Secured Transactions Flashcards

A bank wants to perfect a security interest in a debtor's checking account maintained at another bank as original collateral. How can the bank perfect?

Answer: Only by control, such as a control agreement with the depositary bank

Under UCC 9-312(b)(1) and 9-104, a security interest in a deposit account as original collateral can be perfected only by control.

A supplier with a PMSI in a retailer's inventory wants priority over a bank holding an earlier-filed blanket lien on inventory. Besides perfecting before delivery, what must the supplier do?

Answer: Send an authenticated notification to the bank that it expects to acquire a PMSI in the inventory, received before the debtor takes possession

Under UCC 9-324(b), an inventory PMSI requires both perfection by the time the debtor receives possession and an authenticated notification to prior filed secured parties received within five years before that possession.

A furnace is installed in a building and becomes a fixture. A creditor holding a security interest in the furnace wants priority over an existing mortgagee of the real estate. What generally must the creditor do?

Answer: Make a fixture filing in the real estate records, and if claiming PMSI priority, do so within 20 days after the goods become fixtures

Under UCC 9-334, a PMSI in fixtures can prime a prior real estate mortgage if a fixture filing is made in the real property records within 20 days after the goods become fixtures.

A debtor named on a filed financing statement moves its state of organization from Delaware to Texas by converting into a Texas entity. How long does the secured party's perfection continue before it must refile in Texas?

Answer: Four months after the change of location

Under UCC 9-316(a)(2), perfection continues for four months after a debtor changes its location to another jurisdiction, after which the secured party must perfect under the new state's law.

A secured party proposes to keep repossessed business equipment in full satisfaction of the debt (strict foreclosure). The debtor does not object, but a junior secured party who had filed a financing statement objects within 20 days after notification. What is the result?

Answer: Strict foreclosure is barred, and the secured party must dispose of the collateral under 9-610

Under UCC 9-620 and 9-621, a timely objection from a party entitled to notification, including a junior secured party, defeats strict foreclosure and requires disposition of the collateral.

A borrower grants a security interest in a certificated stock certificate. The lender takes delivery of the certificate with a signed stock power. A competing creditor perfected earlier by filing. Who has priority in the certificated security?

Answer: The lender with control/delivery, because perfection by control of investment property beats perfection by filing regardless of timing

Under UCC 9-328, a security interest in investment property perfected by control has priority over one perfected by any other method, regardless of the order of perfection.

After a commercially reasonable disposition of collateral, the sale proceeds are insufficient to cover the debt. In a consumer-goods transaction, what must the secured party do before recovering a deficiency?

Answer: Comply with Article 9's notice and disposition rules, since noncompliance can eliminate or reduce the deficiency

In consumer transactions many courts apply an absolute-bar or rebuttable-presumption rule under UCC 9-626, so noncompliance with notice and commercial-reasonableness rules can wipe out the deficiency.