Bài giảng Business Law - Chapter 29: Security Interests in Personal Property

Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin6Introduction to Credit and Secured TransactionsSecurity Interests in Personal PropertyBankruptcyCreditPARTSecurity Interests in Personal PropertyPAETRHC29One must have some sort of occupation now-a-days. If I hadn’t my debts I shouldn’t have anything to think about.Oscar Wilde, A Woman of NoImportance, Act I (1893)Learning ObjectivesDescribe types of collateral for a security interest under UCC Article 9Explain how to create and perfect a security interest in debtor’s propertyRecall priority rules for security interestsList steps creditor can take if debtor defaultsArticle 9 applies to common transactions:Financing a car, buying equipment with a payment plan, or financing business inventoryStrict compliance with procedure is required or creditor will lose the preferred claim to debtor’s personal propertyA creditor who loses a secured interest is merely a general creditorArticle 9 RequirementsTypically, for loans, tangible goods are the collateral (property securing the promise to repay), but Art. 9 classifies collateral as:Instruments, such as checks, notes, drafts, and certificates of deposit [9–102(a)(47)]Documents of title, such as bills of lading, dock warrants, dock receipts, and warehouse receipts [9–102(a)(30)]Collateral Under Article 9Accounts, such as rights to payment of a monetary obligation for goods or services not evidenced by instruments Chattel paper, such as documents that reflect an obligation to pay money and a security in specific goods [9–102(a)(11)]General intangibles, a catchall, including intellectual property [9–102(a)(42)]Collateral Under Article 9Goods, such as consumer goods, equipment, farm products, inventory, and fixtures [9–102(a)(44)]Investment property, such as stocks, bonds, and commodity contracts [9–102(a)(49)]Deposit accounts, such as demand, time, savings, passbook, and similar accounts maintained with a bank [9–102(a)(29)]Collateral Under Article 9A security interest is not legally enforceable against a debtor until attached to one or more particular items of debtor’s property (collateral)Attachment requires [9–203]:agreement in which debtor grants creditor a security interest in collateraldebtor must have rights in the collateralcreditor must give value to the debtorAttaching the Security InterestA security agreement must be clear that a security interest will existPurchase money security interest (PMSI): created when seller retains security interest until goods paid for or lender takes security interest for money loaned to acquire goodsFuture advances: extensions of credit specified in security agreement [9–204(3)]Contractual security interest in debtor’s after-acquired property [9–203(b)(2)]Special IssuesA creditor gets protection against other creditors or purchasers of the collateral by perfecting the security interest: By filing public notice (financing statement)By the creditor taking possession or control of the collateralAutomatic perfection in certain transactions, such as a purchase money security interestPerfecting the Security InterestSee In re LanceSeveral creditors may claim a security interest in the same collateral, thus the Code establishes a set of rules for priorityBasic rule: when more than 1 security interest in the same collateral filed (or otherwise perfected), the first security interest filed (or perfected) has priority over any filed (or perfected) later [9–322(a)(1)]If none perfected, the first to be attached to collateral has priority [9–322(a)(3)]Basic Priority Rules A perfected purchase money security interest in inventory has priority over a conflicting security interest in the same inventory if requirements are metPMSI in collateral other than inventory has priority over a conflicting security interest in the same collateral if the PMSI is perfected at the time debtor receives the collateral or within 20 days [9–324(a)]Exceptions to Basic Priority Rules A third exception is that a buyer in the ordinary course of business takes free of a security interest created by his seller even though the security interest is perfected and buyer knows about it [9–320(a)]Exceptions to Basic Priority Rules Goods become fixtures by attachment to real estate, creating real estate interestGenerally, security interest in real estate takes priority over interest in fixturesExceptions exist, but in Yeadon Fabric Domes, Inc. v. Maine Sports Complex, LLC, Yeadon failed to perfect a security interest in fixtures that would have taken priority over the real estate interestSecurity Interests & Fixtures If debtor defaults, secured creditor may:Forget the collateral and sue debtor on the note or promise to payRepossess the collateral and foreclose to keep the collateral in satisfaction of the remaining debtRepossess and sell collateral, then either sue for deficiency or return surplus to debtor (depending on situation)Default & Foreclosure Thought QuestionWhat security interests in personal property affect you and your family?