9-609 basic right of possession of a secured party- upon default secured party can take possession of the collateral
Assignment 3: Repossession of collateral
collateral-defined term (9-102) property which secured creditor has a security interest
3.2. if clients breaches peace-as general principle client can go on debtor’s property as long as don’t breach the peace
if client breach the peace with debtor action can be brought against client for wrongful repossession.
person who protest repossession of the property-ct say if continue with taking collateral where there is a reasonable probability that violence with ensue will constitute a breach of the peace
General rule: any likelihood of physical resistance during repossession if a secured party continues on will constitute a breach of the peace
Cannot enter a home to repossess property.
Breaking a lock to get to property was ok or breaking a window in the care is ok to get inside of car
if client cuts chain on fence to property and leaves other property unsecured and unprotected=breach of the peace.
if there is a guard there can u trick or deceive guard to allow u on the property- some cts have held that repossession of property by deceit is breach of the peace.
What should creditor place in security agreement could agree to allow creditor to trespass on his property to repossess;
9-602 rights of debtor that may not be waived- if try to place something in security agreement that courts will say is a breach of the peace then it will be ineffective
ex. Cannot place in agreement right for creditor to enter debtor’s home to repossess property
but can put right to trespass in agreement as long as not manifestly unreasonable
3.3. Lawyer can tell client legal consequences of hiding anything; cannot tell client to hide the property (fraudulent under model rules)
tell debtor as long there is someone there to communicate to secured party that something bad will happen to them if they continue with repossession.
author suggest sitting on property with a gun. Debtor must be forceful enough where continue attempts at repossession will constitute breach of the peace
if secured party brings sheriff with no writ then perse not there in an official capacity then perse shows that debtor not in position to protest and that sheriff being there was a breach of peace
if creditor has filed replevin action and the sheriff to get the property
for next time 3.5 and next assigment 5
missed 2 Wednesday
Finish Assignment 3 Start Assignment 5 Article 9 Sale and Deficiency
1. 3.5 Deals with Accounts Financing. This is the most complicated type of secured transaction.
“TYPE=PICT;ALT=”This is dealing with intangible collateral that usually can’t be repossessed. The kind that can be repossessed is the note or promissory note. Under Art 9 these are considered to be instruments.
“TYPE=PICT;ALT=”Account §9-102(a)(2) Def.
“TYPE=PICT;ALT=”A creditor sells goods to a customer. This problem deals with goods on an open account. This is a credit transaction.
“TYPE=PICT;ALT=”The customer now owns the merchant/creditor the money for the goods. From Creditors aspect it is an asset.
“TYPE=PICT;ALT=”The Creditor can take his accounts that are owed him and use them as collateral for a loan from a secured party (bank, etc.,) The bank will then take a security interest in all accounts owed to the Creditor as collateral for the loan.
“TYPE=PICT;ALT=”The 1st transaction is an unsecured transaction and then Creditor will take those accounts and get a loan, which will be a secured transaction.
“TYPE=PICT;ALT=”This has a lot of paperwork and it is hard to manage these kinds of transactions. The secured party has to always think about what can go wrong. This is a constantly floating kind of lien, this is secured by accounts that are being collected and ones that are not yet in existence.
“TYPE=PICT;ALT=”What can go wrong?
o All of a sudden the account debtor (customer) paid off all the obligations to the Debtor (the Creditor in the original transaction) and the debtor does not take the money and pay off the Secured Creditor (the bank).
§ Then the bank has all this money they have loaned and they have no collateral left.
o Deare might make fake invoices so they can borrow more money from the bank.
o They might start doing business with people who are not going to be paying their bills on time, or people that are not good credit risks.
o Another problems is if Deare starts selling defective product.
“TYPE=PICT;ALT=”Ways to solve these problems
o The S
p the business afloat and that litigation is not in the best interests of the parties.
3.8 Client sells a car on credit and the client has to buy the loan papers back b/c the buyer defaults on the loan. The buyer has complained about the quality of the car.
“TYPE=PICT;ALT=”Under §9-609 – you don’t have the right to repo unless you can show that the debtor is actually in default. The debtor has to be IN DEFAULT or else they can possibly sue you and other problems. If there are facts that show that the person may not be in default then you should file a replevin action rather than self-help.
Start Assignment 5 Article 9 Sale and Deficiency
“TYPE=PICT;ALT=”Deals with Foreclosure b/c the Debtor is actually still the owner of the property. You have to proceed with the foreclosure of the debtors interests.
o There has to be notices and there are certain ways the sale has to be done, and if there is something that is not really able to be sold – you have to do all of this in a reasonable way.
“TYPE=PICT;ALT=”You look at the form/function of the transaction to see if Art 9 even applies.
“TYPE=PICT;ALT=”What happens to a secured party that repos collateral and sells the property and they actually do not do what they are supposed to do, What Happens?
“TYPE=PICT;ALT=”Under what circumstance is a secured creditor allowed to have a deficiency judgment made in there favor?
Monday, February 07, 2005
“TYPE=PICT;ALT=”We have been focusing on the fact of having a security interest.
“TYPE=PICT;ALT=”Assignment 6&7 were about bankruptcy and secured creditor’s have more rights than unsecured creditors.
“TYPE=PICT;ALT=”We are now turning our attention to how do we go about becoming a secured creditor.
o What we are talking about are lending transactions where the debtor consensually agrees to give security interest.