Chapter 1. Scope Of Article 9 223 results (showing 5 best matches)
- (b) [Security interest in secured obligation.] The application of this Article to a security interest in a secured obligation is not affected by the fact that the obligation is itself secured by a transaction or interest to which this Article does not apply.
- Part 6 of Article 9 on foreclosure treats these transactions differently. A consignor whose interest also “secures an obligation” under 9–102(a)(20)(D) must follow the restrictive rules on repossession, resale and the like. If, on the other hand, the transaction is a consignment that creates a security interest in the consignor but does not “secure an obligation” (i.e., if it is a mine run consignment of diamonds with a duty of sale or return but no duty to pay for unsold goods) then the consignor must protect its interest by filing a financing statement and is, for the purposes of perfection and priority, treated like a secured creditor but is not so treated for the purpose of foreclosure. The consignor may get its goods back by whatever method is permitted under the state law outside of Article 9. One way to think of the two transactions is to say that a classic consignment creates an interest that behaves like a security interest for the first five parts of Article 9 but not for...
- In addition, former Article 9 contemplated transactions where the parties used consignment language, but the deals were truly “secured transactions,” not conventional consignments. If, for example, a debtor borrowed money from a creditor, granted a security , that transaction would be treated in all respects like a secured transaction even if the parties labeled it a “consignment.” The foregoing type of transaction differs from the usual consignment in which the consignee has no obligation to pay if it returns the goods. If a court concluded the transaction was in fact intended as security, then knowledge by the consignee’s creditors would not save it from the claim of a trustee or a judicial lien creditor, for it would be treated in all respects like a security interest. This division left some “consignments” entirely within Article 9 but some only partly there, and left the courts in doubt about what parts of Article 9 applied to which transactions.
- What of the other cases excluded from 9–102(a)(20) by 9–102(a)(20)(D) not because they are not sufficiently secured transactions but because they secure “an obligation”? The drafters here have preserved a distinction between a conventional commercial consignment, defined in 9–102(a)(20), which in almost all cases, is a “security interest,” and the unusual commercial consignment which creates a security interest “that secures an obligation.” But if all consignments under 9–102(a)(20) must be perfected and enjoy more or less the same priority as any other security interest, who cares whether a transaction is merely a consignment subject to Article 9 or whether it is a security interest “that secures an obligation”? If it secures an obligation, Article 9 will apply anyway.
- The real challenge in drawing a distinction between realty and personalty interests arises when a mortgagee, a seller of land, or a lessor, grants a security interest to a third party in a stream of payments that come from the mortgage note, from the land-sale contract buyer, or from the lessee. Underlying these transactions is a real estate transaction, but our secured creditor has a security interest not in the real estate, but in the stream of payments.
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Chapter 2. Creation and Perfection of Enforceable Article 9 Interests 359 results (showing 5 best matches)
- This section does not define “possession.” …[I]n determining whether a particular person has possession, the principles of agency apply. For example, if the collateral clearly is in possession of an agent of the secured party for the purposes of possessing on behalf of the secured party, and if the agent is not also an agent of the debtor, the secured party has taken actual possession without the need to rely on a third-party acknowledgment. See subsection (c) and Comments 4 and 8. However, if the agent is an agent of both the secured party and the debtor, prudence might suggest that the secured party obtain the agent’s acknowledgment in order to ensure perfection by possession. The debtor cannot qualify as an agent for the secured party for purposes of the secured party’s taking possession. And, under appropriate circumstances, a court may determine that a third person in possession is so closely connected to or controlled by the debtor that the debtor has retained effective...
- Perfection is a term of art in Article 9. Sections 9–308 through 9–316 specify how one perfects in each of the various transactions under Article 9. We devote the remainder of this Chapter to mapping perfection’s boundaries. The perfected secured creditor is nearly as far above the unperfected secured creditor in the priorities pecking order as the unperfected secured creditor is above the general creditor. Perfection also earns the secured party priority over a subsequent lien creditor. The lien creditor is the trustee in bankruptcy wielding rights under section 544(a) of the Bankruptcy Code. Thus a secured party who perfects prior to bankruptcy usually enjoys a solitary feast, but an unperfected secured party will invariably have to eat from the general creditors’ trough in bankruptcy. Likewise, the date of the perfecting act is commonly the date from which priority is measured vis à vis other perfected secured creditors. Usually, though not invariably, a creditor who perfects...
- We suspect the questions inherent in the word “authenticate” and the definition of a “record” will be slow in rising to the surface in secured transactions. Secured creditors are nothing if not careful and conservative. We suspect they will be slow to abandon signed, written documents. On the other hand, many lenders will soon store most of their agreements and other documents in electronic form, and it is easy to imagine a case in which the secured creditor loses or, by mistake, destroys the original written document and will have to rely upon the electronic copy in case of litigation.
- [I]f the proceeds are not goods, to the extent that the secured party identifies the proceeds by a method of tracing, including application of equitable principles, that is permitted under law other than this article with respect to commingled property of the type involved.
- Under the predecessor of 9–502 (9–402(1)) a financing statement had to include the addresses of the debtor and secured parties, and had to be signed by the debtor to be effective. The drafters of Revised Article 9 apparently concluded that the debtor’s signature was an unnecessary technicality and that the addresses of the parties were useful but not critical, for a searcher could find the address of any earlier secured creditor and presumably the searcher has the address of its debtor. (The requirement for addresses now appears in 9–516(b) where, as we will see, their omission has only limited adverse consequences for the secured creditor.) The section allows the use of a mortgage as a financing statement in certain real estate transactions and, like the former law, requires a financing statement that is to be filed for record in the real property records to contain a description of the real property and to state to the filing officer that it must be filed in those records. The...
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Chapter 5. Default and its Consequences 210 results (showing 5 best matches)
- Issues associated with the sale or other disposition of collateral to guarantors (and in some cases to employees of the secured creditor) have recurred as long as there has been secured credit in modern commercial transactions. Former section 9–504(5) dealt with this issue as follows:
- In the case of non-notification lending, section 9–607 gives the secured creditor the right to notify the account debtor upon default, and section 9–406 then obliges the account debtor to pay the secured creditor upon proper notification of assignment of the rights to payment to the secured creditor. The account debtor, of course, needs to insure that payment made to the secured creditor will discharge its liability to the debtor. If the account debtor’s payments are insufficient to satisfy the debtor’s liability to the secured creditor, the debtor may or may not have liability for the deficiency. This depends upon the terms of the agreement between the secured creditor and its debtor, and absent specific terms, on the form of the transaction. According to subsection 9–608(b):
- The drafters quickly decided that the rebuttable presumption rule was the proper outcome in business transactions. Regrettably the committee declined to follow the recommendation of the Reporters that the rebuttable presumption rule should also apply in consumer transactions. Even if one believes that a misbehaving secured creditor should suffer punitive damages in consumer transactions where the actual damages are likely to be small, complete denial of a deficiency is a particularly crude measure of those damages. If the debtor’s default occurs after the collateral has declined precipitously in value, the denial of a deficiency can produce large punitive damages; if, on the other hand, the collateral’s value is near the amount of the debt, punitive damages, in the form of the denial of a deficiency, are small even though the creditor’s failure might be the same in both cases. Accordingly, we favor the rebuttable presumption rule for all transactions, business and consumer.
- The Comments also contain a discussion of the rights of junior secured parties. They even discuss and invite the use of the marshaling principle (where a creditor with a claim on two funds might be required first to satisfy itself out of only one of those funds if a competing creditor had a claim only on the other). So reader beware, much new law lurks in the Comments.
- conclusion, consider this case: A car dealer has $50,000 of chattel paper and bank agrees to “lend” to dealer against that chattel paper. If the dealer signs a note promising to repay the bank’s $50,000 loan and a document titled “security agreement,” we have a secured loan, not a sale of chattel paper, and if on default, the chattel paper brings less than the loan due, bank has a right to a deficiency judgment. If, on the other hand, the car dealer “sells” the chattel paper to the bank for a fixed sum, $45,000 (particularly if their agreement indicates that the bank will take the “credit risk” associated with the consumers’ obligation to pay or otherwise provides that the bank may not recover from the car dealer any amounts that remain unpaid upon default by the consumer purchasers), the bank probably has no right to a deficiency, yet is entitled to any surplus above the $45,000. The bank has bargained for both the risk and the benefit. One should understand that the line between a...
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Chapter 4. Priority Conflicts 265 results (showing 5 best matches)
- Section 9–324 grants priority to purchase money security interests over prior conflicting security interests even though the purchase money security interest is later perfected; we sometimes call this “super priority.” The purchase money secured creditor is often the seller of a product who has retained a security interest to secure its purchase price; however, a bank or other financing agency can also be a purchase money secured creditor. The priority of purchase money secured creditors has long been recognized in real estate transactions and in pre-Code rules for personal property. What is the justification for this special priority?
- Consider first the most important sections and their coverage: section 9–201—the secured creditor wins unless the competitor finds a rule that says otherwise; section 9–317—secured creditors vs. lien creditors; section 9–322—secured creditors vs. secured creditors; section 9–324—purchase money secured creditors vs. other secured creditors (see also section 9–317, purchase money secured creditors vs. lien creditors); section 9–334—security interests in fixtures and crops; and section 9–320—secured creditor vs. buyer of goods from the debtor. Most of the remaining priority rules are particular applications of those listed above or, in some cases, deal with quite narrow areas. We cover most of them in this Chapter.
- For the first time in any version of Article 9, the 1999 revision states a special rule for the perfection and priority of a security interest in fixtures consisting of “manufactured homes.” If the fixture qualifies as a manufactured home, as that term is defined in 9–102(a)(53), if the transaction is a “manufactured home transaction” as that term is used in 9–102(a)(54), and if the perfection is by means of compliance with the certificate of title law, the secured creditor enjoys priority over the mortgagee on the real estate (both those who came before and those who come after), over owners, and over buyers.
- The rights of other purchasers of goods and of lien creditors are governed by the Articles on Secured Transactions (Article 9) * * *.
- The guiding principle of section 9–322(a) is that the secured party who either files or otherwise perfects before the other person, wins. If both parties perfect by filing, priority goes to the person who filed first. Likewise, if one or both parties perfect by means other than filing, priority goes to the one who first perfected or filed, whichever came first.
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Chapter 3. The Bankruptcy Trustee Vs. The Article 9 Claimant 165 results (showing 5 best matches)
- 3. Buyers are going to buy “Target.” They propose to grant a security interest in all of Target’s assets to secure the loan from the bank to buy out the shareholders of Target. When the transaction is completed, the pre-existing creditors of Target will be in a manifestly diminished position. The cumulative effect of the transaction is to take money out of Target and pay it to the shareholders. Thus, in effect, elevating them over the corporation’s creditors to whom they should have been subordinate. Assume that Target goes into bankruptcy a year after the transaction. To the bank’s argument that it gave value in the form of a loan, the trustee will argue that the bank was a knowing conspirator in a smelly transaction. Will the bank security interest be avoided?
- Even though security is enforceable against the debtor under Article 9, it still may be unenforceable against the debtor under other state law. Thus it is elementary that one party to a consensual transaction may rescind for fraud, for mutual mistake, for duress or for undue influence. The trustee succeeds to powers of rescission that the debtor has against a secured creditor upon bankruptcy. The trustee similarly succeeds to any defenses or rights that the debtor may have against the secured creditor under the doctrine of unconscionability or under the expanding reach of consumer credit protection acts.
- It seems likely that courts interpreting section 546 will find the decisions under section 2–702(3) to be persuasive. Consider some examples. First the courts have recognized a secured creditor as a good faith purchaser entitled to the protection of 2–702(3). But the courts have disagreed about the consequences when bankruptcy keeps the secured creditor from seizing the collateral. How does the incipient but unexercised right of the secured creditor affect the competition that ensues between the trustee, on the one hand, and the reclaiming buyer, on the other? The secured creditor might not assert its claim for a variety of reasons. First, it might be fully secured or it might have waived its claim as part of the confirmation of the plan.
- The court rejected the creditor’s argument that, in receiving money under the letter of credit, it was receiving no property that belonged to the debtor. Although the creditor had a perfected security interest in the debtor’s goods, the goods proved to be of little value and the creditor’s interest was subordinate to others’ interests. The court concluded that the transfer of the security interest to the issuing bank was a preference since it met all elements of 547(b). This seems a correct outcome when the entire transaction occurs within 90 days of bankruptcy; it differs from in that respect. The transaction in
- Presumably if the creditor gave new value concurrent with the transfer in the form of money or the release of property, the transfer is not on account of antecedent debt. Unfortunately, the definition of new value does not touch upon the question how much time can pass between the incurring of the debt and the transfer without the debt’s being antecedent. By means other than defining antecedency, the drafters have minimized the problems that otherwise would be presented. First, as indicated above, they have allowed a thirty-day grace period for perfection and so have removed the antecedency question for any secured creditor who perfects within 30 days of the creation of a security interest. Second, by subsections 547(c)(1) and (2) the drafters have legitimized certain close at hand and ordinary course transactions that would otherwise be subject to attack under section 547(b).
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Index 148 results (showing 5 best matches)
Outline 35 results (showing 5 best matches)
- 4–2 Rights of Unperfected Secured Creditors vs. Unsecured Creditors With and Without Judicial Liens
- d. Proceeds of Purchase Money Secured Creditor
- d. Consumer Buyers of Consumer Goods vs. Secured Creditors
- 5–5 Collection Rights of the Secured Party, Sections 9–606, 9–607
- 5–13 Remedies for Secured Creditor’s Failure to Comply with Part Six of Article 9
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Advisory Board 10 results (showing 5 best matches)
- Professor of Law, University of San Diego Professor of Law, University of Michigan
- Professor of Law, Chancellor and Dean Emeritus, University of California, Hastings College of the Law
- Professor of Law, University of California, Berkeley
- Professor of Law, University of Chicago
- Professor of Law, University of Illinois
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Preface 1 result
Acknowledgments 2 results
- Professor White acknowledges the assistance of Michael A. Zellen, ’07, University of Michigan Law School, and his administrative assistant, Janis Weston.
- Professor Summers acknowledges the assistance of Gina Jackson, his administrative assistant and Rose Stella, ’07, Cornell Law School.
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Title Page 3 results
Copyright Page 2 results
- Thomson/West have created this publication to provide you with accurate and authoritative information concerning the subject matter covered. However, this publication was not necessarily prepared by persons licensed to practice law in a particular jurisdiction. Thomson/West are not engaged in rendering legal or other professional advice, and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you should seek the services of a competent attorney or other professional.
- Printed in the United States of America
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- Publication Date: September 5th, 2007
- ISBN: 9780314184788
- Subject: Commercial Law
- Series: Concise Hornbook Series
- Type: Hornbook Treatises
- Description: This book offers a comprehensive and accessible introduction to Article 9 of the Uniform Commercial Code. It covers secured transactions from A to Z with examples and answers that will enable students to test their knowledge and find the answers to the many conundrums in Article 9.