SECURED TRANSACTIONS

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SECURED TRANSACTIONS
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ARTICLE 9 - UCC

• GOVERNING LAW OF SECURED TRANSACTIONS
• APPLIES TO ANY TRANSACTION WHICH IS INTENDED TO
  CREATE A SECURITY INTEREST IN PERSONAL PROPERTY
  OR FIXTURES

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PARTIES TO SECURED TRANSACTION

• SECURED PARTY
• Usually a lender or credit seller of goods
• DEBTOR
• Usually a borrower or buyer of goods

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COLLATERAL

• Consumer goods
• Equipment
• Inventory
• Other accounts, instruments, fixtures

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TYPES OF SECURITY INTERESTS

• Purchase Money Security Interest (PMSI)
• Secured party finances purchase of collateral
• Pledge
• Secured party has possession of collateral
• Floating Lien
• After acquired property future advances

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ATTACHMENT

• Agreement to create security interest
• Debtor has or acquires rights in collateral
• Secured party gives value past or present
  consideration
• Authenticated record or pledge

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SIGNIFICANCE OF ATTACHMENT

• Security agreement is enforceable against the
  debtor
• But not third parties who may claim an interest
  in collateral
• Secured partys interest attaches to collateral

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PERFECTION

• Necessary to protect security interest from
• claims and rights of third parties
• Analogy - recording a mortgage on real estate
• Security interest must be attached to be
  perfected
• Analogy must have valid mortgage for recording
  to be effective

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METHODS OF PERFECTION

• Filing a financing statement
• Taking possession of collateral
• Automatic perfection PMSI consumer goods
• Other methods noting lien on automobile title
  certificate

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SIGNIFICANCE OF PERFECTION

• Perfection protects the secured party from most
  interests of third parties who may claim an
  interest or rights in collateral
• Third parties includes buyers of collateral,
  other secured parties, and trustee in bankruptcy

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PRIORITY RULES

• Secured party v. Secured party
• First to file or perfect wins
• Note creditor may file before loan is made or
  interest attaches
• Both unperfected first to attach wins

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Secured party v. Secured party

• Exceptions to first in time rule
• PMSI in noninventory collateral
• Has priority over preexisitng security
  interest if perfected within 20 days of debtor
  taking possession of collateral
• PMSI in inventory collateral
• Must be perfected before debtor takes
  possession, notice must be given to prior
  secured party

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Secured party v. Buyers of Collateral

• Buyer takes subject to security interest except
• Buyer in the ordinary course of business
• Takes free of security interest created by his
  seller unless he knows the sale is in violation
  of the secured partys rights
• Good faith buyer of consumer goods from consumer
  seller
• Unless perfected by filing

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Secured party v. Trustee/Lien Creditor

• Perfected secured party has priority over trustee
  in bankruptcy or other lien creditor
• Unperfected trustee or lien creditor wins
• Statutory liens e.g., repairmans lien
• Takes priority over perfected secured party
  unless lien law provides otherwise

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REMEDIES OF SECURED PARTY

• Repossess the collateral
• Self help - no breach of the peace
• Sell/dispose of the collateral
• Notice to buyer usually required
• Commercially reasonable disposition
• Strict foreclosure retain collateral