Secured Transactions - Final Version

These transactions are governed by UCC Article 9 because they involve security interests in personal property (and fixtures).

Requires 1) creditor give value, 2) debtor has rights in the collateral; 3) and debtor either signs a written security agreement describing collateral, or gives possession of collateral to creditor under an oral security agreement (pledge).

Must be 1) written; 2) signed by the debtor; 3) grant or create security interest; and 4) correctly identify the collateral in which interest is granted.

Is valid; and security interest attaches when the debtor acquires rights in the collateral. Except for consumer goods taken as additional collateral more than 10-days after attachment.

Determined by the debtor’s primary intended use at time of attachment, and classification consists of farm products: crop, livestock, supplies; inventory: good held for sale and raw materials; consumer goods: personal, family, or household purpose; and equipment: durable goods used in business.

Secures claim for credit or a loan that enables debtor to acquire the collateral.

Lender PMSI requires that loan be made for purpose of acquiring the collateral, and loan proceeds are actually used to acquire it.

Perfection requires attachment plus notice. Perfected security interest is generally enforceable against any subsequent claimant, including secured parties, buyers, and lien creditors.

Occurs for purchase money security interests in common goods.

Secured party is perfected only as long as she physically possesses collateral pursuant to a written or oral security agreement.

Party who repossesses with debtor's consent perfects at time of repossession.

Requires endorsement on certification of title

Gives notice. Financing statement must be i) a writing signed by debtor, ii) give names and addresses of secured party and debtor, iii) indicate the collateral; and 4) filed with Dept. of Licensing in Olympia.

If collateral is fixtures, filing must contain legal description of real property and filed in county auditor’s office.

Generally, once a secured party perfects, later events such as sale, transfer, or change of use of collateral will not affect perfection.

New corporation that assumes debtor's business obligations is bound by the security agreement as a new debtor.

Perfected security interest automatically extends to all collateral transferred to the corporation and all collateral acquired up to 4 months after becoming a new debtor.

Financial statement will lapse after 5-months unless continuation statement is filed within 6-months of lapse.

After lapse, secured party is legally as if it had never perfected.

Generally, priority is given to secured party who is first to perfect, or if perfection has not occurred, the first to attach. A properly perfected PMSI has superpriority over competing security interests.

If perfected before or within 20-days after debtor receives possession of collateral.

If perfected and notice is given to other secured parties with prior perfected security interests in the same collateral, before debtor takes possession of the collateral.

Owner of goods who gives possession to another with authority to sell of behalf of consignor.

Treat as PMSI in inventory for the consigned goods. (Artist letting gallery sell art)

Takes collateral subject to any perfected security interest unless the secured party consents to sale free of the interest.

Buys collateral in good faith from a merchant dealer without knowledge that sale violates rights of a secured party (generally inventory). BIOC takes free of security interest created by seller, even if security interest is perfected security interest and even if buyer knows of the security interest.

Secured party with perfected secure interest in collateral sold has same priority in proceeds.

Proceeds may consist of cash or accounts receivable. Perfected security interest in cash remains as long as it is identifiable; it ceases being identifiable when they are spent by a debtor or become untraceable.

If debtor defaults, secured party may repossess or foreclose all collateral as to which it has a priority claim provided it does not breach the peace. Otherwise, if debtor defaults, secured party may seek judicial repossession for collateral as to which it has a priority claim if breach of peace is likely.

After repossession, secured party may keep collateral. Or may sell collateral with notice of the sale to the debtor and other secured parties of record, and all aspects of sale must be commercially reasonable.

Debtor may redeem collateral by paying obligation and expenses to secured party.

Are applied to the secured party’s expenses of sale and the secured debt; then to junior secured parties; and any surplus goes to the debtor, who remains liable for any deficiency.