Secured Transactions Outline

Secured Transactions Outline
Sullivan Summer 2016
Types of Loans- List of Various types of loans
Laws Governing Secured Transactions- Real Property, Personal Property, and Fixtures
Vitale v. Hotel California- Amercement- It is difficult to recover when unsecured & 3rd party may be liable
Ellerbe v. City of Los Angeles- Urgency-  Creditors can’t simply compel urgency in recovery
Repossession & Foreclosure
UCC § 9-609- Secured Party’s Right to Take Possession after Default- Can self-help w/o breach of the peace
Salisbury v. Colorado – Breach of the Peace- Must avoid a reasonable possibility of violence & nature of repo
Chapa v. Traciers- Breach of the Peace-  Unfortunate occurrences alone are not violence if handled correctly
Types of Foreclosure- Judicial Foreclosure, Strict Foreclosure, and Foreclosure under Article 9- IMPORTANT
Armstrong v. Csurilla- Shock of the Conscience- Absent wrong doing in the sale or a valuation, no shock
Anti-Deficiency Statutes- If statute exists, deficiency judgment is reduced to amount of value not sale
Judicial Sale Hypo- Clarifies the range of prices that are acceptable for a creditor to bid on an auction
UCC § 9-102(a)- Definitions- Definition of Inventory, Consumer Goods, Equipment, Lien Creditor IMPORTANT
UCC § 9-620- Acceptance of Collateral- Lays out the requirements for both partial and full acceptance
Judicial vs. Strict vs. Art 9 Foreclosure- Highlights the character differences between the foreclosures
UCC § 9-610- Disposition of Collateral after Default- Collateral must be dealt in commercially reasonable way
UCC § 9-627- Commercially Reasonable- No standard test for commercially reasonable, case by case + factors
Chavers v. Frazier- Commercially Reasonable- Hasty sales, improper advertising, and low price may invalidate
UCC § 9-626- Deficiency or Surplus in Art. 9- May only claim a deficiency if creditor proves deficit
UCC § 9-623- Right to Redeem Collateral in Art. 9- Debtor may only redeem after complete fulfillment
– Three types are Chapter 7- Liquidation, Chapter 11- Reorganization, and Chapter 13- Private Reorg
Bankruptcy Code § 506(a)(1)- Remainder of Secured Debt- After collateral sold, remainder is unsecured
Bankruptcy Code § 362(d)- Lifting Stay- Stay only lifted if equity not enough and not needed to reorganize
Bankruptcy Code § 361- Adequate Protection- If equity not enough, extra compensation may be required
In re Craddock- Adequate Protection- If collateral < value of debt, indubitable equivalent may compensate Bankruptcy Code § 1325- Allowance of Reorganization-  (1) debtor ok’s, (2) good enough for C (3) surrender Till v. SCS Credit- Form of Restructuring- The court prefers the prime-plus repayment structure Creation of Security Interest - Basically attachment is when we physically document and form a relationship between C and D UCC § 9-203- Attachability- (1) collateral has value (2) debtor has possession of it (3) authenticated agreement In re Schwalb- Authentication-  A person signing into a security interest with slightly off wording is enough In re Giaimo- Authentication Forms/Composite- Only need a signed form to show intent of parties to form SI In re Shirel- Sufficiency of Description in Authentication- “All merchandise” not specific enough, see dissent UCC § 9-204- After-Acquired Property; Future Advances- Can claim both depending on the terms of SI - Proceeds are broadly described to mean any new collateral that arises out of old and w/ bankruptcy UCC § 9-315- Proceeds-  Automatically attaches to any identifiable proceeds of collateral UCC § 9-102(a)(64)- Definitions of Proceeds- General def, accounts, broad products, what is destroyed Proceeds v. After-Acquired- Proceeds are automatic, while after-acquired must be in agreement In re Oriental Rugs- Burden of Proving Connection- Burden’s on creditor to show whether proceeds connection Bankruptcy Code § 552- Proceeds in Bankruptcy- Products, offspring, or profits unless court says + limitations In re Delbridge- Proceeds in Bankruptcy- Parties need be reasonable when dealing with each other for proceed In re Cafeteria Operators- Proceeds in Bankruptcy- Cash proceeds must be used to restock inventory or proceed Limitation on Collateral- Excluded items that cannot be taken from debtor FTC § 444.1- Excluded Collateral- No household goods other than art, electronics, antiques, jewelry FTC § 444.2- Unfair Credit Practices- Unfair practice to take nonpossessory security assets of household goods In re Green­- Collecting Alienated Plans- Pensions and IRA’s designed for future w/o access can’t be collected Default & Perfection Standard Default Provisions- Default: (1) not paid promptly (2) breaches any provision (3) dies, … + problem Modification v. Reinstatement and Cure- In depth comparison between the two Hypothetical Secured Transaction- Application of the rules - Perfection is the process of creating priority and notice for secured creditors UCC § 9-308- Perfection- If §§ 310 and 316 are met, it is perfected when it attaches. Must attach to perfect UCC § 9-310- Requirements for Perfection- Must have a financing statement UCC § 9-502- Financing Statements- Must include name of D, name of C, and indication of collateral UCC § 9-504- Indication of Collateral- must have (1) description and (2) indication that statement covers all In re Pickle Logging- Indication of Collateral- Cannot mislead other’s even if by accident on financing stmnt - (1) accepted when should be rejected, (2) vice versa, (3) correctly accepted but erroneous info; SEE UCC § 9-516- Filing- If not filed, effective except against a purchaser who gives reasonable reliance on absence UCC § 9-520- Filing- If accepted, effective even if should have been rejected subject to correct info § 9-516(b)(5) UCC § 9-338- Priority in Filing- Priority goes to person who reasonably relied on missing information UCC § 9-506- Errors in Filing- Financing statement is effective unless error/omission seriously misleading UCC § 9-503- Name of Parties- Options for person’s name. DBA is not ok, use art of incorp In re EDM- D/B/A- Cannot be a business’s unofficial trade name or a D/B/A, must be incorporated name Exceptions to Article 9 Filing Requirement- (1) Possession, (2) Control, (3) PMSI, + CHART UCC § 9-313- Perfection w/o Filing- Same as exceptions, with definitions UCC § 9-312- Instruments, Chattel Paper, & Negotiable Docs by Filing- Can be perfected by filing UCC § 9-330- Possession of Instruments, Chattel Paper, Negotiable Docs- Possession>Filing
UCC § 9-314- Perfection By Control- If it’s the type of thing you can’t possess, controller has perfection
Gallatin v. Lochovich- PMSI- There’s no value limit on consumer goods, boats included if for personal use
UCC § 9-512- Amendments of FS- May make any corrections (minor or serious) if identifies original FS’s ID #
UCC § 9-513- Termination Statements- C must file even if D doesn’t know unless will terminate naturally
In re Hilyard Drilling- Continuation- New statements not enough in lieu of continuation w/o reference and time
Changes after Perfection- Name change, collateral change, and practice questions, location
UCC § 9-507- Effects of Major Changes on  FS- If name was changed before or within 4 months of fs, OK
UCC § 9-315- Collateral Changing Form- If cash, good; if used for non-cash, must be in original FS or 20 days
UCC § 9-301- Jurisdiction- If possession, law is where collateral is; if not, law is where debtor is
UCC § 9-307- Location of Debtor- If person, where they live; if business, location; if incorp, where incorp
UCC § 9-316- Change if Location- You have 4 months after someone moves to refile, possession goes with you
Priority w/o Bankruptcy- If senior lien forecloses, rest are screwed, if junior foreclosures, senior retains
Priority in Bankruptcy- Trustee can sell w/ security interest still intact, or free and clear of liens, super-priority
UCC § 9-615- Foreclosure with Multiple Creditors- First pays expenses, then self, then subsequent creditors
UCC § 9-617- Priority- If superior forecloses, subsequent out of luck; vice versa, superior retains, PROBLEMS
Grocers Supply v. Intercity- Priority- Superior creditor can stop foreclosure by subsequent through own/court
Bankruptcy Code § 363- Sale Free of Liens- 5 reasons (3 important); (2) consent, (3) sale > liens, (4) in dispute
In re Oneida- Sale Free of Liens- Value of aggregate liens is how much is max acquirable after sale (reduced)
Bankruptcy Code §364(d)- Superpriority- Court may grant new credit if, unable to obtain and adequate prot.
Bankruptcy Code §361- Adequate Protection- May be provided by cash payment, additional lien, other relief
In re 495 Central Park Ave- Superpriority Liens- New lien (in bankruptcy) ok if increases value past new lien
UCC § 9-102(a)- Definition of Lien Creditor- Person who receives a court ordered lien over a property
Competing Creditors- IMPORTANT, goes through each scenario, future advances, and PMSI’s
UCC § 9-317- Priority Between Creditors- In general, secured creditor is superior to lien if statement filed
UCC § 9-323- Priority: Future Advances- Secured creditor gets a 45 day grace period, if >45, must not know
UCC § 9-317- Priority: PMSI- Secured creditor gets a 20 day grace period to file, if >20, lien creditor wins
Bankruptcy Code §544- Strong Arm- If secured creditor not perfected by time of bankruptcy, trustee can avoid
Unsecured Creditors in Bankruptcy- Pro rata share, cannot pay w/in 90 days of filing or 1 year for insiders
Bankruptcy Code §547- Preference- 5 actions unsecured can’t take in which a trustee can avoid a payment
Conflicting Secured Interests- General, 3rd-Party, Advances, After-Acquired, PMSI, Commingled, Accessions
UCC § 9-322- Priority: Secured Interests- (1) if both perfected, first to file, (2) perfected wins, (3) first to attach
UCC § 9-325- Priority: Transferred Collateral- 3rd party wins if (1) created by other, (2) transferred, (3) kept
UCC § 9-324- Priority: PMSI- PMSI has priority as long as it is perfected within 20 days of creation
UCC § 9-336- Priority: Commingled- Priority to perfected over unperfected, if all perfected priority by value
UCC § 9-335- Priority: Accessions- Priority goes to interest in whole over individual parts
– When both after-acquired and future advance clauses, can group two collaterals as one
– Court has discretion to force primary to sell property with subsequent interests on it last
In re Derecktor- Marshalling- The court will do what’s best for secured including marshalling, not unsecured
Sellers v. Secured Party- Nemo Dat, thief’s can’t transfer title; six ways to get around seller getting beat
UCC § 2-702- Reclamation- Seller may reclaim from buyer, unless new buyer is a good faith purchaser
Buyers v. Secured Lenders- § 9-315, Authorization, Ordinary Course of Business, Garage Sale
UCC § 9-320- Buyers- A BIOC takes free of SI created by buyer’s seller, garage sale requirements
UCC § 1-201- Ordinary Course of Business- Seller must be in the business of selling that kind of good
 
 
Types of Loans
Student Loans
Auto Loans
Credit Card
Unsecured Loan- They can’t just come and repossess what you bought using it
Home Mortgage
All of these types have no difference in right of creditor to be paid; difference lies in what the creditor can look to for payment
Secured Loans
Security Interest
Gives the creditor the right if the borrower stops paying the loan to take whatever interest he has (repossess) and resell it to a third party
Time line
Attachment: creates the security interest
Value given
Rights in collateral
Authenticated security agreement that describes the collateral
What does a security interest include?
Limitations on collateral
Future advances (must be in agreement)
After-acquired property (must be in agreement)
Automa