Secured Transactions

Article 9 applies to consensual security interests in personalty and fixtures.

• Value
• Contract
• Rights in the collateral

By putting the world on record notice of the security interest.

The first to perfect takes.

The Article 9 lender has statutory and judicial remedies.

Goods

The entity who owes the money

The entity who lends the money

The contract, record

The right the creditor has in debtor's personalty or fixtures

The personalty or fixtures that creditors can look to for satisfaction

Those items used for personal or familial purposes

Items used in business

Goods held for sale or lease

Crops, livestock, and supplies used in farming operations.

Items annuxed ro realty

• Patents
• Trademarks
• Copyrights
• Stocks
• Bonds
• Mutual funds
• Proceeds from the sale of collateral
• Amounts receivable
• Promissory notes and drafts

The attachment of the right (value, contract, rights in the collateral).

The security agreement or record must evidence the secured transaction unless the secured party has taken possession of the collateral. 

The record must be 1) authenticated by debtor (signed or electronically marked) and 2) must reasonably identify the collateral.

No need for contract if creditor is in possession.

The secured party has taken possession of the collateral.

Places the world on record or constructive notice of the secured party's existence.

• Take possession
• Automatic perfection for PMSIs in consumer goods (PMSI = purchase money securty interest, enables the debtor to purchase the goods)
• The secured party files notice of the security interest in the public records

Purchase money security interest.

Enables the debtor to purchase the goods.

There is automatic perfection for PMSIs in consumer goods.

The security party files notice of the security interest in the public records.

Generally files financing statment - only purpose is to provide interest parties with sufficient information to make follow-up inquiries.

• Contents--simple and sparse
• 1) Debtor's name and address
• 2) Creditor's name and address and
• 3) Descipriton of the collateral

• Where filed?
• -Secretary of State in the state where debtor is located
• --State of debtor's principal residence
• --State of debtor's registered organization
• --EXCEPTION: If the collateral is timber, minerals, or fixtures file locally in the county where the realty is located

• Debtor's name and address
• Creditor's name and address
• Description of the collateral

• Secretary of State in the state where debtor is located
• --State of debtor's principal residence
• --State of debtor's registered organization

EXCEPTION: If the collateral is timber, minerals, or fixtures, then file locally in the county where the realty is located.

Each claimant is entitled to satisfaction in full before a subordinated claimant is entitled to take

Someone who purchases the collateral from a merchant's inventory

The Article 9 creditor who succeeds in attaining perfection.

1)  The perfected attached creditor who filed first.

Article 9 allows you to file early, even at the onset of loan negotiations.  Then if the early filer subsequently attaches she is allowed the benefit of the early filing.

2)  Some Purhcase Money Security Interests (PMSIs)

3) The Buyer in the Ordinary Course

General unsecured creditor who goes to court to get a judicial lien on the collateral

Someone who purchases the collateral outside the ordinary stream of commerce

This is the Article 9 creditor who creates an enforceable security interest.

• Debtor
• Subsequent Attached Unperfected Creditor
• General unsecured creditor

• Perfected Attached Creditor
• Lien Creditor
• Any buyer without knowledge of the security interest

This is the lender who never bothered to take collateral

A secured creditor who takes as collateral a security interest "in all of Debtor's         whether now held or hereafter acquired."

A floating lien.

A security inerest that enables the debtor to purchase the goods.

• Equipment
• -PMSI wins if it files properly within 20 days after debtor takes possession of hte cash registers

• Inventory
• -PMSI wins if 1) it files properly BEFORE debtor takes possession AND 2) notifies AACF BEFORE debtor takes possession

• Debtor has breached
• Self help repossession is permissible - so long as creditor does not breach the peace

Yes, so long as the creditor does not breach the peace.

• A breach of the peace occurs when the secured party's actions are likely to cause violence. 
• --A reposession made over ANY protest by the debtor constitutes a breach of the peacee
• --Where the repossessor misuses the color of law there is a breach of the peace.

Voluntary and contemporaneous consent.

Whenever the debtor objects.

Occurs when the secured party retains the collateral in full satisfaction of the debt.

Send a written proposal.

• Writing is sent to
• -Consumer goods = debtor and secondary obligor (a guarantor of the debt)
• -Non-consumer goods = debtor and other secured parties who have told the foreclosing creditor of their security interest in the collateral, perfected creditors and secondary obligors

• Debtor
• Secondary obligaor (a guarantor of the debt)

• Debtor
• Other secured parties who have told the foreclosing creditor of their security interest in the collateral
• Perfected creditors
• Secondary obligors

Strict foreclosure is not allowed.

If the collateral is consumer goods and the debtor has paid 60% of the loan, in the event of a non-PMSI, or 60% of the cash price in the event of a PMSI, strict foreclosure is not allowed.  Instead, the secured party must sell the collateral within 90 days or be liable in conversion.

The secured party may sell the collateral and apply the sale proceeds to the debt.

• Every aspect of hte sale must be commercially reasonable
• Prior to the sale, reasonable notice must be sent

• Article 9 provides standard notice forms which are presumptively commercially reasonable
• If consumer goods, notice must be sent to debtor and secondary obligors
• With all types of collateral notice must be sent to the debtor and those secured parties who have advised the foreclosing creditor of their security interest, as well as perfected creditors and seconary obligors
• Public sale -- the time and place of sale
• Private sale -- time after which the sale will be made
• Consumer goods -- need to include how to calculate deficiency and the debtor can redeem
• Amount of notice? Commercial reasonableness; for consumer goods needs to be at least 10 days or more before the time of sale
• Can secured party buy? (Public sale - yes; private sale - no)

The collateral nets less than the oustanding debt.

If a secured party sells collateral at a 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 the deficiency.

• Cut off once the secured party has resolved or completed a strict foreclosure
• The debtor must pay the amount owed plus any interest and creditor's reasonable expenses.  (If there is an acceleration clause, then the debtor must pay off the entire debt and interest and expenses.)