Label Parties: DEBTOR

Label Parties:

DEBTOR: §9102(28)

A)Person having an interest other than a SI in collateral whether or not person is the obligor

B)seller of accounts, chattel paper, payment intangibles, or promissory notes OR

C)consignee .

OBLIGOR §9-102(59)

Is accountable in whole or in part for payments of the obligation

SECURED PARTY: §9-102(72) A) a person in whose favor a SI is created or provided for under a SA, whether or not any obligation to be secured is outstanding

B) a person who holds an agric lien

C) a consignor

D )a person to which accounts, chattel paper, payment intangibles, or promissory notes have been sold

F) a person that holds a SI under

§2-401, 2-711(3)…

ATTACHMENT:

§9-203(a) SI becomes effective; enforceable against the debtor

§9-203(b) need to meet 3 reqs to attach unless agreement postpones it:

1-value has been given by the creditor to debtor

§1-204 value: a person gives value if:

1-creditor’s commitment to give future value 2-creditor’s preexisting claim against the debtor

3-Buyers acceptance of delivery under a preexisting K for purchase 4-Consideration ($$) sufficient to support simple K

2-debtor has rights in the collateral

debtor already owns or has possession of the collateral

in a sale of goods, collateral has been identified by the seller as intended for buyer §2-501 3-one of the following:

A) if debtor keeps possession need an authenticated (written) SA

def SA: §9-102(73) an agreement that creates or provides for a SI

SA needs to have 3 things:

1-words of grant (lang creating a SI in debtor’s collateral) 2-description (not supergeneric)

§9-108 sufficient description of the collateral that REASONABLY IDENTIFIES…

§9-504 comment 2 SA must have a more detailed description..not supergeneric 3-debtor signed it

B) when pledge SA by implication is oral

C) rare…stocks..cert has to be delivered …control…oral D) control…can be oral

**A,B,C,DSOF evidentiary doctrine Is the SI perfected????

Goal of perfection is to put everyone on notice that there is a SI in debtor’s property. To perfect we need ATTACHMENT AND some additional steps depending on what the collateral is…§9-308(a)

If SI attached secured creditor perfected if

cont to take necessary steps.. If no attachment secured creditor is unperfected

Perfect by:

FILING FILING FILING FILING FILING FILING FILING

**General rule:

§9-310 perfect by filing unless you fall within the exception…

**§9-502(d) it doesn’t matter if you file a FS before or after attachment…its best to file right away b/c you get priority if you later battle another perfected SC

§9-322(a)(1) 1

^st

to file or perfect wins…

Most common way to perfect is to file a FINANCING STATEMENT.

 Where do you file a FS????

§9-501 a central state wide filing system (usually sec of st office)

BUT check to make sure its not a fixture filing b/c gets recorded in real estate filing…

 what needs to be in a FS???

§9-502 must contain

 Name of debtor

 Name of SP

 Indicate collateral covered in FS §9-504

1. §9-108 reasonably identifies the collateral 2. can be broad… “covering all assets”

 who can file:

§9-509 can file initial FS or amendment if:

1- debtor authorized the filing of an authenticated record (ex: SA) 2- pursuant to §9-315(a)(1) SI in collateral continues

 what constitutes a filing???

§9-516(a) communication of a record to a filing office and tender the filing fee OR acceptance of the record by the filing office.

§9-516(b) the filing office can refuse to file for certain reasons…(need address of parties)

§9-516(d)however if they refuse it for any other reason, it is still effective, except against a purchaser (SP) of the collateral which gives value in reasonable reliance upon the absence of the from the files****

 if an incomplete FS is accepted …

§9-520 if the filing officer messes up and accepts an incomplete FS its still enforceable if at least meets §9-502 reqs and puts on notice…

**hurt party can sue st for negligence

 if it gets indexed incorrectly, it still effective §9-517

 §9-523 get a duplicate copy to protect yourself…

 errors in FS not seriously misleading:

§9-506(a) and comment 2 if FS at least complies with §9-502 reqs its effective even though it contains errors that are not seriously misleading.

 Errors in debtor’s name:

If using reasonable searching methods would’ve found the FS then its ok…§9-506(c)

 Trade names of debtor:

Individuals doing biz under trade names must be identified by their real names, not their company names. §9-503(c)

 Partnership of debtor:

If a partnership is the debtor, the FS is sufficient if it states the partnership name, it doesn’t have to name the indi partners §9-503(a)(4)

 Debtor changes the name:

§9-507(c) and comment 4 If debtor changes name (such as corp merger) that a FS becomes seriously misleading the filing ceases to be effective as to any new collateral by the debtor after 4months unless a new stmt or amendment is filed…

 new debtor:

what happens when collateral is transferred from original debtor to the “new debtor” who becomes bound under the SA?? Companies merge to create new entity..

step 1: def “new debtor” §9-102(a)(56)

step 2:when does one become bound by the SA as a “new debtor” see

§9-203(d) (makes sense b/c looking to see if attached)…

1 of 2 things will happen to make that person responsible:

1-by law other than art 9 (ex: corp law: mergers) 2-by K

step 3:if a new debtor is bound by the original SA that describes the collateral at issue, a new SA is not necessary. §9-203(e)

step 4: the original filing remains effective. However if the difference b/w the name of the original debtor and that of the new debtor makes the FS seriously misleading {def §9-506} then according to §9-508 got a 4 month “safe harbor” to refile…

 the FS is effective for a period of 5 yrs from the date of filing §9-515(a)

 ***unless a continuation stmt {def §9-102(27)} is filed 6 months

before the expiration of the 5 yrs SP loses perfection…§9-515(c)

 what happens when the loan is paid off???

 Termination stmt: §9-102(a)(79)

Whenever there is no outstanding secured obligation the SP must on authenticated demand by the debtor, within 20 days send the debtor a term stmt that SP no longer claims a SI under FS. The debtor can then file the term stmt.

If the SP fails to send the term stmt within 20 days after proper demand has been made, the debtor may recover for any damages suffered plus a stat penalty of $500 §9-625(b) and (e)(4)

 Consumer goods

B/c most FS expire in 5 years unless a cont stmt is filed no compulsion is placed on the secured party to file a termination stmt unless demanded by the debtor, except in the case of consumer goods.but remember if PMSI in consumer goods it wont be filed..so this would only really apply with motor vehicles…which goes into cert of title equals filing a FS and go into cert of title rules…{comment 2 §9-513}

§9-513(b) SP has:

(a)~1 month to comply if

{§9-513(a)(1)}applies…there is no more obligation by the debtor OR

(b)~20 days after SP receives a written demand from debtor

 If not consumer goods

§9-513(c)SP has 20 days from time receives auth demand to send the term stmt to debtor OR file a term stmt if:

1-no more obligation to give value…

4-debtor did not authorize the filing of a FS

 Releases:

§9-512 SP can release collateral described in the FS from the SI by filing an amendment to the FS…

 Bogus filings

 Filing a FS by someone who doesn’t have a right to file in ineffective §9-510(a)

 But how do you get it off the record???

1-debtor may file a term stmt §9-509(d)(2) comment 3 2-debotr may file a correction stmt §9-518

3-debtor may sue (for CL conversion)

4-dbtor can recover actual damages + punitives of $500 §9-615

PERFECT BY:

POSSESSION POSSESSION POSSESSION POSSESSION POSSESSION

one of the best ways to perfect is to take possession of the collateral (pledge

)§9-310(b)(6)

a pledge occurs when the creditor takes physical possession of the collateral and holds onto it during the term of the loan. Perfected as soon as reqs for attachment are met.

§9-313

(a-b) collateral perfected by possession includes:

-goods -money

-negotiable documents -instruments

-chattel paper

-certificated securities

c) provides that perfection by possession when dealing with a 3

^rd

party occurs when:

1-SP’s agent or 3

^rd

party actually takes possession and

2-authenticates a record saying that he’s holding the collateral for SP.

look to comment 4: notification of 3

^rd

party or acknowledgment that they will hold the collateral for SP (to be delivered in future) is not good enough…to have

possession must have actual possession.

look to comment 3: in determining whether a particular person has possession the agency principles apply…in order for SP to have actual possession he or his agent cant be closely linked with the debtor…

d)need attachment to perfect..and perfection continues as long as you have possession

e) certificated security…perfect by delivery

f)3^rd party not required to acknowledge that holding collateral for SP g) if he does acknowledge (comment 8)

1- provides that acknowledgment is effective even if wrongful to the debtor

2- makes clear that an acknowledgment does not give rise to any duties under this article..(for example if 3^rd party acknowledges, they do not become obliged to act on the SP{ direction or to remain in possession of the collateral unless it agrees to do so or other law so provides

h) SP still has possession even if he gives the collateral to a 3^rd party, if the person was instructed CONTEMPORANEOUSLY with the delivery:

1-

to hold possession for SP or

2-

redeliver the collateral to SP at a later time

 inventory in storage…possession…warehouse receipt…bailee…negotiable doc

 take possession of debtor’s inventory…have it placed in warehouse, and then take possession of the warehouse receipt. Since no one can get possession of the warehoused goods without surrendering warehouse receipt §7-403(3) possession of the document equals possession of the goods §9-312(c)

 since a negotiable document of title (warehouse receipt or bill of lading) represents the goods that are being held by the bailee perfection of the document by possession perfects in goods §9-312(c). SP can also file to perfect in the goods BUT its better to get possession §9-312(c)(2) says that if SP perfects by possession in the document it takes priority over any other method of perfection.

 If the goods are in the hands of the bailee who has not issued any

document, the SP can perfect by getting the bailee to authenticate a record acknowledging that bailee is holding goods for SP. §9-313(c)

 The bailee is not req to give such acknowledgment and if the bailee refuses, SP has to file FS in goods §9-313(f)

 Duration of perfection

SI perfected by possession lasts as long as SP has possession…§9-313(d)

 DUTY of SP in possession

-SP must use reasonable care in preserving and storing the collateral §9-207(a)

-SP has right to reimbursement for expenses in maintaining collateral §9-207(b)(1)SP -may keep any increase in value as collateral, but has to be returned to debtor §9-207(c)

 SP may repledge

the collateral as long as the debtor can eventually get it back §9-207(c)(3)

 SP right to use collateral only for the following:

A- for purposes of preserving the collateral for value B- pursuant to ct order OR

C- except for consumer goods, in the manner and to the extent agreed by the debtor

§9-207(b)(4)

 §9-312(e) temporary perfection…if there is new value, auto perfect for 20 days A SI in certificated securities, negotiable documents or instruments is perfected without filing or taking possession for a period of 20 days from time it attaches to the extent new value is given under an authenticated SA.

 Exception: if SP gives up possession to debtor, only protected if its to allow the debtor to sell:

§9-312(f) if you possess goods or negotiable documents and you give up possession to the debtor youll still be perfected for 20 days without filing but only if your giving up possession do the debtor can sell…

 9-312(g) a perfected SI in a certificated security or instrument remains perfected for 20 days without filing if the SP delivers it to the debtor for the purpose of:

1-ultimate sale or exchange

2-presentation, collection, enforcement…

 §9-312(h) when the 20 periods are over, perfection depends on whether you

complied with art 9 (file or possess)

PERFECT BY:

CONTROL CONTROL CONTROL CONTROL CONTROL CONTROL CONTROL

 Control of investment property:

§9-106 sends you to art §8-106

 Control of letter of credit

§9-107 the SP must:

1- get control of the LOC by receiving an assignment if 2- the SP obtains the consent of the issuer (bank)

 CONTROL OF DEPOSIT ACCOUNTS

*only way to perfect a deposit account is by control §9-312(b)(1)

*ways to get control:

§9-104 a SP has control of the account if:

1-the SP is the bank which the account is maintained

2-the debtor, SP, and bank agree in auth record that SP will have control 3-SP’s name also appears on the account

PRIORITY OF DEPOSIT ACCOUNTS:

§9-327 (2) GENERAL RULE:

{1

^st

to get control wins}

EXCEPT:

§9-327(3) the bank where the accounts are maintained gets priority exception to exception:

§9-327(4) SI perfected by control under §9-104(a)(3) {SP name appears on account}

beats the bank which the account is maintained.

PERFECT BY:

AUTOMATIC AUTOMATIC AUTOMATIC AUTOMATIC AUTOMATIC Perfection occurs automatically once attachment has occurred…

 PMSI in consumer goods §9-309(1)

§9-103(a)(2) a PMSI arises when the SP (or any other person) advances money or credit to enable the debtor to purchase collateral.

So get it 2 ways:

1- on credit (ex: I sell you my lap top but you cant pay me now PMSI)

2- loan money to purchase but only if that same money (value) is actually used in the transaction to get the collateral. (ex: I give you the money to buy a laptop and take a SI in it)

*although creditor is not req to file PMSI in consumer goods, should have a SA

§9-203(b)(3)(B) EXCEPTIONS:

1-motor vehicles

SI in cars must be perfected by notation on the cert of title, even if consumer good

§9-309(1) 2- FIXTURES

consumer goods that are to become fixtures req special steps…need a fixture filing

 Assignment of an insignificant portion of the debtor’s outstanding accounts or payment intangibles §9-309(2)

High % no automatic perfection (file) Lower % automatic

**disagreement in the cts Comment 4 to §9-309(2)

“casual or isolated transaction” need not file Gilmore’s test (drafter of org art 9)

If assignee is “both insignificant and ignorant” doesn’t have to file

***In Re Wood tells us the BOP is on the assignee

 A buyer of promissory notes and payment intangibles is automatically perfected

§9-309(3-4)

Priority Battles:

unperfected vs unperfected 1^st to attach wins §9-322(a)(3)

unperfected vs perefected

perfected beats unperfected §9-322(a)(2)

*knowledge is irrelevant

perfected vs perfected

§9-322(a)(1) 1^st to file or perfect wins

**remember §9-308 you can take steps to perfection before SI by filing or taking possession of the collateral before it attaches.

Priority of PMSI §9-324

 §9-324(a) general rule for consumer goods:

perfected PMSI in goods other than inventory or livestock has priority over a conflicting SI in the same goods if it is perfected within 20 days of debtor receiving possession of the collateral.

*a perfected SI in its identifiable proceeds also has priority

 §9-324(b) PMSI inventory

perfected PMSI in inventory wins if:

1- PMSI is perfected when the debtor receives possession of the inventory 2- the PM SP sends {§9-102(74)} an authenticated (written) notification to

the holder of the conflicting SI

3- the holder of the conflicting SI receives notification within 5 years before the debtor receives possession of the inventory AND

4- notification states that the PMSI party has or expects to acquire a PMSI in the inventory of the debtor and describes the inventory

 §9-324(c) says that (subsections 2-4 on notice) only has to be sent out if someone with a conflicting SI

1-filed a FS before on the inventory the PMSI party files or perfect

*receiving notice is the better position b/c it satisfies the policy behind art 9 which is to give notice…

**proceeds get priority too…

§9-324(c-d) livestock (same as inventory)

§9-324(f) software

§9-324(g) PMSI vs PMSI

seller takes priority over the lender

*if both PMSIs are lender go to §9-322(a)(1) race rule {1^st to file or perfect}

*comment 13: in part to property law {favors someone who parts with $$$ as opposed to property}

Statutory lien holder

Talking about a repair persons lien that arises automatically…

Art 9 only applies if battling a secured creditor…



unperfected vs statutory lien holder

holders of stat liens (auto mechanic, landlord, taxing authorities) beat unperfected unless st stat indicates otherwise §9-333.



perfected vs statutory lien holder

priority rule: §9-333(b) a possessory lien on goods has priority over a SI in the goods unless the lien is created by a statute that provides otherwise.

§9-333(a) possessory lien means an interest:

1- which secures payment or performance of an obligation for services 2- which is created by stat in favor of that person

3- whose effectiveness depend son that person’s possession of goods (ex: car repair person)

**§9-333 doesn’t say anything about consent…

BUYERS



unperfected vs BUYER(Regular) §9-317(b)

buyer (other than SP) of tangible chattel paper, documents, goods, instruments, or a security certificate (take free of unperfected SI) wins if:

 gives value and receives delivery of the collateral

*if collateral is an account, electronic chattel paper, or

investment property other than a certified security, there is no delivery req b/c there is nothing tangible to deliver §9-317(d)

 as long as they have no knowledge of the SI

 BEFORE its perfected (so dealing with an unperfected interest)

BUT if PMSI buyer might win

§9-317(e) if a PMSI creditor gets a 20 day grace period to file from the date get collateral (other than inventory)



secured creditor vs “BOC”

step 1: §9-201 Golden Rule {SP wins unless other rule applies}

step 2: §9-315(a)(1)

a SI in goods other than inventory continues in the collateral even in the hands of a good faith buyer for value. SI can be waived. So check SA to determine if SP gave the right to sell free of the SI…

if yes: END

if no: {and it’s a good…go to §9-320(a)}

step 3: §9-320(a): protects the buyer of goods

 A “BOC” (other than farm products)

{focuses on seller’s biz, so it can be the Buyers 1

^st

time buying…liquidation sales are not in the ord course of biz}

 Takes free of a SI created by buyers seller

{Buyer will only beat SI created by the person who sold it to them, Buyer will not beat a SI created and perfected before then…}

 Even if the SI is perfected and the buyer knows of its existence

{

Buyer can know SI and still win but cant know that his purchase violates SI, then they would lose

}

step 4: §1-201(9) ”BOC”

1. Buys in GOOD FAITH

2. WITHOUT KNOWLEDGE that the sale violates the SI 3. ORDINARY COURSE OF BIZ

4. IN THE BIZ OF SELLING GOODS OF THAT KIND

5. BUYER TAKES POSSESSION of the goods or has a right to recover

6. GIVES NEW VALUE

EXCEPTION to §9-320(a) comment 4

Buyer of farm products wont be protected. However Federal Food Security Act

preempts…

 Farmers are req to give their creditors a list of their buyers

 SP then send notice to buyers arranging payment

 Buyer who complies, take free of perfected SI

 Farmers who fail to inform creditors of their buyer identity are fined



secured party in possession beats “BOC” §9-320(e)

(a) and (b) do not apply if SP has possession under §9-313



consumer-to-consumer {garage sale buyer}

§9-320(b)

 a person who buys goods for use as consumer goods

 from a seller that was using them as consumer goods

 takes free of SI

 even if it was perfected

 if he buys without knowledge of the SI

 for value

 and before FS was filed on the goods* (so PMSI wont be protected)



Buyer of negotiable instruments:

buyers of instruments are “holders in due course”

§9-331(a)

…such temporary possession protection is given to “holders in due course”…without any knowledge of prior claims.

 Holder: has priority even over secured creditor

 Due course: buyer who takes for value in good faith

{want to encourage market for promissory notes, discounting them provides an incentive for marketing them}

*note: if bank perfects by possession they don’t lose priority immediately have a

20 day window for presentment §9-312(g)



buyer not in the ordinary course of business (future advances)

§9-323(d)

a buyer of the goods other than a buyer in the ordinary course of business takes free of a SI to the extent that it secures advances made the earlier of :

1-the time the SP acquires knowledge of the buyer purchase OR 2-45 days after the purchase

UNLESS as provided in subsection (e) { however if the advance is made pursuant to commitment before the above times SP wins}

Comment 6:

Buyer wins if gets the advance after the SP has knowledge that Buyer got the advance or if more than 45 days have passed since Buyer got the advance.

UNLESS the advances were made pursuant to commitment within 45 days and without knowledge of the purchase.

****of course a “BOC” takes free of a SI under §9-320 and are not subject to

future advances.



unperfected vs JLC

JLC beats unperfected §9-317(a)(2) Def of a lien creditor: §9-102(a)(52)

a) a creditor that has acquired a lien in the property involved by attachment, levy, or like

b) an assignee for benefit of creditors from the time of assignment

c) a trustee in bankruptcy from the date of filing of the petition or d) a receiver in equity from the time of appointment

exception to §9-317(a)(2) PMSI

§9-317(e) However if the SP files a FS and has an authenticated SA, he will still win



Lien creditor vs SP with future advance

Lien creditor has priority in future advances if the advance was made more than 45 days after he became a lien creditor unless:

1-the advance was made without knowledge of the lien creditor or 2-pursuant to commitment entered into without knowledge of the lien.

***original loan look to §9-317 break down:

SP wins if advance is made within 45 days…

SP wins if he doesn’t have knowledge of the lien creditor

SP wins if he does have knowledge BUT only if he committed without knowledge

Fixtures:

Have to comply with art 9

§9-102(44) fixture is a good so classify it as a type of good…

§9-102(41) to see if a good becomes a fixture look to st law to determine not art 9

(

case in book which sets out a 3 part test to determine a fixture:

1-good is annexed to property

2-uses of good conform to use of home 3-intent to make permanent)

to perfect

**start with §9-301(3)(A) file a fixture where the collateral is located

b/c a fixture is so close to real property may get an interest…through mortgage so to make sure creditor(bank) discovers art 9 problem…drafters included §9-501(2) office designated sec of st for filing FS BUT which sends you to §9-501(1) which tells you if a fixture file where you would make a property filing in that state

BUT if:

Transmitting utility §9-102(80) go to §9-501(b) which tells you where to file

for art 9 to protect against real property creditors make a fixture filing…meeting def in §9-102(40) that a fixture filing has to meet and satisfy both

 §9-502(a) what has to be in a FS and 1. name of debtor

2. name of SP

3. indicate the collateral covered by the FS

 §9-502(b) reqs to be a fixture filing 1. indicate that it covers a fixture filing

2. indicate that it is to be filed for record in real property records 3. provide a sufficient description to which the real property is related

4. if the debtor does not have an interest of record in the real property provide the name of a record owner

 §9-502(c) record a mortgage as FS

 a record of the mortgage is effective from the date filed as a FS filed as a fixture filing if:

1. the record indicates the goods or accounts it covers

2. the goods are or are to become fixtures related to property described in the record or the collateral is related to the real property described on the record 3. satisfies FS reqs

4. duly recorded

PRIORITY BATTLES:

2 mortagees=property law

2 secured creditors = §9-322 race rule art 9 vs real property(bank) =§9-334

art 9 vs real estate creditor:

for §9-334 to become activated must meet 2 reqs:

1-battle has to be over a fixture and

2-has to be b/w an art 9 creditor and a mortgagee (real property)

battle art 9 vs real property Analysis of priority:

Step 1: §9-201 golden rule SP wins Step 2:

Start with “race rule” in §9-334(e)(1) then look for exceptions…

Bank (real estate encumbrancer) wins b/c recorded 1^st before..art 9 loses(SP) ..if SP loses look for exceptions to help SP…

 Does §9-334(d) help?

Perfected SI in fixtures has priority if the debtor has an interest of record or in possession of property AND

1)SI is PMSI interest

2)arises before the goods become fixtures

3)SI is perfected by fixture filing before the goods become fixtures or within 20 days thereafter

 BUT §9-334(d) is subject to (h)

A SI in fixtures is subordinate to a construction mortgage if the record of the mortgage is recorded before the goods become fixtures and before the completion of construction.

 **§9-334(e)(2) SP wins if he perfects the SI by any method permitted (even by filing reg FS) AND the fixtures are readily removable:

(a)factory or office machines

(b)equipment not primarily used in the operation of real property

(c) replacement property exception…of domestic appliance that are consumer goods

 §9-334(f)(2) a SI in fixtures WHETHER OR NOT PERFECTED has priority over a conflicting interest of an encumbrance or owner of real property IF:

1-the encumbrancer or owner has an authenticated record, consented to the SI or disclaimed an interest in the goods as fixtures.

2-THE DEBOTR HAS A RIGHT TO remove the goods as against the encumbrance or owner.

{basically if the debtor has the right to remove the goods, SP wins}

Art 9 creditors (with perfected SI in fixtures) vs JLC

§9-334(e)(3)

art 9 creditor wins, don’t need to file a fixture filing..as long as perfected…

crop SI vs mortgagee

*under §9-334(I)..art 9 creditor in crops has priority over conflicting real property encumbrances covering the same crops...b/c we want to extend credit to framers…

accessions: §9-335

§9-102(1) says it’s a good attached to another good but doesn’t lose its identity as personal property,

ex: enginecar

§9-335

A- can have art 9 attach to item that becomes an accession B- priority- don’t have to do anything different

hypo:

bank has SA in snow mobile and all parts affixed to it…debtor grants Sears a PMSI in CD player on it…

priority battle

art 9 vs bank (art 9 in whole) C- use art 9 regular rules

2 perfected creditors §9-322

D-good accession is attached to is a good covered by an accession of title

commingling §9-336

(a) def of commingled goods (b) deals with attachment (c) deals with attachment

(d) perfection continues: if perfected before commingles SI cont (e) who has PRIORITY:

if dealing with a SI that attaches under (c) art 9 rules governs..

(c) says as provided in (f) battle not b/w whole vs part …here b/w 2 creditors interest in part…(go to 9-324 PMSI to get around race rule)…

hypo:

takes SI in machine in factory…D buys a ball bearing …gets lost in mass so cant identify your 10 balls…Sears has a PMSI and perfects….

Under (c) once commingled Sears SI jumps to the machine…

(d) perfection cont…

(e) who has priority: if dealing with SI that attaches under (c)-art 9 rules govern

Federal TAX LIENS:

A federal tax lien arises on assessment and covers all tax payers property real and personal…IRS must file in a designated place to beat any purchaser, holder of SI, mechanic lien or JLC

Unperfected vs tax lien Tax lien wins

Perfected vs tax lien

If perfected before tax lien filed safe.

pmsi vs tax lien

if the PMSI creditor perfects before it hands over collateral to the debtor, then it has priority over the tax lien

Can after acquired collateral be saved from a tax lien????

§6323(c) provisions for after acquired collateral

for after acquired collateral to be protected from a tax lien following must be met:

1-written SA exist before tax lien is filed 2-SI perfected before the tax lien is filed 3- SP makes the loan in the Ord Course of Biz

4-debtor acquires the collateral in the ord course of biz

5- the loan is secured by the after acquired collateral is made before the 46^th day from tax filing

6-the debtor acquires the collateral before the 46^th day from tax lien filing

protect SP from tax lien on future advances?

§6323(d) The SP has priority over a tax lien as to a future advance clause if:

1-the property (any kind) is covered by a SA entered into before the tax lien filing 2-the property is owned by the debtor at the time of the tax lien filing

3-the SI is perfected at the time of the tax lien filing

4- the future advance is made before the 46^th day from the tax lien filing

5- the SP is without actual knowledge of the tax lien when it makes the advance

Proceeds:

Proceeds is defined in §9-102(64)

a) what ever you get from the dale, exchange, or other disposition of the collateral b) whatever is collected on, or distributed on account of the collateral

 comment 13 says is broad enough to cover cash or stock dividends distributed on account of securities or other investment property that is original collateral.

c) rights arising out of collateral

d) to the extent of the value of the collateral, claims arising out of loss, nonconformity or interference with the use of, defects or infringements of rights in, or damage to the collateral

e) to the extent of the value of the collateral and to the extent payable to the debtor or secured party, insurance payable by reason of loss or nonconformity, defects or infringement of rights in or damage to the collateral

 §9-109(d)(8) although art 9 does not apply to SI in insurance policies, it will apply if the insurance policy is just proceeds {ex: collateral gets destroyed in fire and get $$$ insurance, that’s proceeds}

what type of proceeds comment 13-e to §9-102?

 §9-102(9) defines cash proceeds as $$$, checks, deposit accounts{and the like… covers property that is functionally equivalent to $$$}

 9-102(58) defines noncash proceeds as proceeds other than cash…

is the attachment of the creditor’s SI in the proceeds automatic or must they be claimed by the original SA??

§9-203(f) says that attachment of a SI in collateral gives the SP rights in the proceeds {provided by §9- 315…comment 3} also so its automatic in SA, unless agreed otherwise…

General rule priority in proceeds: §9-315(a) SP has a choice

1) {go after original collateral}

A SI continues in collateral notwithstanding sale, exchange, or other disposition thereof unless the disposition was authorized free of a SI by the SP in the SA or otherwise AND

 might have a problem if §9-320(a) protects the “BOC”

2) {go after proceeds}

also attaches in identifiable proceeds of the collateral

 what if the proceeds get commingled and are not identifiable?

 If goods…{hog feed} go to §9-336 SI is lost if commingled

 If $$$$ {mostly cash upon sale {gets deposited in bank account so how do you figure it out?}

Look to CL tracing rules:

2 ways:

1-funds proceeds were deposited in never drops below the amount of proceeds, so the proceeds are still considered to be there and the secured creditor can take them.

*spend your own $$$ first

2-once the fund drops below the amount of the proceeds SI drops right along with it.

Secured creditor will get the lowest balance the account fell to {even if $1 and goes back up to $1million}

=>the reason for this is b/c secured creditor failed to properly protect his proceeds, so they will get some $$$ back but the rest goes to pay the rest of the creditors

**BOP is on the debtor to show that there was a lower intermediate balance ….

So now we know if have a SI in collateral we have a SI in proceeds also, but for how long????

§9-315(c) says that a SI in proceeds is perfected if the SI in the original collateral is perfected…

BUT {its temporary}

§9-315(d) says that its perfection becomes unperfected on the 21

^st

day after SI in proceeds attaches… UNLESS

(1) the following conditions are met:

A) filed FS covers the original collateral AND B) the proceeds are collateral in which SI

 may be perfected by filing

 at office where the original FS was filed C) the proceeds are not acquired with cash proceeds (2) the proceeds are identifiable cash proceeds

(3) default:

if don’t meet the above rules…go out and file or possess tot

pe

rfect within 20 days

MULTISTATE TRANSACTIONS:

 General Rule: debtor’s Location governs perfection §9-301(1)

(where the collateral is accounts or general intangible…no physical form)

 Debtor is located according to §9-307:

 If debtor is an individual, he is located at his principal residence

§9-307(b)(1)

 If organization with 1 place of biz, at the place of biz; if org with more

than 1 place of biz, at its chief executive office §9-307(b)(2-3)

 Reg org, Corp is located in the st of incorporation §9-307(e)

 If org outside the US, location is DC §9-307(c)

 If the collateral has physical form (neg doc, goods, instruments, tangible chattel paper), the law where the jurisdiction is located will govern §9-301(3)

 If the debtor is perfected where he is located and moves, he must: §9-316(a) The SI remains perfected until THE EARLIEST OF:

1-FS lapse 5 yrs (perfection ceases under that jurisdiction) 2-have 4 MONTH GRACE PERIOD TO REPERFECT

3-1 yr after a transfer of collateral to a person that thereby becomes a debtor and is located in another jurisdiction (merger)

*§9-102 names “new debtor”

*§9-507 the FS naming debtor remains effective…

***§9-316(b) comment 3 if you don’t reperfect within the grace periods, you have

never been perfected against purchasers for value (another SP or Buyer)…not for

judgment of lien creditors…

§9-301 comment 4

the general rule {while a debtor is located in a jurisdiction the loackl law ofd that jurisdiction governs perfection and priority} does not apply to

 Deposit accounts §9-304

 Investment property §9-305

 LOC §9-306

 When SP has possession §9-301(2)

 Fixture filings§9-301(3)(a)

 Goods covered by cert of title §9-303 ex: problem 50

§9-303(c) is the gen rule which states that the local law of the jurisdiction under whose cert of title the goods are covered governs perfection from the time the goods are covered by cert of title until the goods cease to be covered.

when dealing with cert of title…and Debtor moves…

step 1: §9-316(d)

says don’t worry about the move. As long as it was perfected in previous st it none the less remains perfected until it expires

step 2: §9-316(e)

its not going to stay continued if fighting a purchaser (voluntary interest-SP or Buyer) have to reperfect the shorter of

1-before expiration in other jurisdiction or 2-within 4 months

step 3: §9-337

however purchaser get clean title if 7 reqs

According to §9-337 and comment:

Law favors non biz buyers. Buyer has protection and takes free of SI even if its been reperfected b/c the buyer gave value and goods were delivered with a clean cert of title and he had no knowledge of the SI so he should be protected.

Broken up into 7 categories:

1-by any method under law of another jurisdiction

2-this st issues cert of title that does not show that the goods are subject to the SI or contain a stmt that they may be subject to SI not shown on cert

3-Buyer of the goods other than person in biz of selling goods of that kind 4-takes free of SI if the buyer

5-gives value

6-receive delivery of the goods after issuance of cert of title and

7-without knowledge of SI