Secured Transactions-Bar Exam

Trxn intended to creat a security interest in personal property or fixtures. I generally inolves a sale on credit or loan in which the seller or the lender obtains a lien on some or all of the debtor's property as security for payment. Look for: 1) a crdit transaction and 2) an agreemetn that creates a lien inf avor of the creditor in the debtor's personal property to secure the debt.

The agreemnt (contract) that creates the security interest between the debtor and the secured party (lender, seller, or other person)

An interest in personal preoprty or fixtures (so, not land) which secures payment or performance of an obligation. It is a contingent property interest in the debotr's collateral that the debtor grants to the creditor. When the contngency, which is default, occurs, the property interest springs to life andthe creditor has rigths in the debtor's collateral.

The property subject to a security interest. Collataeral is property that the secured party can repossess upon default to insure that the debt is paid.

Seller-financed PMSI: Secured party sells debtor collateral on credit and retains a security interest in the item sold.
Financer-financed PMSI: consists of 1) a loan to a debtor that enables the debtor to buy SPECIFIC collateral, and 2) the creditor takes a security interest in the specific collateral. NOTE: the loan proceeds or credit must actually be used to acquire the collateral.

A secured party often will want to obtain a security interest no only in debtor's present property, but also in property that the debtor will obtain int he furture.. This is permissible.

A secured party often contemplates making future loans to the debtro and wants to secure these future advances in the present security agreement. This is permissible. A new securty agreement is not needed.

This is how you become a "secured creditor." Deals with those steps legally required to give the secured party a security interest in teh collateral that is effective as against the debtor. Once a security interest attaches, it is effective against the debtor and the credity has all the rigths of a secured creditor under article 9.

Deals with those steps legally required to give teh secured party an interest int he collateral that is effective as against the worled (other creditors). In general, perfection is the process of giving public notice of the security interest to the world.

Document generally sued to provide public notice of th esecurity intrerest, an d so to perfect the security interest.

1) Goods (tangible, movable personal property--include unborn young of animals and growing crops). Goods are futher classified by how the debtor is using the collateral and the possibilities are: a) Consumer goods--used OR brought for use primarily for personal, family or houshold purposes; 2) Equipment--used OR bought for use primarily in business (also the catch-all category if no other categories fit); 3) Farm products--crops or livestock or supplies used or produced inf arming operations or produts of crops or livestock in their unmanufactered states (such as ginned cotton, woll-clip, maple syrup, mil and eggs) if they are in the possession of a debtor engaged in farming operations; 4) Inventory: held py a person who wholds them for sale or lease or to be furnished under service contracts; materials used or consumed in a business in a short period of time. 2) Semi-intangible and intangible property (8 types): a) Instruments (commercial paper)--negotiable instruments and any other writing which evidences a right to the payment of a monetary obligation, and which arein the oridanry course of business transferred by delivery w/ any necessary indorsement or assignement (does not include investment property); b) Documents--a document which in the regular course of business is treated as evidencing that the person in possession of it is enttiled to receive,hold and dispose of the document and thegoods it coveres (bill of lading or warehouse receipt, usually!); c) chattle paper: a records or records which evidence BOTH a monetary obligation (promissory note, e.g.,) and a security interest in or a lease of specific goods. d) investment property--includes items like stocks, bonds, mutual funds, and brokerage accounts containing such items; e) Accounts--a right to payment (not evidence by an insturment or chattel paper) 1) for good, 2) for services (usually one of these first two!), 3) for real property, etc. Health care insurance receivables are included. A contractual obligation arising from a loan of money is not an account; f) Deposit accounts--an account maintained with a bank. But these are ONLY for business bank accounts (nonconsumer deposit acounts); f) Commercial tort claims--a claim arising in tort with respect to which the claimaint is an organization (e.g., parntership or corporation), OR where the claimaint is an individual and the claim arose in the claimaint's business or profession and does not include damages for personal injury or the death of an individual; h) General intangibles: any personal property not coming w/in the scope of the other definitions (e.g., software, patent and TM rights, copyrighs, good will). A general intangible under which teh account debtor's principal obligation is a monetoary obligation is a payment intangible.

1) any transaction, regardless of form, that creates a security interest in personal property or fixtures by contract;
2) an agricultural lien
3) a sale of accounts, chattle paper, payment intangeibles, or promissory notes (unless the sale is for the purposes of collection only , or the sale is party of the sale of a business);
4) certain consignements;
5) a secured sale disguised as a lease---question here is, at the time the parties entered into the transaction, was it reasonably likely that the "lessor" would get the item back when it still had meaningful economic value? If no, then it is a sale w/ a security intererst in substance.

1) A security agreement--unless the collateral is in the possession or control fo the secured party pursuant to an agreement, a written (or electronically stored) security agreement is requried. Most often, the debtor wants possession fo the collateral, so a writing is necessary. FORM OF AGREEMENT, when written: 1) the agreement must be evidence by a record and must show an intent to create a security interest, the agremeement must be "authenticated" but the debtor, the agreement msut contain a describption fo the collateral so that it is "reasonably identifiable"--example (a TV, fridge, "chattel paper" or "documents" ok too, but NOT "all debtor's property).
2) the Secured party must have given value--this is liberal, any consideration sufficient to support a simpel contract is enough, even past consideration and a promise to pay (the debtor always gives this, so question focuses on secured party).
3) the debtor must have rights in the collateral b/c the debtor cannot grant a contingent property interest in property that it does not own.

DOESN"T MATTER when these three conditions happen or in what order, once you have all three you are a secured creditor.

1) Debt secured may include future advances, no new security agreement is needed.
2) Property secured may include after-acquired property (but need explicit agreement, UNLESS it is collateral of the type that is rapidly depleted and replenished, like inventory and accounts, and then it will be implied). These do NOT apply to commercial tort claims.
Property secured generally includes proceeds. Unless otherwise agreed, a security interest AUTOMATICALLY gives the secured party a right to identifiable proceeds. Problem occurs with CASH: to determien which part of a commingled mass of cash is identifiable, apply the lowest intermediate balance test. From date that proceeds are deposited and end at time applying the test, the law deems that the LOWEST balance during that time period is the secured party's identifiable proceeds (but cannot excced value of cash proceeds originally deposited).
3) The attachment of a security interest in collateral also is an attachment of a security interest in a supporting obligation for that collateral (attaches to the guarantee or surety for that collateral).

1) Automatic Perfection
2) Possession of collateral by secured party
3) Perfection by "control"
4) Notfication fo lien on cetificate of title
5) Filing a financial statement