:

SP may not enter without

When collateral is outside of home

(place of business, offsite)

SP can take collateral so long as there is no:

Repossession by judicial action

WRIT OF REPLEVIN

WRIT OF REPLEVIN

WRIT OF REPLEVIN

If secured party chooses not to resort to self-help repossession, he or she may get a judicial writ, ordering the sheriff to obtain possession of the collateral and deliver it to the secured party

NY: called WRIT OF REPLEVIN

When the secured party retains the collateral in full satisfaction of the debt.

Creditor lawfully retains collateral and debt in turn is canceled

when collateral is consumer goods --> debtor and secondary obligors (guarantors)

NOT consumer goods --> debtor and other secured parties who have told the foreclosing creditor of their security interest in the collateral, as well as perfected creditors + secondary obligors

If any notified party objects within 20 days after notice, STRICT FC NOT ALLOWED!

(must be disposed of by sale!)

If collateral is consumer goods and debtor has paid 60% of the loan for non-PMSI or 60% of cash price for PMSI --> STRICT FORECLOSURE NOT ALLOWED

Instead, secured party must sell collateral within 90 days or be liable in conversion

Secured party sells collateral and applies sale proceeds to the debt

Secured party chooses whether the sale will be public or private

Every aspect of sale must be COMMERCIALLY REASONABLE

Prior to sale, reasonable notice must be sent

Article 9 forms are presumptively reasonable

consumer goods --> debtor/secondary obligors

all other types --> debtor, other secured parties who have adivsed the foreclosing creditor of their security interest, perfected creditors, secondary obligors

1. how to calculate any deficiency

2. how debtor can redeem

Standard: commercial reasonableness

-in a nonconsumer transaction, notice is deemed sent within a reasonable time if it is sent 10 days or more before time of sale

Public --> YES

Private sale --> NO

(too much potential for self-dealing)

bring an action for a deficiency judgment

NOTE: if SP sells collateral at low price to an insider buyer, the price that an independent third party would have paid, rather than the actual amount paid, is the price that will be used in calculating deficiency