Secured Transactions Outline
Kara Bruce – University of Toledo
a. Goods; “all things that are movable at the time the SI attaches”
i. Consumer Goods – household/personal
ii. Farm Products
v. Equipment (catch-all category)
b. Paperized Rights to Payment
i. Chattel Paper – record that evidences both a monetary obligation, and an SI or a lease
ii. Instrument – negotiable instruments or other writings that evidence the right to payment of a monetary obligation and are a type that in the ordinary course of business are transferred by delivery. Think promissory note or check
c. Intangible Rights to Payment
i. Accounts – the right to be paid for gods/services/etc that were sold/leased/licensed etc., but not the right to be paid for a loan
ii. Payment Intangibles 9-102(a)(42)(61) – a form under which the principal obligation is monetary –
1. Only time we’ve dealt with it is payment streams coming from leases. It’s beyond the scope of this class.
iii. Electronic chattel paper – same as chattel paper 9-102(a)(51)
d. Secondary Obligor – an obligor to the extent that the obligors obligation is secondary; or the obligor has a right of recourse with respect to an obligation secured y collateral against the debtor, another obligor, or property of either.
e. Obligor – a person that with respect to an obligation secured by a SI in or an ag lien on the collateral, (i) owes payment or other performance of the obligation (ii) has provided property other than the collateral to secure payment or (iii) is otherwise accountable in whole or in part for payment or other performance of the obligation. The term does not include issuers or nominated persons under a letter of credit.
f. General Intangible – an personal property including things in action, other thanaccounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter of credit rights, letters of credit, money, oil, gas or other minerals before extraction. This term includes payment intangibles and software.
2. Benefits if Article 9 Security
a. Self – help
b. Priority over competing creditors
c. When the sheriff goes out to seize collateral, they can’t seize collateral that’s exempt
3. Scope of Article 9
a. 9-109 Scope – this article applies to:
i. 9-109(a) any transaction that creates a SI in personal property or fixtures by contract
1. Si means an interest in personal property or fixtures which secures payment or performance of an obligation
2. Agricultural liens
3. Sale of accounts, chattel paper etc.
5. Exclusions (preempted by)
a. Federal statutes, regulations and treaties
b. State statutes governing, creation, perfection, priority, or enforcement of an SI
c. Foreign statutes
d. Letters of credit
4. Attachment 9-203
a. The process by which a SI becomes enforceable against the D with respect to the collateral.
i. SP gives value
1. 9-203(b) – 1-204
a. In return for a binding commitment to extend credit or for the extension of immediately available credit, whether or not drawn upon and whether or not a charge back is provided in the event of difficulties in the collection (consideration)
b. After Acquired Property – as security for, or in total or partial satisfaction, a preexisting claim. 1-204(2)
i. (I.e. every time they sell goods, the creditor doesn’t have to keep giving value).
c. Future Advances – Binding commitment to extend credit or the extension of immediately available credit (this is for money that hasn’t been paid yet).
d. By accepting delivery under a preexisting contract for purchase or
e. In return for any consideration sufficient to support a simple contract.
ii. D has rights in the collateral
1. A thief will never be able to – if D has less than full rights, the SI will attach to whatever rights D has.
iii. Security agreement meeting the requirements of 9-203(b)(3)
1. The D has authenticated a SA that describes collateral
a. Authenticate means to sign or encrypt or similarly process a record in whole or in part with the present intent of authenticating person to identify the person and adopt or accept a record
b. Bollinger: COMPOSITE DOCUMENT RULE – authenticated SA need not be evidenced by a single document
i. Look at the transaction as a whole in order to determine if there is writing, or writings signed by D describing the collateral, which demonstrates an intent to create a Si in the collateral.
2. OR: (for collateral that is not a certificated SI)
a. Collateral is in the possession of SP pursuant to the D’s SA.
3. OR: For certified securities – collateral is registered form and certificated has been delivered to SP pursuant to the SA or
4. OR: For various types of collateral SP has control pursuant to the SA.
c. Description of Collateral:
i. After Acquired Collateral – 9-204 – collateral purchased by D later on.
1. If security agreement provides that it applies to after-acquired collateral, no new SA is needed.
a. If the clause is left out but clearly meant to be included courts are torn whether to enforce.
just what they think, it’s what a reasonable lender would do.
3. Good faith doesn’t preempt the terms of a contract, so if it’s in there specifically that you don’t have to give notice, you don’t have to give notice.
iv. Waiver and Estoppel
1. Moe v. John Deere- JD repeatedly modified the contract and allowed the D to pay late and modify the terms.
2. Non waiver clauses – the courts are split
a. Those that allow default can still repossess without notice (minority)
b. Those that allow waiver of default need to give notice. (Majority)
a. Remedies for SP
i. Reduce a claim to judgment (9-601(a)).
1. Judicial enforcement
a. An AP need not exercise its art. 9 remedies, but may obtain an in personam judgment on the debt, then use the judicial procedures available within the juris. To enforce the judgment
1. Access to all non exempt property
a. No art 9 disposition reqs. (Commercially reasonable disposition)
b. Creditor may bid at the sale (buy the collateral back, sue D for deficiency and resell the collateral)
c. Cla-Mil E.
i. UCC 9-604 – SP that removes collateral shall promptly reimburse owner of real property damaged by the removal. (but if it is the Marshall removing, not the SP then this rule doesn’t apply).
d. Proper judicial sales are almost invulnerable to D attack
ii. Cons –
2. Time consuming
3. Traditionally lower prices
ii. Repossess collateral (9-609)/self help
1. A SP has a right to self help repossession pursuant to 9-609 so long as the SP does not breach the peace
a. Breach of peace has an uncertain definition
i. Casebook author says anytime there is a physical altercation it is a breach of peace. Some cases say as soon as the D says no stop and you do it anyway it’s a breach of peace.