SECURED TRANSACTIONS
LEE
SPRING 2015
BEFORE SI/DECIDING IF SI
· Thinking about making a loan and want to be SP?
o Property exempt?
§ Statutorily exempt?
· àexempt
§ Property is a necessity of life (e.g. 75% of wages, homes)?
· àexempt
o Normal Start of Process?
§ (1)File FS
· àConsider FS section below
§ (2) Search (want to see if property is unencumbered)
· àCheck public registries (Motor vehicle records, real estate records, credit records)
· Goods?
o Yesà (1) Search filings (inquire as to the D’s source of title and, if circ.s seem to require it, search in the name of a former owner (9-507(a), Comm 3)), (2) Examine goods for possession, (3) Determine if goods were possessed in previous 20 days (Another SP’s SI may still be perfected if had possession)
§ (3) Physical inspection
§ (4) Get results
§ (5) Make loan
· Creditor’s obligations?
o Instalment loan?
§ Loan repayable in more than one payment?
· àInstallment loan
o LOC?
§ Arrangement in which C agrees to lend and receive payment at times elected by the D, up to the line amount and until the contracted due date of the line?
· àLOC
· D’s obligations?
o What collateral secures the obligations?
§ àWhatever the SA says (w/ minor exceptions)
· Is there an Art 9 SI (simply granting SP right to the asset)?
o Is there an interest in property, contingent on the non-payment of a debt?
§ YesàProceed
· Consensual (provided in Ks)?
o Real Property?
§ Mortgage/Deed of Trust?
o Personal Property?
§ Tran that created a SI in personal property or fixtures by K?àYes Art 9 applies (S1-109(a)(1)?
· Non-Consensual?
o Judicial Lien?
§ Lien ordered by ct.?
· Yesàjudicial lien
o Statutory Lien?
§ Lien imposed by statute (e.g. mechanic’s lien, landlord’s lien)?
· YesàStat lien
o Intended as security doc. apply?
§ Tran in the form of a lease?
· Consideration that the lessee (would be D) pays lessor for the right to possession and use of the goods is an obligation for the term of the lease and is NOT subject to termination by the lessee?
o Incorrect, it is subjectàLease (Art 2A applies)
o correct:
§ (1) is the original term of the lease equal to or greater than the remaining economic life of the goods?
§ (2) is lessee bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods?
§ (3) can lessee renew the lease for something nominal? OR
§ (4) does lessee have an option to become the owner of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement?
· Yes to anyàlease creates a SI, so Art 9 (1-203)
· No to allàLease (Art 2A applies)
§ Sales of Accounts?
· W recourse (if an account debtor doesn’t pay then the seller has to buy the account back for initial sale price)?
o YesàSI
o Deed in lieu of foreclosure (Cs sometimes give D money off for this)?
§ Was SP’s right contingent on nonpayment of a debt?
· YesàSI
o SI in wage claims, insurance policies and claims, real estate interests, non-commercial tort claims?
§ àNo
ART 9 TYPE COLLATERAL
o Art 9 Type of Collateral?
§ Tangible (Goods 9-102(a)(44))?
· Consumer goods (characterize goods in hands of debtor)?
o Goods used or bought for use primarily for personal, family, or household purposes?
§ YesàConsumer goods
· Equipment
· Farm Product; OR
· Inventory
o YesàTangible
§ Quasi-tangible?
· Instruments (means negotiable instruments)?
o Promissory notes?
§ Promise to pay (ex: I promise to pay $2 million to the order of Sam Smith)?
· YesàPromissory note
§ Order to pay (e.g. Bank ‐‐ Pay to the order of Sam Smith $2 million)?
· YesàCheck (which counts
· Investment property?
o Commodity accounts
o Security accounts
o Securities
· Documents of title?
o Warehouse receipts
o Bills of ladingb
o Delivery order
o Any other doc which in the regular course of biz or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold, and dispose of the doc and the goods it co
Were they made: (1) w/in 45 days after lienor “became a LC (sheriff executes writ)” (2) w/o knowledge of the lien, Or (3) Pursuant to commitment made w/o knowledge of the lien
o YesàYes (9-323(b)
§ Real estate?
· Spectrum?
o Mortgage/Deed of Trust perfected (recorded)àLien Creditor Recordsàfuture advance
· Some states?
o Optional + knowledge àLien creditor has priority
o Obligatory àMortgagee has priority
o Proceeds
CREATING SI
· Perfection (Has SI become enforceable against third parties; not limited to one SP; depends on type of collateral, (9-308(a)))?
o (1) Attachment (9-203(b); makes SI enforceable against D; creating SI)? AND
§ 3 elements met?
· (1) value [given by the SP] (1-204)?
o SP acquires rights (to collateral) (1) in return for a binding commitment to extend credit (2) as security for a pre‐existing claim (money given) OR (4) in return for any consideration (money) sufficient to support a simple contract?
§ YesàValue
o SP acquires rights for an unsecured loan (past consideration)?
§ àValue w respect to a later granted SI
· (2) D has rights in collateral
· (3) SA/Grant of SI?
o Evidentiary compliance?
§ (1) Oral security agreement?
· Possession by SP?
o YesàEvid of oral security agreement
o Noàcontinue
§ (2) Written security agreement?
· (a) Authenticated? AND
o Signed?
§ Yesàauthenticated (9-102(a)(7), continue
§ Noà with present intent to adopt a record (info that is inscribed on a tangible or electronic medium that is retrievable in perceivable form) attaches to or logically associates with the record an electronic sound, symbol, or process (9-102(a)(7)(B)? YesàAuthenticated; NoàNot
