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Secured Transactions
University of Toledo School of Law
Bruce, Kara J.

Secured Transactions Outline
Kara Bruce
Fall 2010

Chapter 1, Creating a Security Interest
A. Why Secured Credit?
· Rights of Unsecured Creditor
· Rights of Secured Creditor
· Is Secured Credit Efficient or Fair?
B. Introduction to Article 9
· History
· Revision
· Working Definitions
C. Scope of Article 9
a. Included within Article 9-109 are transactions that create a security interest in personal property or fixtures by contract.
b. “Security Interest” means an interest in personal property or fixtures which secures payment or performance of an obligation. 1-201(b)(35).

9-109(a):

1. an agricultural lien
2. A sale of accounts, chattel paper, payment intangibles or promissory notes
3. a consignment
4. an Article 2 or 2A security interest
5. An article 4 or 5 security interest.

Excluded:

1. Exclusions to the extent other law governs 9-109(c)
2. Landlord’s lien;
3. Statutory or common law lien for services or materials;
4. Wage asignments;
5. Sale of accounts, chattel paper, payment intangibles or promissory notes as part of a sale of business;
6. Assignment of accounts, chattel paper, payment intangibles or promissory notes for collection only;
7. Assignment of right to payment under contract to new performing party.
D. Attachment: The Process by which a security interest becomes enforceable against the debtor with respect to the collateral. 9-203(a)
a. Requirements for Attachment 9-203(b):
§ The Secured Party gives VALUE
§ The debtor has RIGHTS IN THE COLLATERAL;
§ There is a SECURITY AGREEMENT meeting one of the requirements of 9-203(b)(3)
· The Security Agreement
§ One of the conditions of 9-203(b)(3) is met:
· The Debtor has authenticated a security agreement that describes the collateral;
· (for collateral that is not a certificated security”): collateral is in the possession of the Secured Party pursuant to the debtor’s security agreement.
· (for various types of collateral) SP has control pursuant to the security agreement
§ Authenticated record v. alternate evidentiary requirements.
· Ex. Tape recording may qualify as a record under the code, but is it authenticated? If he knew of the recording then yes.

b. The Composite Document Rule
i. An “authenticated security agreement” need not be evidenced by a single document.
ii. In re Bollinger corp.: when the parties have neglected to sign a separate security agreement, it would appear that the better and more practical view is to look at the transaction as a whole in order to determine if there is a writing, or writings, signed by the debtor describing the collateral which demonstrates an intent to create a security interest in the collateral.”
· Issue: How precise are the requirements for article 9?
· if Financing statement contains description of collateral than some courts say that it can function as a security agreement.
· If no security agreement is signed, then courts like to look at the transaction as a whole to determine if there is a writing or writings, signed by the debtor describing the collateral that demonstrates an intent to create a security interest in the collateral.
· Scope of the Security Interest
c.Description of Collateral

Classification of Collateral: property subject to a security interest. 9-102(a)(12); see also 1-201(37) definition.

Financing statements must also provide descriptions of collateral

· 9-502(a)(3) requires that a financing statement indicate the collateral
· 9-504(1) provides that a financing statement sufficiently indicates the collateral if it describes it.

In re Grabowski: 9-203(b) “a security interest is enforceable against the debtor and third parties with respect to the collateral only if …(3)(A) the debtor has authenticated a security agreement that provides a description of the collateral.”

· A description of personal…property is sufficient, whether or not it is specific, if it reasonably identifies what is described. (Includes descriptions by “category” or “type” of collateral. 9-108(b)(2)-(3)).

9-108(b) safe harbors: an identification of collateral is reasonable if the collateral is listed specifically, identified by category, identified by type, etc…

· Commercial tort claims, consumer transactions dealing with consumer goods, security entitlement, a securities account, or a commodity account – then a description by type is insufficient.
d.After-Acquired Collateral

A security agreement may create or provide for a security interest in after-acquired collateral (subject to limitations). 9-204
Common wording: “…now owned or hereafter acquired.”

· Question: what if the Security Agreement is silent re: after-acquired collateral?
· Cmt. 3 to 9-108 “This qu

gment.
·

Pros

Cons

Access to all non-exempt property

Expensive

No article 9 disposition requirements

Time consuming

Creditor may bid

Traditionally lower prices

2. Repossession
a.A secured creditor has the right to self-help repossession pursuant to UCC 9-609, so long as the secured party does not breach the peace.
b.Breach of Peace:

Uncertain definition

Potential for significant liability: 9-635

1. Damages suffered 9-625(b)
2. Statutory damages 9-625(c)(2)
3. Principles of tort law, supplement cmt.3

As a result, SP’s are reluctant to use self-help repossession without the express consent of the debtor.

Cases:

· Williams v. Ford Motor Co.: No breach of the peace because plaintiff did not dispute the taking and there was no provocation of violence.
· Williams Dissent: confrontations surrounding repossessions, even without violence, should constitute a breach of peace.
· Dixon v. Ford Motor Credit Co.: Repossession in disregard of an unequivocal oral protest = breach of peace.
· Chrysler Credit Corp. v. Koontz: an unequivocal oral protest, without more, is not a breach of peace.
· “Lying” Cases.

Repo: Judicial Action

· Marshal, not secured party, is liable for damages to real property resulting from marshal negligence in removing property. Marshal is an agent of the court, not the secured creditor.
3. Disposition of Collateral