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Secured Transactions
SUNY Buffalo Law School
Buckley, Elizabeth F.

                                                              i.      Taking the Test
Characterize the Parties
Classify the Collateral
Determine whether the security interest is perfected or unperfected
Find the Appropriate Rule
Apply the Facts to the Rule
 
2.     Secured Transactions Outline
 
a.       9-201 Definitions
                                                               i.      Debtor: 9-102(a)(28) and Obligor 9-102(a)(59):
1.       An obligor is one who owes payment of the secured debt.
2.       A debtor is the person whose property is subject to the creditor’s security interest. Usually, the same person is both the debtor and the obligor.
                                                             ii.      Secured Party 9-102(a)(72): The creditor in whose favor the security interest is created
                                                            iii.      Security Agreement 9-102(a)(73): The agreement that creates the security interest. The medium may be either tangible or electronic.
                                                           iv.      Security Interest 1-201(b)(35): The interest in property that secures payment of the debt. Note that this definition applies to all Articles of the UCC and is found in (Unrevised) Article 1.
1.       Note: The term “security interest” also applies to interests created by specific transactions, such as consignments and sales of accounts, that do not create security interests but are nonetheless covered by Article 9. In these cases the buyer or consignor is referred to as the “secured party,” the seller or consignee the “debtor,” and the assets sold or consigned the “collateral.”
                                                             v.      Collateral 9-102(a)(12): The property subject to the security interest. Collateral may be tangible property like “goods”. However, increasingly collateral is intangible property like “accounts,” or “general intangibles,”
1.       Goods 9-102(a)(44): All things that are movable when a security interest attaches. Goods may include “inventory,” “farm products,” “consumer goods,” or equipment.
a.       Inventory 9-102(a)(48): Goods held for sale or lease
b.      Farm Products 9-102(a)(34): Crops or livestock
c.       Consumer Goods: Goods for primarily personal, family or household purposes
d.      Equipment 9-102(a)(33): Any other kind of goods, for instance, business machines.
2.       Instruments 9-102(a)(47): A check or a “promissory note” (even if nonnegotiable, it is an instrument if it is of a type used in the regular course of business), which is transferred by indorsement plus delivery (which it usually is).
a.       Promissory Note 9-102(a)(65): An instrument that evidences a promise to pay money. This EXCLUDES checks and certificates of deposit.
3.       Documents 9-102(a)(30): Warehouse receipts, bills of lading, delivery order
4.       Intangible Property:
a.       Account 9-102(a)(2): Payment arising either from the disposition of any kind of property, including real property and intellectual property, as well as the rendering of services.
                                                                                                                                      i.      However, it does not include rights to payment evidenced by chattel paper or instruments or those for loan advances.
                                                                                                                                    ii.      An account is a right to payment – with no writing or insufficient writing to be an instrument or chattel paper. It includes most UNSECURED obligations arising from the disposition of property or the rendering of services that are not evidenced by negotiable instruments.
b.      General Intangibles: Other kinds of rights to payment as well as intangible property like copyrights, software, and a myriad of other kinds of property.
                                                                                                                                      i.      Payment Intangible 9-102(a)(61): This is a subset of a general intangible under which the account debtor’s PRINCIPAL obligation is a monetary obligations.
1.       Ex. A bank loan. When the repayment obligation isn’t evidenced by an instrument, it is a payment intangible.
2.       Ex. If the right to receive payment from the account debtor alone is assigned, the obligation to pay money is the main part of the transaction, however if an entire contract is assigned, where the K contains covenants and imposes duties of performance on the account debtor, the monetary obligation may not be the PRINCIPLE obligation.
5.       Deposit Accounts 9-102(a)(29): Accounts maintained with a bank. (It excludes instruments and consumer transactions.)
6.       Chattel Paper 9-102(a)(11): Writing(s) evidencing: (i) obligation, and (ii) security interest.
a.       Ex. You buy something at Sears, sign a promissory note, promising to pay, and Sears retains a security interest in what you bought. This is chattel paper.
b.      Chattel paper may be in electronic form 9-102(a)(31)
7.       Letter of Credit Right §9-102(a)(51): Right to payment under a letter of credit (Article 5, U.C.C.). It excludes the right to draw on a letter or credit.
8.       Commercial Tort Claims §9-102(a)(13): Tort claims filed by a business that arose out of business (excluding personal injuries). Requires specificity, and there can be no “after-acquired tort clauses.”
9.       Investment Property §9-102(a)(49):
a.       Certificated Securities: Either in bearer form or registered
b.      Uncertificated Securities
c.       Securities Accounts
10.   Proceeds §9-102(a)(64): Whatever is acquired under disposition of collateral. (It is collateral that has changed in form.)
a.       This is usually in the form of cash, accounts, instruments, or chattel paper
                                                           vi.      Financing Statement 9-102(a)(39): The record that the secured party files in public records, usually the state’s filing office.
                                                          vii.      Attachment 9-203(a): A security interest attaches to collateral when it becomes enforceable against the debtor. See below Attachment.
1.       Attachment USUALLY occurs when:
a.       The debtor and secured party have entered into a SECURITY AGREEMENT, AND
b.      The SECURED PART

. This is future collateral for a present loan. There will be no attachment until the debtor acquired an interest in the property.
                                                                                                                                      i.      Exception for After Acquired Property: Ten-day rule for additional security for consumer goods. [§9-204(b)] 4.       One of the conditions of 9-203(b)(3) is met.
5.       9-203(b)(3) Conditions
a.       9-203(b)(3)(A): (Most Common), The debtor has authenticated a security agreement that provides a description of the collateral. This usually means that the debtor has signed a written security agreement that grants to the secured party a security interest in designated collateral; or
b.      9-203(b)(3)(B): The collateral is not a certificated security and is in the possession of the secured party under Section 9-313 pursuant to the debtor’s security agreement;
                                                                                                                                      i.      Authenticate 9-102(a)(7): Includes either signing a record or adopting a symbol or encrypt with the present intent of authenticating person to identify that person and to adopt or accept the record. Thus, the debtor authenticates by identifying itself and manifesting acceptance of the terms of the agreement.
d.      The Composite Document Rule
                                                               i.      In re Bollinger Corp: The Pro Secured Creditor View
1.       A third party made a loan to the debtor. As evidence of the loan, the debtor executed a promissory note and signed a security agreement with the third party giving it a security interest in certain machinery and equipment.
a.       Attachment? Yes: There was a security agreement, the secured party gave a loan (value) to the debtor, the debtor owned the machinery and equipment (collateral), and 9-203(b)(3)(A) was met because the debtor authenticated the security agreement in acceptance of the terms of the agreement, with a description of the collateral.
2.       The debtor entered into a loan agreement with appellee. Appellee paid off the remaining balance to the third party in return for the third party’s assignment of the original note and security.
3.       The debtor executed a promissory note to appellee containing a provision that the note was secured by a security agreement. No formal security agreement was ever executed.
Attachment?: There was no formal security agreement executed, the appellee did give value to the d