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Secured Transactions
University of Kansas School of Law
Ware, Stephen J.

Secured Transactions Outline
Spring 2004 – Professor Ware
 
I.                     Definitions
a.        Attachment – Legal process of seizing another’s property in accordance w/ a writ or judicial order for the purpose of securing satisfaction of a judgment.
b.       Chattel Paper – writing or writings which evidence both a monetary obligation and a SI or lease in a specific good. §102(a)(12)
c.        Creditor – anyone owed a legal obligation that could be reduced to a $ judgment
d.       Clouded title – title to possible encumbered property
e.        Default – debtor fails to comply with a provision of a sec agreement
                                                               i.      usually failure to make a payment
f.        Encumbrance – right, other than ownership interest, in real property. Includes mortgages and other liens on real property. §102(a)(32)
g.        Foreclosure – process of applying value of collateral to the payment of a debt
                                                               i.      foreclosure of personal property is much easier than real property
                                                              ii.      A9 governs foreclosure on personal property
h.       Instrument – a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a sec agreement or lease, and is of a type that in ordinary course of business is transferred by delivery with any necessary endorsement or assignment. §102(a)(47)
                                                               i.      Does not include (i) investment property or (ii) letters of credit
i.         Levy – seize property or cash
j.         Lien – “a charge against or an interest in property to secure payment of a debt or performance of an obligation.” BC §101
                                                               i.      Consensual lien – SI
                                                              ii.      Nonconsensual liens – statutory liens
1.        Mechanic’s lien
2.        Judicial liens
k.       Money – medium of exchange currently authorized or adopted by a domestic or foreign G. §1-201(24)
l.         Priority – right to have collateral’s value applied to your debt when collateral’s value is insufficient to repay all creditors
m.      Purchase – taking by sale, lease, discount, negotiation, mortgage, pledge, lien, SI, issue or reissue, gift, or any other voluntary transaction creating an interest in property. §1-201(29)
                                                               i.      Purchaser – person that takes by purchase
n.       Secured – collateral is specified by a lien
                                                               i.      If debtor defaults, the collateral is forfeited
                                                              ii.      Security holder has power over debtor
o.       Security Interest (“SI”) – any lien created by K between debtor and creditor
                                                               i.      Doesn’t include statutory liens
                                                              ii.      Includes RE mortgages, deeds of trust, SIs in personal property created under A9
p.       Secured Party – person whose favor a SI is created or provided for under sec agreement. §102(72)(A)
                                                               i.      Includes: (B) person holding an agricultural lien, (C) consignor, (D) person to which accounts, chattel paper, payment intangibles, or promissory notes have been sold, (E) trustee in whose favor a SI is created.
q.       Security Agreement – an agreement that creates or provides for a SI.
                                                               i.      Effective according to its terms b/w the parties, against purchasers of the collateral, and against creditors. §201(a)
r.        Signed – using any symbol executed or adopted with present intention to adopt or accept a writing.
s.        Unsecured – creditor has no lien against collateral
                                                               i.      Done by either by negotiation with debtor or by statute
                                                              ii.      Other terms for unsecured creditors 
1.        General credit

Writ of execution – sheriff levies (takes) directly against debtor
                                                                                                                                     ii.      Writ of garnishment – sheriff levies debtor’s property/cash held by a 3P
                                                                                                                                   iii.      Note: sheriffs must comply reasonably w/ writ
c.        Amercement – At CL, if sheriff does not properly execute levy against judgment debtor, creditor can get indemnified by the sheriff. Vitale v. Hotel California
                                                                                                                                       i.      Thus, sheriff must pay creditor directly, then sheriff can go after debtor.
3.        Attachment – Legal process of seizing another’s property in accordance w/ a writ or judicial order for the purpose of securing satisfaction of a judgment.Black’s Law.
a.        During a lawsuit, or after judgment, writ of attachment may be available
b.        Especially if danger of fraudulent transfers
4.        Note: judgment creditors have the right to use discovery to obtain info about a debtor’s assets
                                                           iii.      Limits on Getting Payment
1.        Limit 1: No self-help for unsecured creditors. Prohibited seizures can bring 3 kinds of liability
a.        Tort liability – conversion
b.        Larceny – theft
c.        “Wrongful collection practices” – recovery must be in a “reasonable” manner according to state’s law
Limit 2: Debtor in different states – $ judgments are only enforced in state where rendered