Select Page

Secured Transactions
University of Toledo School of Law
Campbell, Bruce A.

Secured Transactions Outline
For exam: answer all the elements of the question…for times sake. Most important thing. Rather than just give an answer, sum up the reason. Say who wins and why type of thing.
Get to the heart of the matter. Give conclusory answers with some explanation of how you got there is the best method when under time crunch→ especially for bar essay.

I. Introduction
A. Collecting an unsecured debt
1. Creditor loans Debtor $200,000 unsecured, to be paid back in a year at 12% interest
2. If D doesn’t pay, what can C do?
3. C must bring a contract action against D
a. C must prove formation, enforceability, terms, breach, damages
4. If C wins, the court will issue a money judgment to C
a. So the court now recognizes that D owes C money
b. But C still can’t just take D’s property
5. If D still won’t pay, C must go to court and get a writ of execution
6. C points out D’s property to sheriff, who levies execution (seizes D’s property)
7. This creates a judicial lien in favor of C; C is a lien creditor of D
8. The sheriff conducts an execution sale
a. The proceeds first go to pay off the costs of conducting the sale
b. Then C gets paid
c. Often C is the only one to show up at the execution sale
9. C’s risks in this process
a. D could move assets around between companies, so that there’s almost nothing left by the time C is ready to collect
b. D could have other creditors that have priority over C
c. D could file for bankruptcy
10. Advantage of getting a security interest
a. Decreases the likelihood that D won’t pay in the first place
b. If D doesn’t pay, most of the above process is unnecessary
c. C will be willing to give D a lower interest rate because of the reduced risk
B. Concept of security interests
1. Debtor owes Creditor money; D has an obligation to pay C
2. D has personal property; D grants a security interest in that property to C to secure the payment of the obligation
3. If D doesn’t pay, C has the right to seize the property subject to the security interest; C can sell the property and use the proceeds to satisfy the debt
4. There is little or no j

n reason for secured interests is to reduce the risk that the debtor won’t pay
II. Definitions
A. Buyer in ordinary course of business (§ 1-201(b)(9))
1. buyer must take possession
2. sold for cash, credit, exchange, etc…in the ordinary course
3. transfers for BULK is NOT ordinary course of business (like a merger/acquisition)
4. going out of business sales is NOT ordinary course of business
B. Chattel paper (§ 9-102(a)(11))
1. A document that evidences a monetary obligation and a security interest in specific goods
C. Collateral (§ 9-102(a)(12))
1. The property subject to the security interest
2. Collateral is identified in the security agreement; can be a single, specific item (e.g. a certain car), all of a category (e.g. all furniture), all of an Article 9 type (e.g. all inventory), etc.
Collateral can be existing or after-acquired