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West Virginia University School of Law
Cardi, Vincent P.

The Cardi Book
I.                   Introduction
a.       Overview of State Debtor and Creditor Laws
                                                              i.      Debtor owns a piece of property
1.      Makes a K with Contractee and Debtor owes Contractee $$$
2.      If Debtor pays, fine
3.      If Debtor does not pay, Creditor goes to court and gets a judgment
4.      Judgment creditor asks the debtor to pay $$$
a.       If debtor does not pay, creditor seizes personal property and sells it
b.      If that’s not enough, sheriff seizes the real property and sells it
5.      Often, however, multiple creditors have claim on the same property
                                                            ii.      Consensual Security Arrangements = voluntary methods for creditor to become first in line for a piece of property
1.      Mortgages, etc. = deed of trust
2.      Article 9 Security Interests in Personal Property
3.      Common Law Consensual Security Interests in Personal Property
a.       Not under the UCC
b.      Usually case law
c.       Ex. Security interest in consumer bank accounts
4.      Guarantees and Sureties
a.       Someone else signs to pay a loan if a debtor does not pay
b.      Ex. your father co-signs for you
c.       Must be in a signed writing
5.      [Creating Set-Off Opportunities] a.       Common law right
b.      If both parties owe $$$ to each other, and both debts are due, the party with the smallest debt can subtract his debt from the amount owed to him
c.       Ex. P owes R $100. R owes P $110. Both debts are due; R owes P $10.
                                                          iii.      Automatic Pre-Litigation Statutory Liens = statutes which allow a creditor to take property automatically
1.      Mechanics’ Liens
a.       When someone does work on a real property, he has a lien on the property
b.      Dates from the time he began to work
2.      Artisans’ Liens
a.       Automatic lien on personal property for work done on this property
b.      Ex. mechanic works on your car
3.      Landlords’ Liens
a.       Landlords have an automatic lien on a tenant’s property on premises
4.      Tax Liens
5.      Seller’s Reclamation Under UCC 2-702
6.      Other UCC Article 2 Liens
7.      Non-Statutory Equitable Liens
                                                          iv.      Extraordinary right to Set Aside Transfers and Recover Property
1.      Fraudulent Conveyances
a.       When a person tries to give away or sell its property in order to prevent the property from being taken by a creditor
b.      Creditors can prevent or undo these transfers
2.      Article 6 Bulk Sales
a.       An automatic right of a seller to seize property debtor has sold to a third party from that third party
b.      Not law in WV, only in 10 states
c.       Can sue 3rd party and void the transfer
d.      The person must sell ‘substantial part’ of inventory ‘outside of normal course of business.’
e.       Ex. Car dealership who normally sells cars individually sold 90% of inventory to one buyer. 
3.      Equitable Remedies Such as Tracing
                                                            v.      Litigation Remedies
1.      Post-Complaint, Pre-Judgment
a.       Pre-Judgment Attachment
                                                                                                                                      i.      If certain facts exist, creditor can seize property before getting a judgment in order to preserve the property for later
                                                                                                                                    ii.      Ex. Debtor is selling his property
b.      Lis Pendens
2.      Post-Judgment Remedies
a.       Judicial Liens
                                                                                                                                      i.      Recording in abstract of judgment creates a lien on real property
b.      Execution Liens
                                                                                                                                      i.      Lien on personal property
                                                                                                                                    ii.      Creditor takes court documents to sheriff who seizes personal property
c.       Garnishment of Debtor’s Property in Hands of Third Party
                                                                                                                                      i.      Getting property belonging to debtor of someone else’s real property
d.      Garnishment of Wages (Suggestee Execution)
                                                                                                                                      i.      Getting an employer of Debtor to send a portion of Debtor’s wages directly to creditor
                                                                                                                                    ii.      Can’t take a whole check, only a portion
e.       Discovery of Assets though Debtor Examination
                                                                                                                                      i.      Creditor orders Debtor to appear in a legal proceeding and testify as to where his assets are
3.      Exemptions
a.       Homestead
                                                                                                                                      i.      Personal residence
                                                                                                                                    ii.      In WV it is $5,000
b.      Personal Property
                                                                                                                                      i.      Debtor is allowed to keep a certain amount of personal property established by statute
c.       Wage exemption
                                                                                                                                      i.      Creditor cannot take all of Debtor’s pay check
                                                                                                                                    ii.      Creditor can only take what exceeds 35x the minimum wage
                                                          vi.      Others Not Mentioned
1.      Receiverships
a.       Court appoints a guardian to handle a person’s property
2.      Assignment for Benefit of Creditors
3.      General Equitable Powers of Courts
b.      Each piece of property must be examined individually; each creditor may have different rights towards different property
c.       The World of Debtors and Creditors
II.                Liens Generally
a.       A claim or charge on property for payment of some debt, obligation or duty
b.      Does not transfer title to the holder
c.       It is a proprietary interest and a property right, but gives no general right of property or title to the holder
d.      Two types
                                                              i.      Liens by “operation of law”
1.      may arise under either common law, equity, or a statute
                                                            ii.      Consensual security interests
1.      when a debtor gives a creditor or potential creditor a lien to secure a debt
2.      Security interest in personal property
III.             Consensual Liens Governed by Statute
a.       Almost always governed by Article 9 UCC
                                                              i.      Exceptions: consumer bank accounts and tort claims
b.      Security Interests in Personal Property Under Article 9 (§ 46-9-101)
                                                              i.      How to answer an Article 9 Question
1.      Scope
a.       Make sure it falls under scope of Article 9—Section 9-203 (ask Cardi, maybe 9-909)
b.      Generally applies to a transaction that creates a security interest in personal property
c.       Subsection c excludes certain things
2.      Creation of Security Interest
a.       9-203
b.      a security interest attaches when it is enforceable
c.       a security interest is enforceable when
                                                                                                                                      i.      agreement is in a writing signed by the debtor which states that it is a security interest and describes the collateral sufficiently to be identified OR
                                                                                                                                    ii.      party has to take possession of the property pursuant to the agreement AND

which credit is established
                                                                                                                                                                                                            ii.      More complicated if the item is inventory—Must inform the other creditor that the inventory is sold on credit with a security interest within 5 years of credit and delivery
2.      Lienholders, Bankruptcy Trustees, and Purchasers
3.      Unperfected Security Interest
4.      Debtor and general claimants
6.      Default, Repossession, and Disposition of Collateral
a.       Not only does a security interest give a creditor a claim against debtor and other creditors, it also gives the debtor the right to
                                                                                                                                      i.      take the property upon default without going to court if it can be done without “breach of the peace” OR
                                                                                                                                    ii.      Sue to enforce the security interest
b.      Code does not define “default”
                                                                                                                                      i.      Well drafted security agreements will contain lots of clauses and say that failing to do any of these is a default
                                                                                                                                    ii.      Violation of a security agreement is a crime in WV
c.       Once the creditor obtains the property, it may have
                                                                                                                                      i.      Public Sale OR
1.      auction
2.      Required to notify debtor
3.      Creditor can purchase from a public sale
4.      Property purchased at a public sale takes subject to any senior liens on the property 
5.      Property purchased at a public sale takes free of any junior liens on the property.
                                                                                                                                    ii.      Private Sale
7.      Article 9 UCC does give some remedies for debtors when creditors violate
                                                            ii.      Forms: Security Agreement and Financing Statement
                                                          iii.      Article 9 Problems
1.      Problem 1: Overview of Article 9
2.      Problem 2: Overview of Priority
c.       Consensual Liens in Realty: Vendor’s Liens and Deeds of Trust
                                                              i.      Vendor’s Lien (§ 38-1-1)
                                                            ii.      Deeds of Trust (§ 38-1)
                                                          iii.      Credit Line Deeds of Trust
1.      A subsequent loan from a different source takes priority over subsequent extensions of credit under an existing deed of trust UNLESS the loan was an obligation of the creditor.
2.      Subsequent loans under existing credit need not mention the deed of trust, but should mention it just to be safe.
                                                          iv.      Forms: Sample Deed of Trust, Extension of Deed of Trust, Notice of Trustee Sale, and Trustee’s Report of Sale Under Trust Deed
IV.             Statutory Liens
a.       Mechanics’ Liens on Realty (§ 38-2)