Debtor•Creditor•Secondary Obligor•Trustee in Bankruptcy•

Who are the Parties involved and what are there roles?I.

Consumer Goodsi.Farm Productsii.Inventoryiii.Equipmentiv.

Goods1.

Chattel paper (UCC § 9-102(a)(11))i.Instrument (UCC § 9-102(a)(47))ii.Investment Property (UCC § 9-102(a)(49))iii.Documentsiv.Letter of credit rightsv.

Quasi-Intangibles2.

Account (UCC §9-102(a)(2))i.Payment Intangible (UCC § 9-102(a)(61))ii.General Intangible (UCC § 9-102(a)(42))iii.Deposit Accounts (UCC § 9-102(a)(29))iv.

Intangibles3.

What is the collateral?II.

No cash phase for same filing office ruleLook at problems on 181 and 182 and do problems on 195

Classify the Collateral

Goods - all things movable at the time the SI attaches.

Are these goods “goods other than farm products which . . are held for sale”? - INVENTORY

Are these goods held by a businesses and are not for sale? -EQUIPMENT

Are the goods the raw materials resulting from D's operations in farming? - FARM PRODUCTS

Are the goods used or bought for personal, family, or household purposes” and not business use? - CONSUMER GOODS

Evaluate if goods change. For instance, inventory ---> equipment if the D uses the inventory for his own business purposes. ALWAYS evaluate in the hands of the D

Quasi-Intangibles

Is it a record or records that evidence both a monetary obligation and a security interest in specific goods? - CHATTEL PAPER

Is it a negotiable instrument or other writing that evidence the right to the payment of a monetary obligation (but which are not themselves either a security agreement or a lease) and are of a type that in the ordinary course of business are transferred by delivery? (Think promissory notes) - INSTRUMENT

Is it a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract, or commodity account? - INVESTMENT PROPERTY

CHATTEL PAPER•INSTRUMENT (poromssiorty notes)•INVESTMENT PROPERTY•DOCUMENTS•LETTER OF CREDIT RIGHTS•

Rights to Payment:

Intangibles

Is the collateral a right to payment of a monetary obligation, whether or ACCOUNTS •

GENERAL INTANGIBLES

Outline v3 - Analytical FrameworkTuesday, March 15, 2011

12:57 PM

Secured Transactions Page 1

Is the collateral a right to payment of a monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a State, governmental unit of a State, or person licensed or authorized to operate the game by a State or governmental unit of a State. Is it health-care- insurance receivables? -ACCOUNT

Is it a demand, time, savings, passbook, or similar account maintained with a bank. The term does not include investment property or accounts evidenced by an instrument? - DEPOSIT ACCOUNT

Is it any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or other minerals before extraction. Is it payment intangibles or software? - GENERAL INTANGIBLES

the claimant is an organization; orA.

arose in the course of the claimant's business or profession; and

i.

does not include damages arising out of personal injury to or the death of an individual? - COMMERCIAL TORT

CLAIMS

ii.

the claimant is an individual and the claim:B.

Is the claim arising in tort with respect to which:

Is it a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance? (The term does not include the right of a beneficiary to demand payment or performance under a letter of credit) - LETTER OF CREDIT RIGHTS

ACCOUNTS •PAYMENT INTANGIBLES (UCC § 9-102(a)(61))

•

GENERAL INTANGIBLE (UCC § 9-102(a)(42))•DEPOSIT ACCOUNTS (UCC § 9-102(a)(29))•COMMERCIAL TORT CLAIMS•

Fixtures - Is the good so attached to the real property that it falls under real property law?

i. The good is affixed to the land;ii. The good is adapted to be used with the

land; and

iii. The parties intended that the good be made a permanent addition to the land.

i. Extent to which:Criteria to Determine if Fixture:

• A good that becomes a fixture remains a good (equipment, consumer goods, etc.)

HOWEVER:

After-Acquired Property (Floating Lien) Must be specified in the K (Security Agreement) - NO NEED, HOWEVER, FOR INVENTORY & ACCOUNTS RECEIVABLE - THEY ARE AUTOMATIC

*Cars - certificate of title requires notation on certificate of title - NO AUTOMATIC PERFECTION FOR CARS

Characterize the Parties

Attachment - Did the Creditor Attach?

Did the C give value to the D (any consideration, security for preexisting claim, binding commitment to extend credit, or accepted delivery under preexisting contract)?

1.

Did D have rights to the collateral or power to transfer the rights in 2.

If all are in place the party is a SECURED PARTY; otherwise, they are an UNSECURED PARTY

Secured Transactions Page 2

the collateral?2.

Was the security agreement that was authenticated by Debtor, OR

i.

Does C retains possession of the collateral (for non-certificated securities), OR

ii.

(For certificated securities): collateral is in registered form and the certificate has been delivered to C pursuant to the security agreement?

iii.

Does the SA adequately describe the collateral and is not super-generic?

iv.

Do C and D have a security agreement between them?3.

If the Party Did Not Buy Collateral from the D...

Did the party buy the collateral from the D?1.Does the C have a security interest?2.If C has a security interest, is it perfected?3.

If YES, the apply 9-320(a) - buyer is a BUYER IN THE ORDINARY COURSE

OF BUSINESS

i.

If YES, then apply 9-320(b) - buyer is a BUYER OF CONSUMER

GOODS

1)

If NO, then ask if the BUYER buys without knowledge of the SI, for value, primarily for personal, family or household purposes, and before the filing of the filing statement.

ii.

Is the BUYER buying from a person in the business of selling goods of that kind (and not a pawnbroker)?

1.

If 1 = YES, then the party is BUYER. If 2 and 3 are YES, then ask:

If 1 = YES, then party is a BUYER. If 3 = NO (2 can be YES or NO at this point), then party is a TRANSFEREE. Apply 9-317(b) - party is a BUYER

THAT RECEIVES DELIVERY. Buyer takes free of SI if buyer gives value and receives delivery of the collateral w/o knowledge of an agricultural lien or SI and before it is perfected. If tangible collateral, the collateral must be delivered. If intangible, the collateral need not be delivered

Did the party lease the goods? LESSEE (9-317c)

Did the party get a license to use the general intangible(s)? LICENSEE (9-317(d))

Did the party give collateral to secure value from the C? If YES, then the party is DEBTOR

Did the party acquire a lien through a judicial process? LIEN CREDITOR/TRUSTEE IN BANKRUPTCY

9-203(f): “The attachment of a security interest in collateral automatically gives the secured party the rights to proceeds provided by section 9-315.”

○

Did it attach in proceeds? -

Did the SI attach in fixtures?

Vendor PMSI: Seller gives PMSI directly to Buyer•Lender PMSI: Bank gives money Buyer who uses to purchase the collateral form Seller

•

Is the SI a PMSI? If so, then the party is a SECURED PARTY and the interest is AUTOMATICALLY PERFECTED;

otherwise, they are an UNSECURED PARTY

PERFECTED OR UNPERFECTED

What is the collateral? How is it supposed to be perfected? Was the collateral perfected like this?

Farm Products(1)Consumer goods(2)Equipment(3)Inventory(4)Fixtures(5)Documents(6)Certificated securities(7)Instruments(8)Tangible chattel paper(9)Agricultural Lien (Unless state (10)

Goods

If NO, then NOT sufficienti.

Does FS contain 1) D's name, 2) SP's name, and 3) the collateral covered or a real property description (for fixtures or timber extracted)?

a.

If YES, if D is an org, does FS i.

Does FS contain 1) D's mailing address, 2) SP's mailing address, and 3) whether D is an individual or org?

b.

FINANCING STATEMENT1. If YES, then Perfected Secured Interest

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Agricultural Lien (Unless state statute says otherwise)

(10)

If NO, then filing office MUST REJECT (But if it

does take it and it is

sufficient, then FS is

GOOD)

1)

contain the type of org; the jurisdiction; and either an organization ID number or an indication the D does not have such a number?

If YES, then filing is properi.

Did D authorize the filing in an authenticated record or authenticate a SA?

c.

1) New Debtor -

• No New SA needed

• No new FS needed unless the business

structure resulted in

a seriously

misleading name change (like Phillip

Morris --> Altria)

Whether the new company is bound by the terms of the existing security agreement (especially the after-acquired property clause) and whether perfection continues turns on whether it is a “new debtor.”

i. If D changes his name or there is a new debtor, there must be a NEW FINANCING STATEMENT. Not necessary if just disposing of collateral. However, IF NAME CHANGE the original FS is effective up to four months unless it is amendment

SUMMARY/ADD. NOTES: If a-c are all set, then FS is good. If (b) is not set, but filing office takes it and (c) is all set, then if the FS is sufficient filing is GOOD. If there are errors, they must not be "seriously misleading" (if standard search logic would have found it). If D's name is a registered org, cannot use nickname but only legal name. Collateral description can be supergeneric.

d.

Perfection by possession is valid for goods (9-313a)

a.

In re Rolain, p. 95i.An agent can be the possessor, but there cannot be possession by the debtor

ii.

Possession by Agent - 9-313(a) & cmt. 3;

b.

A SP takes possession of collateral in the possession of a person other than the debtor when:

i.

The person in possession authenticates a record acknowledging that it holds possession of the collateral for the SP’s benefit; or

ii.

The person take possession of the iii.

Possession by Bailee - 9-313(c)c.

POSSESSION2.

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The person take possession of the collateral after having authenticated a record acknowledging that it will hold possession of collateral for the SP’s benefit.

iii.

SUMMARY/ADD. NOTES -Perfection only lasts as long as the possession lasts.

d.

• Vendor PMSI > Lender PMSI

goods that become fixtures;○

goods subject to state certificate of title laws;

○

When federal statute, regulation, or treaty that preempts the perfection rules of article 9

○

Exceptions:•

PMSI in Consumer Goods (UCC 9-301(1))

a.

PMSI in Software (9-103)b.

Isolated assignment of account or payment intangible (as long as it does not assign a significant part of assignor's outstanding accounts) - 9-309(2)

•

Sales of payment intangibles and promissory notes - 9-309(3), (4)

•

Assignmentsc.

AUTOMATIC PERFECTION3.

Deposit Accounts (Only Way)1.Certificated Security2.Investment Property3.Electronic Chattel Paper4.Letter of Credit Rights5.

If YES, then the control is automatic.

1)

If NO, then D, SP and bank must agree for SP to have access to account by DACA. Else, SP must become the bank's customer on the account

2)

Exception - security interests in deposit accounts as original collateral in consumer txns are excluded from Article 9.

3)

Is SP a bank?i.Deposit Accounts (UCC 9-104)a.

the D, the SP, and the broker have agreed that the commodity intermediary will honor the instructions of the SP

i.

Investment Property (UCC 9-106, 8-106)

b.

A secured party has control of a letter-of-credit right to the extent of any right to payment or performance by the issuer or any nominated person if the issuer or nominated person has consented to an assignment of proceeds of the letter of credit under Section 5-114(c) or otherwise applicable law or practice.

Letter of Credit Rightsc.

CONTROL (UCC 9-314)I. If YES, then Perfected Secured Interest

a. InventoryPMSI in Non-Consumer Goods(1)

PMSI in Fixtures that are (2) i. PMSIs in CP or Instruments that a. PMSI-Inventory >

1. PMSI in Inventory

Secured Transactions Page 5

a. InventoryPMSI in Fixtures that are Consumer Goods

(2)

(3) PMSI in software

i. PMSIs in CP or Instruments that are proceeds of inventory;

ii. Proceeds of CP and identifiable cash proceeds of inventory (checks, cash, money orders, etc.)

1) PMSI is perfected when D receives possession of inventory

2) PMSI party sends authenticated notice to holder of conflicting interest

3) Holder of conflicting interest receives notice within 5 years before D receives possession of inventory

4) Notification states that the person sending notice currently has/expects to acquire a PMSI in the inventory AND describes the inventory

iii. If:

a. PMSI-Inventory >

2. PMSI in Software > Conflicting interest in the same collateral

•

• The PM collateral secures an obligation that is not a PM obligation;

• Collateral that is not PM collateral secures the PM obligation; or

• The PM obligation has been renewed, refinanced, consolidated, or restructured.

• 9-103(f) & Cmt. 7(a).

9-103(f) Dual Status Rule: A PMSI in non-consumer goods doesn’t lose its status as such even if

• Transformation Rule - PMSI lien is transformed into a on-PMSI, b/c the new loan is not been used for purchasing goods, so PMSI interest may be voided by Debtor

Proceeds Attachment recap: a SP’s interest in collateral attaches automatically to identifiable proceeds received by a debtor upon disposition of that collateral.

•

Sometimes perfection continues after the 20-day grace period.

○

Temporary Automatic Perfection: perfection of a SI continues in proceeds for a 20-day grace period (after the SI attaches to proceeds) 9-315(c).

•

A security interest in cash proceeds continues indefinitely so long as the proceeds can be identified (money, checks, deposit accounts, or the like)

•

If the debtor uses cash proceeds to buy new collateral, the SI continues in the collateral for only 20 days unless the financing statement indicates the type of collateral purchased (or the SP takes steps to perfect within the

•

Cash Proceeds Rule1.

Continuation of Perfection: On the 21st

day, perfection lapses unless perfection is continued as provided in 9-315(d). 3 potential ways perfection could continue per 9-315(d):

•

Secured Transactions Page 6

takes steps to perfect within the 20-day window). 9-315(d)(3).

[SI in the cash paid to another is governed by the 9-332 transferee rules]

•

If (1) SP would file as to original collateral and proceeds at the same place AND (2) there was No Cash Phase, then SP is perfected in the proceeds

•

Ex. Classic example: Inventory Accounts or Chattel paper

□

(for as long as the original FS is perfected).

Same Filing Office Rule2.

Perfect as to proceeds in the 20-day window.

3.

PMSIs beat non-PMSIs so long as they are perfected before or within 20 days of delivery (9-324). Inventory PMSI has notice requirements (no 20-day rule; must perfect before delivery)

•

• PMSIs

9-308(a): a security interest becomes perfected when it has attached and when the applicable steps for perfection have been satisfied.

•

(Attachment/Perfection requirements can occur in any order but perfection is not effective until both are met.)

•

Tacking allows a security interest to be perfected by one method and remain continuously perfected if there is a shift to another method of perfection (provided there is no gap period of non-perfection)

•

SUMMARY/.ADDITIONAL NOTES:

Fixtures

i. Description of the real estateii. Indication that filed in real

property records

iii. Indication of types of collateral covered

iv. Name of record owner, if D does not have interest of record in real property

a. RequirementsI. Perfection by Fixture Filing

i. D has interest of record or possession of real estate

ii. Interest arises before goods became fixtures

iii. SI perfected by fixture filing before goods became fixtures or within 20 days after

a. Has priority over real estate owner if:II. PMSI in Fixtures

Secured Transactions Page 7

PRIORITY

If ACCOUNTS or GENERAL INTANGIBLES, then first to file WINS (9-322a)

•1) In good faith;2) in the ordinary course of the purchaser’s business; 3) the purchaser gives new value and;4) takes possession of the CP (or obtains control of the CP); and5) the CP doesn’t indicate that it has been assigned to an assignee other than the purchaser.

CP Purchaser beats SI in CP claimed Merely as proceeds of a SI in inventory if:

9-330(a): Chattel Paper purchaser v. Security Interest Claimed merely as proceeds.•

1. The purchaser gives new value2. takes possession of the CP (or obtains control of the CP) in good faith;3. in the ordinary course of the purchaser’s business and without knowledge that the purchase violates the rights of

the Secured Party. - Knowledge is defined by 9-330(f): Knowledge.

• CP Purchaser beats SI in CP claimed other than merely as proceeds if:

9-330(b): Chattel Paper purchasers versus other security interests in Chattel Paper. •

○ The purchaser gives value;

○ takes possession of the instrument in good faith and;

○ without knowledge that the purchase violates the rights of the secured party. - Knowledge is defined by 9-330(f): Knowledge.

• A purchaser of an instrument has priority over a security interest in the instrument perfected by a method other than possession if:

9-330(d): Instrument purchasers v. perfected SI in Instruments•

If CHATTEL PAPER or INSTRUMENTS

Is the collateral a right to payment (ACCOUNTS, GENERAL INTANGIBLES, CHATTEL PAPER OR INSTRUMENTS)?

If so, remember perfection is by CONTROL ONLY

Control (9-104) beats non-control.•Conflicting parties with control rank according of time.•

Bank holding deposit account beats conflicting SI○

Unless conflicting SP perfected via 9-104(a)(3)○

• Except

9-327:

Bank’s setoff rights beat conflicting SI in deposit account•Unless conflicting SP perfected via 9-104(a)(3)•

9-340: Setoff Rights

Priority Rules are:

Is the collateral a DEPOSIT ACCOUNT (9-327)?

If the money is spent on something else, SP has to reperfect within 20 days (unless the financing statement covers the new stuff).

•

If the money is paid to someone else…•

9-315(b)(2): SI continues indefinitely in identifiable cash proceeds.

(a) money; or •(b) funds from a deposit account •takes the money/funds free of a security interest •unless the transferee acts in collusion with the debtor in violating the rights of a secured party. •

9-332 Transferee of:

If YES, then Perfection:Are there CASH PROCEEDS (9-332)?

• Residual Rule SP v. Mortgagee over fixtures: Mortgagee wins. 9-334(c)

•• Purchase Money Priority 9-334(d) - PMSI

• First to File or Record 9-334(e)(1)

• Readily Removable Collateral 9-334(e)(2)

• Non-reliance Creditor 9-334(e)(3)

• Consent or Right of Removal 9-334(f)

Exceptions

Is there a FIXTURE?

Secured Transactions Page 8

•

Unperfected SI

Perfected SI

BIOCB Buyer of Consumer Goods

LIOCB Lien Creditor

Unperf. SI

First to attach wins

Perf. SI wins • Buyer who 1) gives

values; 2) takes delivery; 3) w/o knowledge of SI and 4) before perfection -WINS

Tangibles:

• Buyer who 1) gives value; 2) w/o knowledge of SI; and 3) before perfection -WINS

Intangibles:

• Buyer who 1) gives values; 2) takes delivery; 3) w/o knowledge of SI and 4) before perfection -WINS

Tangibles:

• Buyer who 1) gives value; 2) w/o knowledge of SI; and 3) before perfection -WINS

Intangibles:

•

• Lessee who 1) gives values; 2) takes delivery; 3) w/o knowledge of SI and 4) before perfection -WINS

Tangibles:

• Licensees who 1) gives values; 2) takes delivery; 3) w/o knowledge of SI and 4) before perfection -WINS

Intangibles:

• Except Lien Creditor v.

Filed but

Unattached

SI: Lien Creditor loses 9-317(a)(2)(B) & cmt. 4.

• Remember: Trustee in Bankruptcy = Lien Creditor

Lien Creditor Wins.

Perfected SI

Perf. SI wins

First to file or perfect wins

Buyer who 1) buys goods; 2) in good faith; 3) without knowledge that the sale violates the rights of another; 4) in the ordinary course of business; 5) from a dealer of those kinds of goods (inventory) - not farm products and not a pawn star - WINS

Buyer who 1) buys consumer goods; 2) gives value; 3) acts w/o knowledge of a SI; and 4) before filing of FS - WINS

Lessees who 1) leases goods; 2) in good faith; 3) without knowledge that the sale violates the rights of another; 4) in the ordinary course of business; 5) from a dealer of those kinds of goods (inventory) - not farm products and not a pawn star - WINS

Licensees who 1) has a license in general intangibles; 2) in good faith; 3) without knowledge that the sale violates the rights of another; 4) in the ordinary course of business; 5) from a person who licenses general intangibles - WINS

CONSIGNMENTS

•• Regardless of form.

• Person delivers goods to a merchant.

• For purposes of sale. (OK, so a “consignment”)

• Aggregate value of the goods for each delivery is $1,000 or more. (limiting definition to big-ticket transactions)

• The goods are not consumer goods immediately before delivery. (limiting definition to businessy transactions)

• The transaction does not create a security interest that secures an obligation. (if this is the case, then it’s a Secured Transaction and all of Article 9 applies).

The Transaction

•

○ That is, this is not a situation where we know that the dealer is selling the consignor’s stuff.

• Deals in goods of the kind delivered under a name not the name of the person making delivery.

○ That is, this is not a situation where we know that the dealer is selling the consignor’s stuff.

• Is not an Auctioneer

• Is not generally known by creditors to be substantially engaged in selling the goods of others.

The Merchant

I. ARTICLE 9 CONSIGNMENT

Secured Transactions Page 9

That is, this is not a situation where we know that the dealer is selling the consignor’s stuff.

•

Consignor = SPConsignee = DNo A6 default/enforcement

Note: 9-324 PMSI Notice requirements will apply!

• Treated as a PMSI in inventory.

• Consignor must perfect interest by filing a financing statement.

A9 Consignment in Action

i.1. The consignor reserves title to the delivered goods until they are sold;2. The consignor reserves the right to demand return of the goods at will;3. The consignee has the right to return goods which are not sold;4. The consignor exerts control over the sale price;5. The consignee is obligated to segregate the consigned goods from its own inventory;6. The consignee is obligated to hold the proceeds of sales and forward them to the consignor;7. The consignee is required to keep separate books and records pertaining to the goods;8. The consignor has the right to inspect the goods and the books, records, and premises of the consignee;9. Shipping papers and other documents refer to the transaction as a consignment;

10. The risk of loss remains with the consignor.

Factors Indicating True Consignment

1.

◊ Consignor/SP must perfect.

◊ 9-600 enforcement provisions apply

If intended as security, then Article 9 applies fullyIs it a consignment or a consignment intended as a security? (Do the goods go back to consignor?)

2. If an Article 9 consignment, SP must perfect its security interest, but part 6 enforcement provisions don’t apply. If it’s a non-Article 9 consignment. State law would govern the rights of the parties.

If a consignment, is it an Article 9 Consignment?

ii. Why Consignments matters

II. TRUE CONSIGNMENTS

DEFAULT, ACCELERATION, ENFORCEMENT, REMEDIES

DEFAULTI.

NonpaymentNon-insurance of collateralD's removalDestruction or loss of collateralD's bankruptcy

Default is defined by the SA, NOT in Article 9. May include:

“Acceleration” is a contractual term that allows the secured party to declare all amounts owed by the debtor immediately due.

1) A SP need not pursue its Article 9 remedies. It can instead obtain an in personam judgment on the debt, then

use the judicial procedures available within the jurisdiction to enforce the judgment.

Reducing a claim to judgment (Judicial Enforcement) 9-601(a)(1)

2) 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.

◊ uncertain definition.

◊ Potential for significant liability: 9-625

But breach of Peace:

So, often self help repo. doesn’t occur without debtor’s consent

Repossession 9-609 (Dispose or keep the collateral)

3) 9-610(a): after default, a SP may sell, lease, license, or otherwise dispose of collateral.

◊ The fact that a greater amount could have been obtained by a different method does not, by itself, show unreasonable disposition. 9-627(a).

◊ Can be public or private proceedings, by contract, as unit, parcels , and at any time and place

9-610(b): every aspect of a disposition of collateral must be "commercially reasonable". See 9-627

Disposition 9-610

Article 9 Remedies

Secured Transactions Page 10

◊ Can be public or private proceedings, by contract, as unit, parcels , and at any time and place

◊ Must be notice in accordance with the law

i) a secured party sends to the debtor and any secondary obligor an authenticated notification of disposition; or

ii) the debtor and any secondary obligor waive the right to notification.

Notification date - In this section, "notification date" means the earlier of the date on which:

◊► D► Any secondary obligor► Everyone who has notified Creditor of interest before notification date► Anyone on file, who, 10 days before notification date, held a SI in the collateral perfected by a FS

that identifies the collateral and is indexed under the D's name and filed in the correct office

Must give notice to:

Notification requirements for commercially reasonable dispositions: 9-611(b)-(c), 9-612, 9-613, 9-614

4)

i) may notify an account debtor or other person obligated on collateral to make payment or otherwise render performance to or for the benefit of the secured party;

ii) may take any proceeds to which the secured party is entitled under Section 9-315;iii) may enforce the obligations of an account debtor or other person obligated on collateral and exercise the

rights of the debtor with respect to the obligation of the account debtor or other person obligated on collateral to make payment or otherwise render performance to the debtor, and with respect to any property that secures the obligations of the account debtor or other person obligated on the collateral;

iv) if it holds a security interest in a deposit account perfected by control under Section 9-104(a)(1), may apply the balance of the deposit account to the obligation secured by the deposit account; and

v) if it holds a security interest in a deposit account perfected by control under Section 9-104(a)(2) or (3), may instruct the bank to pay the balance of the deposit account to or for the benefit of the secured party.

► 9-607(a)(1) permits the SP to notify the account debtor to make the payments directly to SP. ► The SP may enforce the account debtor’s obligations (that is, exercise the debtor’s rights with

respect to the obligations). 9-607(a)(3).

Collection of Rights to Payment

If so agreed, and in any event after default, a secured party:Collection and enforcement 9-607

5)

◊ The debtor may expressly agree to the terms of the acceptance in a record authenticated post-default.

◊ Consent by silence sometimes is permitted

Strict foreclosure is allowed if the debtor consents.

9-620 permits the acceptance of collateral in full or partial satisfaction of the debtor’s secured obligation, a process called strict foreclosure.

i) Transfers to a [good faith] transferee for value all of the Debtor’s rights in the collateral; ii) Discharges the SI under which the disposition is made;

iii) Discharges any subordinate security interest or other subordinate lien (subject to some exceptions).

Effect of Disposition 9-617

i) Discharges the obligation (the debt) to the extent consented to by the debtor; ii) Transfers to SP the Debtor’s rights in the collateral

iii) Discharges the SI that is the subject of the Debtor’s consent;iv) Discharges any subordinate SI’s or liens; v) Terminates any other subordinate interest.

Acceptance of Collateral (9-622):

(Acceptance of Collateral) - Strict Foreclosure 9-620

i. Debtor may redeem collateral by paying the full amount of the debt plus expenses (attorney's fees, reasonable expenses) incurred by SP in repossessing the collateral and preparing for sale.

ii. D cannot waive right to redemption prior to default, but may do so after default, in writing (9-624)

1) 9-614(1)(C) provides that the debtor be notified of its right to redeem.iii. Required notice in consumer transactions:

iv.1) Criminal liability (for breach of peace)2) Tort liability (may include trespass, conversion)3) Denial of Deficiency Judgment

If SP violates any default provisions:

II. DEBTOR'S RIGHTS OF REDEMPTION OF COLLATERAL (9-623)

Except to the extent precluded by non-Article 9 law, the rights to pursue judicial enforcement and Article 9 enforcement are “cumulative and may be exercised simultaneously.” 9-601(c) & offic. cmt. 5

CHOICE OF LAW

Secured Transactions Page 11

CHOICE OF LAW

• The general rule: the law of the debtor’s location governs issues of perfection, the effect of perfection, and priority (with respect to both tangible and intangible collateral, whether perfected by filing or automatically). 9-301 (1) & cmt. 4

• 9-307(b) An individual debtor is located at the individual’s principal residence.

• A 9-307(e) a registered organization debtor is located in the state of organization.

• Location of the Debtor

• 9-307(c) for debtor located in a foreign jurisdiction, the location will be that jurisdiction if it provides a means of public notice and obtaining priority over lien creditors. Otherwise, the location is Washington, D.C.

9-307(b), a non-registered organization debtor is located at its place of business if it has one, at its Chief executive office if it has more than one place of business

• Agricultural liens (9-302)

• Goods covered by a certificate of title (9-303)

• Deposit Accounts (9-304)

• Investment property (9-305)

• Letter of credit rights (9-306)

• Possessory security interests (9-301(2))

• Security interests perfected by filing a fixture filing (9-301(3)(A));

• Security interests in timber to be cut (9-301(3)(b));

• Security interests in as-extracted collateral (9-301(4))

• Exceptions

•• (2) While collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfe ction or

nonperfection, and the priority of a possessory security interest in that collateral.

Exception: Possessory Security Interest (9-301(2))

•• Goods subject to a fixture filing and timber yet to be cut: law in the location of the collateral governs perfection, effect of

perfection/non-perfection, and priority. 9-301(3)

• As-Extracted Collateral: The local law of the jurisdiction in which the wellhead or minehead is located governs perfection, the effect of perfection or nonperfection, and the priority. 9-301 (4)

• Agricultural Liens: While farm products are located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of an agricultural lien on the farm products. 9-302

Exceptions: Land related collateral

•• Perfection generally requires notation on the certificate. Filing a financing statement is “neither necessary nor effective.” 9 -311.

○ … from the time the goods become covered by the certificate of title until the goods cease to be covered by the certificate of title. 9-303 (c).

• Choice of Law: law of the title state governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in goods covered by a certificate of title

Exception: Goods Covered by a Certificate of Title

Lowest Intermediate Balance Rule

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