SECURED

TRANSACTIONS

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 Chapter 1: Introduction to Article 9

A. Secured Transactions – Introduction and Definition

a. Secured transaction: a transaction that creates a security interest in personal property
b. Security interest: an interest in personal property which secured payment or performance of an
obligation
i. Type of property interest
ii. Only granted to someone in order to secure payment for an obligation
1. Obligation usually means debt, but could also be a lease or contract
iii. “Only if” type of interest
1. Creditor only uses this if the borrower defaults
a. Then he has the right to take control of the property, sell it for cash or
collect payments on it
iv. Makes the creditor more secure
v. Creditor can take personal property, after default, and sell it to help pay off the debt 
this is repossession
vi. If you don’t explicitly grant a security interest in the contract, you have made an
unsecured loan and creditor will not have the immediate contractual right to repossess
B. Why Secured Transactions? State Debtor-Creditor Law
a. General debtor-contractor law of most states:
i. Most creditors have right to seize some of debtor’s property in order to help pay the debt
ii. Whether they had obtained a security interest in the contract or not
b. Secured creditors: creditors that get a security interest
i. Most creditors are unsecured creditors
c. Unsecured creditors:
i. How unsecured creditors can seize property/gain repayment:
1. Start out with merely personal claims for the debt against their borrowers
2. If the debtor does not pay the debt according to its terms, the creditor is entitled to
file suit to obtain a money judgment
3. Then the unsecured creditor becomes a judgment creditor but is still an unsecured
one
4. The debt has now been adjudicated by state or federal court
ii. Once a creditor becomes a judgment creditor:
1. The debtor is compelled to surrender some of his property or money in
satisfaction of the judgment
2. Can be via:
a. Execution
b. Attachment
c. Replevin
d. Garnishment
3. Requires:
a. Judgment creditor to request a writ or document from the court clerk
b. File it somewhere OR
c. Deliver it to a sheriff with a request to attempt to seize any of the debtor’s
available property
4. Once judgment creditor obtains a judicial lien on the property he/she secures
payment of the debt
5. Judicial liens can be sold at judicial foreclosure sales
iii. Problems with judgment collection:
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 1. Judgment creditor doesn’t have access to all of debtor’s property
2. Debtors tend to borrow money from a lot of creditors who all seek judgments too
Chapter 2: Scope/Applicability of Article 9

A. When Article 9 Applies (§ 9-109 Scope)

a. Except as otherwise provided, Article 9 applies to:
i. A transaction that creates a security interest in personal property or fixtures by contract
ii. An agricultural lien
iii. A sale of contracts, chattel paper, payment intangibles, or promissory notes
iv. A consignment
v. Security interest arising under §2-401, 05, 711(3), 2A-508(5)
vi. Security interest arising under 4-210 or 5-118
b. Transactions that Create Security Interests in Personal Property or Fixtures by Contract
(regardless of form)
i. Article 9 applies when:
1. Security interest has been granted
2. The interest is in personal property
3. The interest has been expressly granted by contract
ii. Reservation of title (§1-203)(b)(35))
1. When seller wants to remain the owner of the goods until buyer has paid full price
a. Transaction not in the form of a security interest but where Article 9
applies
iii. Leases or “disguised” security interests (§1-203)
1. Leased goods are really being sold to the lease for good, so that the lessee will be
the owner of the goods when all is said and done
2. The lessee is not going to return them to the lessor, and the lessor really doesn’t
want them returned
3. A transaction (in lease form) creates a security interest if: (§1-203)
a. The consideration that the lessee is to pay the lessor for the right to
possession and use of the goods is an obligation for the term of the lease
and is not subject to termination by the lessee
b. Are any of the four alternative tests satisfied?
i. The original term of the lease is equal to or greater than the
remaining economic life of the goods
1. Look at contract term (1 year, 5 years)
2. Look at remaining life of the goods
ii. The lessee is bound to renew the lease for the remaining economic
life of the goods or is bound to become the owner of the goods
1. Renew lease
2. Become owner of the goods at the end of the lease
iii. Lessee can renew lease for the remaining economic life of the
goods for no additional consideration
1. Optional
iv. Lease can become the owner of the goods for no additional
consideration or for nominal additional consideration upon
compliance with the lease
1. Optional
c. Agricultural liens § 9-109(a)(5)
i. An interest in farm products that secures a right to payment for goods and other services
provided in connection with a debtors farming operation
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 1. Cows
2. Pigs
3. Cotton
4. Grain
5. Other crops
d. Sales of Accounts, Chattel Paper, Payment Intangibles, Promissory Notes (§9-109(a)(3))
i. Rights to payment of money, in various forms
e. Consignments (§9-109(a)(4))
i. Where a person that owns goods, delivers those goods to someone else, in order to have
the retailer sell the goods to someone on behalf of the owner
f. Odds and Ends: §9-109(a)(5) and (6)
i. Where parties did not actually create an express security interest but rather some other
scenario happened where the UCC decides it should automatically deem a security
interest created
B. When Article 9 Doesn’t Apply
a. Subsection 9-109(c) – Extent to Which Article 9 Doesn’t Apply
i. U.S. statute, regulation or treaty that preempts
ii. Another state statute that expressly governs the creation, perfection, priority, or
enforcement of a security interest created by the state or government body
b. Subsection 9-109(d) – Exclusions from Article 9
i. Landlord’s Liens and Statutory Liens
ii. Assignment of Wages or Salary
iii. Sale of Accounts or Other Money Paper as Part of Sale of a Business
iv. Assignment of Accounts or Other Money Paper for Collection Only
v. Assignment of Contract Duty of Performance
vi. Assignment of Single Account to Satisfy Debt
vii. Transfer of Insurance Claim
viii. Assignment of Judgment
ix. Right to Recoupment or Setoff
x. Real Property Rights Assignments of Tort Claims
xi. Assignment of Consumer Deposit Accounts

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 Chapter 3: Definitions/Concepts/Classification of Collateral

A. General Definitions
a. Security interest:
i. Interest in personal property which secures payment or performance of an obligation
b. Security agreement
i. Agreement that creates or provides for a security interest in personal property by contract
c. Collateral
i. Property subject to a security interest
ii. Includes:
1. Chattel paper
2. Payment intangibles
3. Promissory notes that have been sold
4. Goods subject to consignment
d. Secured party
i. A person in whose favor a security interest is created or provided for under a security
agreement, whether or not any obligation to be secured is outstanding
1. A person that holds an agricultural lien
2. A consigner
3. A person to which accounts, chattel paper, payment intangibles, or promissory
notes have been sold
e. Debtor
i. A person having an interest, other than a security interest or other lien, in the collateral,
whether or not the person is an obligor
ii. A seller of accounts, chattel paper, payment intangibles, or promissory notes or
iii. A consignee (deliverer or goods)
f. Obligor
i. A person that owes payment or other performance of the obligation
B. Collateral Definitions § 9-102
a. (1) Goods: all things moveable when a security interest attaches (physical, movable stuff that is
personal property) § 9-102(a)(44)
i. Consumer Goods § 9-102(a)(23)
1. Goods that are used or bought for use primarily for personal, family, or household
purposes
ii. Inventory § 9-102(a)(48)
1. Goods other than farm products that are:
2. Leased by a person as lessor
3. Held by a person for sale or lease or to be furnished under a contract of service
4. Furnished by a person under a contract of service
5. Consist of raw materials, work in progress, or materials used or consumed in a
business
iii. Farm Products § 9-102(a)(34)
1. Goods other that standing timber in respect to the debtor being engages in a
farming operation
a. Crops grown, growing, or to be grown including crops produced on trees,
vines and bushes
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 b. Livestock, born or unborn
c. Supplies used or produced in a farming operation or
d. Products of crops or livestock in their unmanufactured states
iv. Equipment § 9-102(a)(33)
1. Goods other than inventory, farm products, or consumer goods
v. Other Forms of Goods: Fixtures, Accessions, and Commingled Goods
1. Fixture
a. Even though an identifiable thing is sort of separately identifiable, if it
becomes attached to a building or land, it is considered part of the building
or the land
b. Goods attached to land
2. Accessions
a. Goods that are physically united with other goods in such a manner that
the identity of the original goods is not lost
b. Goods attached to goods
3. Commingled goods
a. Goods that are physically united with other goods in a way where their
identity is lost in a product or mass
b. Ex: Flour and eggs in a bakery
b. (2) Rights Memorialized by Legally Significant Pieces of Paper
i. Instruments/Promissory Notes § 9-102(a)(47)
1. Instrument:
a. Negotiable instrument or any other writing that evidences a right to the
payment of a monetary obligation, is not itself a security agreement or
lease, and is of a type that in ordinary course of business is transferred by
delivery with any necessary indorsement or assignment
b. Negotiable instruments that are rights to payment of money
i. Can be transferred by signing/indorsing the instrument
2. Promissory note:
a. An instrument that evidences a promise to pay a monetary obligation, does
no evidence an order to pay, and does not contain an acknowledgment by
a bank that the bank has received for deposit a sum of money or funds
b. One party promises to pay another party
ii. Chattel Paper § 9-102(a)(11)
1. A record or records that evidence both a monetary obligation and a security
interest in:
a. Specific goods
b. License of software used in the goods
c. Lease of specific goods
2. Monetary obligation:
a. Money owed under a lease or secured by goods
iii. Documents § 9-102(a)(30)
1. Legally significant piece of paper involving underlying right to goods
2. Pieces of paper
3. Issued by some entity in possession of goods
4. Each paper is associated with the right to demand possession or control of the
goods
5. Two major documents:
a. Warehouse receipt
i. Shows a warehouse has the goods in question in storage
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 b. Bill of landing
i. Shows a transport company has the goods in question being
delivered
iv. Letter-of-Credit Rights § 9-102(a)(51)
1. Three-way type advance credit arrangement
v. Investment Property § 9-102(a)(49)
1. Property held for investment purposes
2. Stocks
a. Ownership in company
3. Bonds
a. Debt issued by company
c. (3) Intangible Rights
i. Accounts § 9-102(a)(2)
1. Right to payment of a monetary obligation, whether or not earned by performance
for:
a. Property that has been sold, leased, licensed, assigned, or otherwise
disposed or
b. Services rendered or to be rendered
2. Form of monetary obligation
3. No form an account must take
4. Can be account receivable
ii. Deposit Accounts § 9-102(a)(44)
1. A demand, time, savings, passbook, or similar account maintained with a bank
2. Doesn’t include investment property or accounts evidenced by an instrument
3. Usually a savings or checking account
iii. Health-In-Case-Insurance Receivables § 9-102(a)(46)
1. An interest in or claim under an insurance policy which is a right to payment for
health-care goods or services provided
2. Doctors extending credit to patients, giving them time to pay
iv. Commercial Tort Claims § 9-102(a)(13)
1. A claim arising in tort with respect to which
a. The claimant is an organization
b. The claimant is an individual
c. Claim arose in the course of the claimant’s business or profession
d. Does not include damages arising out of personal injury to or the death of
an individual
2. Usually:
a. Fraud
b. Misrepresentation of trade secrets
c. Interference with business relations
v. General Intangibles § 9-102(a)(43)
1. Any personal property
a. Things in action other than:
i. Accounts
ii. Chattel paper
iii. Commercial tort claims
iv. Deposit accounts
v. Documents
vi. Goods
vii. Instruments
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 viii. Investment property
ix. Letter-of-credit rights
x. Letters of credit
xi. Money
xii. Oil, gas, other minerals before extraction

Chapter 4: Purchase-Money Security Interest

A. Purchase Money Security Interest § 9-103

a. Special type of security interest that is favored in certain ways
b. Security interest in goods
c. Goods must be purchase-money collateral with respect to that security interest
d. Focus on sequence for PMSI to work:
i. (1) purchase money loan
ii. (2) then debtor purchases the goods with the loan money
e. For a loan to be a purchase money obligation the purpose of the loan must be specifically to
enable the debtor to purchase the goods
B. Purchase Money Obligation
a. A loan or debt that is incurred specifically to purchase the item
b. Could be credit extended by either direct-financing seller of the good or by a third party lender
like a bank
c. An obligation incurred for price of the collateral
i. Refers to a direct-financing seller
ii. Seller extends credit to buyer to enable them to purchase
d. An obligation incurred for value given to enable acquisition of collateral
i. Refer to third party lenders
ii. Buyer goes to bank to buy from seller
C. Purchase Money Collateral
a. Goods purchased with a purchase money loan and then granted as collateral to secure the very
loan that enabled the debtor to purchase the goods
b. Goods that secure a purchase money obligation incurred with respect to that collateral
c. Debtor/obligor gives its purchase-money obligation creditor a security interest in the very goods
that it incurred the purchase-money obligation in order to buy
d. Debtor gives its purchase-money lender a security interest in the very thing the lender enabled
him to purchase
D. Some Additional PMSI Complexities
a. Inventory Cross-Collateralization § 9-103(b)(1)
i. If the security interest is in inventory that is or was purchase-money collateral, also to the
extent that the security interest secures a purchase-money obligation incurred with
respect to other inventory in which the secured party holds or held a PMSI
b. Dual Status § 9-103(f)
i. Part-PMSI
ii. Part regular security interest
iii. § 9-103(f)(1)
1. Purchase-money collateral secures both kinds of debts
iv. § 9-103(f)(2)
1. The purchase-money obligation is secured by both kinds of collateral
v. § 9-103(f)(3)
1. The purchase-money obligation has been renewed, refinanced, etc.
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 Chapter 5: Attachment/Creation of a Security Interest

A. What is Attachment §9-203(a)

a. The creation of a security interest
b. A security interest attaches to collateral when it becomes enforceable against the debtor with
respect to the collateral
c. Unless the agreement expressly postpones the time of attachment
d. Attachment is important because its when the security interest becomes enforceable against the
debtor
B. Three Requirements for Attachment §9-203(b)
a. (1) Value §1-204
i. A person gives value for rights if the person acquires them:
1. In return for a binding commitment to extend credit or for the extension of
immediately available credit
2. As security for, or in total or partial satisfaction of a preexisting claim or
3. In return for any consideration sufficient to support a simple contract
ii. Usually a secured creditor extending credit or making a loan
b. (2) Debtors Rights in the Collateral
i. Basic property concept
ii. Debtors can only grant liens like security interest in things they have rights to
c. (3) Authentication of Security Agreement with Description of Collateral
i. Statute-of-frauds type requirement
ii. Three components:
1. Authentication §9-102(a)(7)
a. Means “to sign”
b. Signature on the security agreement in written form
c. Attachment generally requires a writing and the writing to be signed by
the debtor
2. Security agreement
a. Must have “words of grant” somewhere in the document
i. Must be a contract that grants a security interest
3. Description of collateral
a. Must describe the collateral involved
b. Amount of specificity is governed by §9-108
i. Description must “reasonably identify” what it describes
ii. Collateral is “reasonably identified” if:
1. Specific listing
2. Category or
3. Except as otherwise provided in (e) a type of collateral
defined in the UCC
iii. Description of collateral as “all of the debtors assets or personal
property” is not reasonably identifying
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 iv. Description only by type of collateral is insufficient description in
a consumer transaction with consumer goods
c. Reasonable authentication standard
i. General
ii. Flexible
iii. Not helpful in determining what kind of collateral descriptions will
be sufficient
d. Examples of reasonable authentication:
i. Specific listing
1. Aka model and make of a washing machine
ii. Category
1. Aka all dryings, all washing machines
iii. Type of collateral defined in UCC
1. Aka definitions in chapter 3
a. Inventory
2. Remember: can’t use the term consumer goods in a secured
transaction with a consumer for consumer purposes
e. “supergeneric” description is prohibited §9-108(c)
d. Authentication Alternatives: Possession, etc.
i. Exception to the authentication/writing requirement §9-203(b)(3)(B)
1. Can be satisfied when debtor agree to grant a security interest in collateral and
transfers possession of the collateral into the hand of a secured party
2. Can be oral instead of writing and signed
C. After-Acquired Property Clauses, Future Advance Clauses, and Proceeds
a. After Acquired Collateral §9-204(a)
i. How to draft security agreements so after-acquired collateral can be included once its
acquired
ii. Debtor must acquire property within 10 days after the secured party gives value
iii. Cannot be consumer goods
1. Don’t want unsophisticated consumers
iv. “now owned or hereafter acquired” language in agreement
v. Courts sometimes assume an after-acquired clause in certain types of collateral like:
1. Inventory and Accounts
2. Court does this because they are always reducing and replenishing
vi. Limitations
1. After-acquired property clauses do not apply to commercial tort claims
2. Consumer goods can only be the subject of an after-acquired property clause to
the extent that the debtor acquired them, with 10 days after the secured party
gives the value for attachment
b. Future Advances §9-204(c)
i. Parties can include a future-advances clause to say that collateral secures future advances
c. Proceeds of Collateral
i. Proceeds: §9-102(a)(64)
1. Whatever is acquired upon the sale, lease, exchange, or other disposition of
collateral
2. Whatever is collected on account of collateral
3. Rights arising out of the collateral
4. The extent of the value of collateral, claims arising out of the loss, nonconformity,
or interference with the use of, defects or infringement of rights in, or damage to,
the collateral
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 5. The extent of the value of the collateral and the extent payable to the debtor or the
secured party, insurance payable by reason of the loss or defects in, or damage to
the collateral
ii. Basically put: proceeds include just about anything that a debtor received in exchange for
collateral
1. Commonly cash or checks
2. Can be promissory notes, instruments or chattel paper
iii. What is collected on account of collateral §9-102(b)
1. Collecting payments  payments are proceeds
iv. Rights arising out of the collateral §9-102(c)
1. Stock split if you own a security interest in a publicly traded company
v. Claims involving the loss, damage or other claims involving collateral §9-102(d)
1. If inventory is stolen you have a claim against the thief and if the inventory is
covered by insurance then the insurance claim would be proceeds of the inventory
collateral
d. Supporting Obligations §9-203(f)
i. When a security interest attaches to collateral, it automatically attaches to all supporting
obligations
ii. Supporting obligation: §9-102(a)(78)
1. Letter of credit right or secondary obligation
2. Supports payment of various financial obligations like accounts, chattel paper, or
instruments
3. Classic example: guarantee
a. A promise to be secondarily liable to pay the dent if the primary debtor
doesn’t pay

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 Chapter 6: Perfection: Overview and Filing to Obtain Perfection

A. Perfection: General Rule and Overview

a. A secured party doesn’t just want to attach a security interest, they want to perfect it
b. Purpose:
i. So future secured parties/lenders can make good informed decisions about whether to
make loans and agree to take security interests in stuff to secure their loans
ii. Designed to give the world notice of the secured party’s security interest in debtor’s
collateral
iii. Best way to ensure a good priority result in the event of conflicting claims in the
collateral
c. Perfection: §9-308(c)
i. When is a security interest perfected?
1. If it has attached and all the applicable requirements for perfection in sections § 9-
310 – 9-316 have been satisfied
2. Attaches when the applicable requirements are satisfied before the security
interest attaches
ii. Two basic requirements:
1. Attachment
a. Value
b. Debtor has rights in the collateral
c. Debtor has signed a security agreement describing the collateral or
d. An alternative like the secured party’s possession of the collateral
2. Satisfaction of some other “applicable requirements” §9-310-316
a. Filing §9-310
i. Most common/default
ii. Paper is filed with a public office and a public, searchable, datable
is created with all important information about the security
interests in existence
1. This paper is called a financing statement
b. Possession §9-313
c. Automatic perfection §9-309
d. Control §9-314
B. Filing: The Default Perfection Method
a. Where to File
i. The Right Office §9-501
1. Office designated for filing a mortgage on related real property if:
a. As-extracted collateral (gas, oil, immediately after removed)
b. Timber to be cut (trees slated to be cut but are still growing)
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 c. Fixture (gas pump at a convenience store)
2. Secretary of state’s office
3. Almost always secretary of states office unless:
a. Security interest is related to land
b. Then file where mortgages and deeds are filed (usually the county real
estate records office)
ii. The Right State §9-301
1. The law that applies for perfection is the law where the debtor is located NOT the
secured party and NOT USUALLY the location of the collateral
2. Location of the debtor §9-307
a. Place of business: where debtor conducts its affairs
b. Determining a debtor’s location: (1) principal residence (2) has only one
place of business then it’s that one location (3) debtor has more than one
place of business then it’s the chief office
3. A registered organization that is organized under the law of the state where its
located
a. Registered organization §9-102(a)(71): organization formed or organized
solely under the law of a single state by filing a public organic record
b. Public organic record §9-102(a)(68): record available to the public for
inspection that is filed with a state to form an organization
4. Individual debtors: located at their principal residence
5. Organizations (non-registered): located at the place of business (or chief one if
there’s more than one)
6. Organizations (registered): located in their state of registration
b. Authorization to File Financing Statement
i. Can authorize by:
1. Expressly authorize the filing in a signed record
2. Agreeing to be bound to a security agreement
c. Contents of Financing Statement: One-page, fill in the blank, form
i. Name of debtor
1. If corp.: use name in articles of inc. aka public organic record
2. If partnership: use name is partnership agreement or names of individual partners
if no agreement
3. DO NOT use trade names (aka d/b/a ___)
4. Individuals: name on drivers license if not birth certificate
ii. Name of secured party
1. Full, formal name
iii. Collateral covered by the financing statement §9-504
1. Description of collateral
2. Indication that financing statement covers all assets or all personal property
a. Must be reasonably identifiable
b. Super-generic descriptions are allowed
iv. Real property/fixture filing financing statements §9-502(b)
1. Must be filed in the mortgage/real estate recording office
2. Need additional info:
a. Name of debtor, secured party and description of collateral
b. Indicate it covers this type of collateral (aka fixtures, timber to be cut, as-
extracted collateral)
c. Description of real property
d. Name of the record owner of the real estate
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 d. Mistakes in the Financing Statement
i. Minor Errors/Seriously Misleading Rule
1. Mistakes ok unless they are seriously misleading
ii. Special Rules for Debtors Name
1. If you misspell debtors name then its seriously misleading
2. Unless: search logic explanation
a. If correct debtor comes up via search you’re good

Chapter 7: Perfection: Post-Filing Events

***Things that Cease Perfection***

A. Lapse of Time
a. Duration §9-515
i. Financing statements have a lifespan of 5 years
b. Perfection ceases upon lapse
i. Unless:
1. Secured party can file a continuation statement to keep interested perfected
c. Continuation statement can be filed
i. Window to file continuation statement is 6 months before the expiration of the financing
statement
B. Change of Debtor’s Name §9-507
a. Once a debtor changes its name, a 4-month timer starts
b. After 4 months, financing statement becomes un-perfected because its seriously misleading
c. Secured party is perfected in collateral acquired up until 4-month anniversary of name change
but not collateral acquired after that
i. If it doesn’t amend the financing statement
d. Secured party must amend the financing statement within 4 months in order to stay perfected in
collateral going past 4 months
C. Change of Debtor’s Location§9-316
a. Once a debtor moves to another state a 4-month timer starts
b. Secured party is temporarily perfected in any collateral by the debtor during the four month
period
c. Secured party must file in the new state within 4-months
i. Or sooner if the first financing statement is less than 4 months away from its 5-year lapse
point
ii. Or it becomes unperfected in all of the collateral (old and new)
D. Staying Perfected in Proceeds §9-315
a. Proceeds are additional to original collateral
b. Proceeds are perfected if the interest in the original collateral is perfected
i. Perfected security interest in proceeds become unperfected on the 21st day after the
security interest attaches to the receipt of the proceeds unless:
1. A filed financing statement covers the original collateral
2. Proceeds are collateral in which a security interest may be perfected by filing in
the office where the financing statement has been filed
a. Pretend a brand new loan and secured transaction were entered into and
the original collateral was the proceeds that have been received
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 3. Proceeds not acquired with cash
a. No cash exchanged hands in between the sale or disposition of the original
collateral and the proceeds we are talking about
ii. If the proceeds are identifiable cash proceeds, then the secured party remains perfected
beyond 20 days
iii. Either the secured party’s financing statement collateral description already includes the
proceeds or it must be amended within 20 days to include the proceeds

Chapter 8: Perfection: Possession, Automatic Perfection, Control, and Other Methods

A. Possession
a. Direct Possession §9-313
i. Perfection by possession
1. Simply taking physical possession of collateral
ii. Types of collateral that can be possessed
1. Documents
2. Goods
3. Instruments
4. Money
5. Chattel paper
a. Exception: motor vehicles CANNOT be perfected by possession
6. Can’t be possessed:
a. Credit rights
b. Health insurance receivables
c. Deposit accounts
d. Commercial tort claims
e. General intangibles
f. Accounts
iii. Perfection by possession only commences when the secured party has possession and
lasts only while the secured party has possession
iv. More than one type of perfection method may be used §9-308(c)
b. Third-Party Possession §9-313(c)
i. When a secured party cannot physically possess the collateral
ii. For third party possession:
1. Written record authenticated (signed)
2. Written record states that third party is possessing for the secured party
3. Has to be legitimate, independent third party
B. Special Rules for Documents, Goods Covered by Documents, Certificated Securities and
Instruments §9-312
a. Perfection of Security Interest in Goods Covered by Negotiable Document §9-312(c)
i. While goods are in possession of a bailee (one who is conveyed the goods) that has
issued a negotiable document covering the goods, a security interest in the goods may be
perfected by perfecting a security interest in the document
ii. Negotiable document:
1. Document where title to the goods is bound up
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 iii. Can be perfected by filing or possession
iv. Since underling goods are bound up in the negotiable document, perfecting a security
interest in the document will perfect a security interest in the underlying goods as well
b. Perfection of Security Interest in Goods Covered by Nonnegotiable Document §9-312(d)
i. Issuance of a document in the name of the secured party
ii. Bailee’s receipt of notification of the secured party’s interest
iii. Filing as to the goods
1. Fallback option
2. File a financing statement
c. Temporary Initial Perfection for New Value in Certain Financial Collateral §9-312(e)
i. Provides for a period of automatic, temporary, perfection of the security interest for 20
days after attachment, if new value is given
d. Temporary Subsequent Perfection While Releasing Goods Covered by Documents§9-312(f)
i. After security interest has been initially perfected
ii. Where goods are in the hands of a bailee that has issued a document and the debtor needs
access to the goods for some reason after the security interest has been initially perfected
iii. 20 day temporary perfection while the goods are relinquished for:
1. Ultimate sale or exchange
2. Loading
3. Unloading
4. Storing
5. Shipping
6. Transshipping
7. Manufacturing
8. Processing
9. Otherwise dealing with them in a manner preliminary to their sale or exchange
C. Automatic Perfection
a. PMSI on Consumer Goods §9-309
i. No need to file or possess if:
1. Secured party with a PMSI
2. In consumer goods
3. Perfected upon attachment
a. Giving value
b. Debtor having rights in the collateral
ii. Doesn’t apply to motor vehicles
b. Other Categories of Automatic Perfection §9-309(2-14)
i. A small, insignificant, amount of the debtors accounts in order to secure a loan (2)
ii. Health care insurance receivables (5)
1. Money or payment owed to a patient by virtue of his or her insurance plan
2. No need for the doctor to file a financing statement or take any other action to
perfect
iii. Sales of payment intangibles and promissory notes (3) and (4)
iv. Various deemed security interests under other UCC sections (6-8)
v. Security interests in various investment property scenarios (9-11)
vi. Other provisions (12-14)
D. Control §9-314(a)
a. Possession-type equivalent for certain types of collateral
i. Investment property
ii. Deposit accounts
iii. Letter-of-credit rights
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 b. Security interest is perfected by control once:
i. The secured party obtains control under applicable provisions of the UCC and
ii. Remains perfected by control only while the secured party maintains control
c. Control of Deposit Accounts §9-104(a)
i. Same bank rule
1. The secured party is the bank with which the deposit account is maintained
ii. Three way agreement §9-104(a)(2)
1. If a three-way authenticated agreement exists between debtor, secured party and
bank, the agreement constitutes control
iii. Putting in secured party’s name §9-104(a)(3)
1. Account is put under someone else’s name
d. Control of Investment Property §9-106
i. Control of a certificated security in bearer form
1. To get control just deliver security to the purchaser
2. Bearer means possessor
3. Stock certificate has no specific registered name
ii. Control of a certificated security in registered form
1. To get control:
a. Certificate is indorsed to the secured party and delivered to him
b. The certificate is re-registered in the secured party’s name and delivered
over to him
2. Stock certificate has a specific registered name
iii. Control of an uncertificated security
1. Stock certificate has not been put in paper form
2. To get control:
a. Deliver to secured party (re-register shares)
b. If issuer has agreed that it will comply with the instructions originated by
the secured party without further consent by registered owner
iv. Control of security entitlements
1. Security entitlement: right to securities which are held in a securities account
which is held at a securities intermediary
2. To get control:
a. The secured party becomes the entitlement holder
b. The securities intermediary has agreed that it will comply with entitlement
orders originated by the secured party without further consent by the
entitlement holder
v. Control of commodity contracts
1. Commodity contracts give right to the acquisition of various kinds of
commodities (oil, gas, steel, corn etc)
2. Bought and sold for investments
3. To get control:
a. The secured party is the commodity intermediary with which the
commodity contract is carried
b. If the commodity customer, secured party, and commodity intermediary
have agreed that the commodity intermediary will apply any value
distributed on account of the commodity contract as directed by the
secured party without further consent by the commodity customer
e. Control of Letter-of-Credit Right §9-107
i. Letter-of-credit right:

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 1. Beneficiary has right to receive proceeds from a letter-of-credit in the future
because an applicant applied for a letter of credit from the issuer bank that issued
the letter
2. Seller will deliver goods to the buyer and issuer promises that when the goods are
delivered it will release the funds to the seller and then request the applicant to
pay the issuer back over time, plus interest
3. To get control:
a. Issuer of the LoC must consent to the assignment of the LoC right
E. Certificate of Title Rules §9-311(a)
a. Initial Perfection
i. Certificate of title applies to motor vehicles
1. Cars
2. Trucks
3. Boats
4. Tractors
ii. It is the physical paper certificate that has:
1. Name of current owner
2. Decription of vehicle
3. Vehicle ID #
iii. Primary point
1. Demonstrate who has title and who is the current owner
iv. If a secured party desires to take a security interest in a car or truck:
1. The applicable state’s certificate of title statutes provides that in order to perfect a
security interest in the vehicle, the secured party must get its security interest
notated on the face of the title certificate itself, as a lienholder
b. Applicable Law – Multistate Issues
i. The law of the state that has issued certificate governs
ii. Where the current outstanding title is
iii. Law doesn’t change based on debtor moving to another state
iv. Once you apply for title in a new state, the new state law governs

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 Chapter 9: Priority: Basic Rules

A. Priority is about ranking security interests

a. Rules of priority when:
i. Two or more creditors try to collect their debts from the same property or
ii. When creditors try to collect their debts from the same property their debtor has sold to a
third party
b. Getting perfected helps a party get a leg up in a priority dispute when 2 or more parties have
contesting claims to collateral
B. General Priority: Secured Party v. Secured Party §9-322
a. Default rule:
i. First in time, first in right
b. First-to-File-or-Perfect (2 Perfected Security Interests)
i. Applies when a dispute about two or more perfected Article 9 security interests exist
1. First to file OR perfect
ii. UCC allows a secured party to file before it has attached
iii. The secured party that is first to file or perfect has priority so long as they have remained
continuously perfected
iv. Early filing for purposes of convenience is allowed under § 9-502(d)
v. Secured party has to be the first to file or perfect, be perfected and stay continuously
perfected
c. Perfected Secured Interests Have Priority Over Unperfected Secured Interests
i. Perfection beats non-perfection
ii. If one is perfected and one is not, perfected one wins priority
d. First to Attach (Between 2 Unperfected Security Interests)
i. Neither interest is perfected
ii. The first security to attach or become effective has priority if conflicting security interests
are unperfected
iii. First to attach has priority
C. First-in-Time, First-in-Right: Secured Party v. Lien Creditor §9-322
a. What’s a Lien Creditor? §9-102(a)(52)
i. Creditor that has acquired a lien on a property by attachment, levy or the like
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 ii. When the judgment creditor is successful in having the sheriff seize the judgment debtors
property the judgment creditor obtains a judicial lien and then becomes a judicia llien
creditor
b. The Priority Rule for Secured Parties vs. Lien Creditors—First-in-Time, First-in-Right §9-
317
i. First in time, first in right rule: §9-317(a)
1. Once the lien creditor gets the judicial lien, the lien creditor has done his part
ii. Secured parties: §9-317(a)(2)(A)
1. Secured party’s security interest is perfected before the lien creditor obtains a
judicial lien by levy
a. Secured party’s interest must attach and be perfected by some method
before lien creditor
2. Secured party’s security interest to take priority over the lien creditor
a. Doesn’t have to be fully perfected to get priority over lien creditor
b. Just has to meet one of the conditions under §9-203(b)(3) and file a
financing statement
c. Have debtor sign proper security agreement granting a security
interest in the property at issue and file a financing statement
iii. Trustee in bankrupty as a lien creditor
1. The moment a debtor files a bankrupty, a trustee is usually appointed immediately
upon filing
2. If a debtor files bankruptcy, a secured creditor is in the same position as a lien
creditor
3. If bankruptcy is filed, article 9 security interest is unperfected, the trustee will
have priority over the article 9 security interest

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 Chapter 10: Priority—Special Rules

A. PMSI: Superpriority
a. PMSI v. Non-PMSI: General Rule §9-324(a)
i. This rule applies to:
1. PMSI
2. Goods, except inventory
3. PMSI secured party has a deadline to perfect, which is no later than 20 days after
the debtor obtains possession of the goods
b. PMSI v. Non-PMSI: Inventory Rule §9-324(b)
i. No 20-day grace period
ii. If PMSI collateral is inventory, the PMSI secured party must be perfected when the
debtor receives possession of the inventory
iii. In order to get superpriority over prior perfected security interest in inventory, the PMSI
secured party must also send an authenticated notification to any other conflicting
security interests in the inventory
1. Authenticated notification:
a. Writing and signed
b. Notification must be sent before the debtor receives possession of the
inventory
2. Before debtor gets possession of the inventory, the PMSI secured party must be
perfected and it must have already send the authenticated notice to the conflicting
prior secured party
3. Notification needs to describe the particular inventory in which a PMSI will be
claimed
c. PMSI v. PMSI §9-324(g)
i. Basic tie-breaker rule
ii. Given that all the steps of 9-324(a) were taken (if the collateral is equipment) or if all the
steps of 9-324(b) were taken (if the collateral is inventory) and there are two such

21
 PMSI’s in the same collateral—the direct financing seller prevails over a third-party
lender
d. PMSI v. Lien Creditor §9-317(e)
i. PMSI priority over judicial liens when filed within 20 days after possession
B. Buyers: To Take Free, or Not to Take Free?
i. Buyers not usually creditors
b. Default Rule: Buyers Take Subject to Security Interest Unless Secured Party Consents §9-
315(a)
i. Default rule:
1. Buyers do not take free of a security interest in the items sold
2. A security interest continues in collateral notwithstanding sale or other type of
disposition
3. Only way for collateral to be sold free of the security interest is for the secured
party to consent for it to be sold free of its security interest on it
c. Exception #1: Buyer in the Ordinary Course of Business §9-320(a)
i. If a buyer is a “buyer in the ordinary course of business” then:
1. Buyer takes completely free of any security interest
2. That the seller had granted to a secured party
3. Doesn’t matter if security interest is perfected or if the buyer knows there is a
security interest
ii. Buyer in the ordinary course of business is: §1-201(b)(9)
1. Look at sellers business
a. Almost always, buyers buying sellers inventory are buyers in the ordinary
course
b. Buyers buying seller’s equipment are not
2. The buyer must buy in good faith
a. Good faith: buyer didn’t have any reason to know something was wrong
with the sale
3. Buyer must generally take possession of the goods to be a buyer in the ordinary
course of business
4. Transfers in bulk
a. Excluded from buyer in ordinary course status
5. Buyers who pay for goods by forgiving debt are excluded from buyer in ordinary
course status
iii. Exception to the buyer in ordinary course of business:
1. Person buying farm products from a person engaged in farming operations
2. Food Security Act of 1985 offers protections for agricultural lenders:
a. Advance-notice system
b. Central-registry system
d. Exception #2: Buyer vs. an Unperfected Secured Party §9-317(b)
i. Buyer of the listed collateral types will take free of a security interest if the buyer actually
gives value for the items and the buyer receives delivery or possession
ii. Buyer must receive possession of the purchased items with no knowledge at al of the
existence of the security interest
e. Exception #3: Buyer of Consumed Goods §9-320(b)
i. Garage sale rule
ii. When one consumer sells to another consumer—that is, they both own, or acquire, the
goods for personal, family, or household purposes
iii. As long as both buyer and seller share this consumer perspective, the rule is potentially
implicated
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 f. Priority of Purchasers of Instruments and Chattel Paper §9-330(a)(b)(d) and §9-331
i. To get priority over a prior security interest in the instrument or chattel paper, the
purchaser must
1. Take possession of the chattel paper
2. In good faith
3. By giving value for the paper
4. Without knowledge that the purchase violates the rights of the secured party
C. Priority of Possessory Statutory Liens §9-333(a)
a. If a dispute arises between such a statutory lien and an Article 9 security interest, Article 9 has
priority
b. Possessory lien:
i. Legal requirement for the provider of services or materials to retain possession of the
good, to effectuate the lien under state law
ii. The possessory lien has priority over any security interest in the same goods
D. Control Priority Rules
a. Three primary types of collateral for which the concept of control was applicable:
i. Deposit accounts
ii. Investment property
iii. Letter-of-credit rights
b. Two basic rules:
i. A security interest perfected by control has priority over a security interest that is not
perfected by control
ii. If both security interests are perfected by control, the security interest which obtained
control first
c. Deposit Account Priority Rules §9-327
i. Control beats non-control
ii. If two security interests have control than the first to get control has priority
iii. That a secured party which has control because it is also the bank with which the deposit
account is maintained, will have control over any secured party with control
iv. Control method will give priority even over the bank with which the deposit account is
maintained
d. Investment Property Priority Rules §9-328
i. Control beats non-control
ii. If two security interests have control than the first to get control generally has priority
iii. A security interest held by a securities intermediary in a security entitlement or a
securities intermediary has priority over a conflicting security interest held by another
secured party
e. Letter-of-Credit Priority Rules §9-329
i. Control beats non-control
ii. If two security interests have control than the first to get control generally has priority
E. Proceeds-Priority Issues
a. Proceeds: General Rules for Priority
i. § 9-322: General Timing Based Rules
1. Whatever the time or filing of perfection is as to the original collateral, is the time
of filing or perfection as to proceeds
2. The priority as to original collateral is the same for proceeds
ii. § 9-322: Non-Timing Based Rules for “Non-Filing Collateral”
1. Non-filing collateral: collateral for which the perfection method is either
exclusively, or preferably, non-filing (aka control or possession)

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 2. If the security interest in original collateral is entitled to priority under these
sections, the security interest in proceeds will be entitled to priority if:
a. Security interest in proceeds is perfected
b. The proceeds are either “cash proceeds” or the same type as the original
collateral
c. If there are proceeds, all intervening proceeds are either cash or an account
relating to the collateral
iii. § 9-322: Timing-Based Rules for “Filing” Proceeds of “Non-Filing” Collateral
1. Filing collateral: collateral proceeds where filing is the only real way to perfect
2. If proceeds of non-filing collateral are things like accounts or general intangibles
b. Proceeds: Special PMSI Rules
i. § 9-324(a): Non-Inventory PMSI Proceeds
1. With respect to PMSI’s in collateral besides inventory, if a security interest has
PMSI priority in the original collateral, it has PMSI priority in any proceeds of
that collateral
a. Assuming the security interest in proceeds is, and remains, perfected
ii. § 9-324(b): Inventory PMSI Proceeds
1. To obtain a priority PMSI in inventory, the secured party must, by or before the
debtor receives possession of the financed inventory collateral:
a. Perfect
b. Send authenticated notice to any secured parties with prior perfected
security interests in the debtors inventory
2. If a PMSI has priority in the inventory, then the PMSI has priority in any
collateral generated from sale or other disposition of inventory
F. Future Advances – Priority Issues §9-323
a. §9-323: provides some limits on this ability of all future advances to have the same priority as
the original loan and security interest
b. Future Advances vs. Lien Creditors §9-323(b)
i. Limits the ability of a future advance to prevail over a lien creditor
ii. Protects one who obtains judicial lien from additional future advance gaining the first
priority over them are thereby shutting him out of any access to available liened assets
c. Future Advances vs. Buyers of Goods §9-323(d)
i. Limit the liability of a future advance to prevail over a buyer of goods
G. Accessions and Commingling –Priority Rules
a. Accessions (goods attached to other goods)
i. Security interest in accessions
1. Provide that a security interest can attach to an accession and can be perfected in
an accession
ii. Regular priority rules
1. No special rules generally apply to an accession
2. Regular first-in-time rules apply or PMSI rules as applicable
iii. Certificate of title exception
1. Cars or trucks
iv. Subsection (e) and (f) – rights on default
b. Commingled Goods §9-336(a)
i. Goods that are physically united with other goods in such a manner that their identity is
lost in a product or mass
ii. No security interest in “commingled” goods
iii. Attachment and perfection
iv. Regular priority rules usually apply
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 v. Priority between two or more security interests in commingled goods
H. Fixtures (and Crops) –Priority Rules
a. Fixtures Can Be Subject To Security Interests and Mortgage Interests §9-334(a)(b)
i. Security interests can be granted in fixtures and that it remains in the goods after they
have become fixtures
ii. Distinguishes fixtures from ordinary building materials incorporated into an improvement
on land
iii. Fixtures remain identifiable as separate artifacts even once attached to land—ordinary
building materials do not
b. Residual Priority Rule: Real Estate Interest Has Priority §9-334(c)
i. Real estate beats Article 9 interest
ii. Only applies if none of the other, more specific priority rules do not apply
c. Fixture PMSI Rule of Priority §9-334(d)
i. PMSI’s favored if:
1. Fixture filing in 20 days
2. Interest in real estate encumbrancer or owner must arise before the goods become
fixtures
d. Fixture PMSI vs. Construction Mortgage §9-334(h)
i. During the ongoing construction, the construction mortgage trumps everything
e. Fixture First-to-File Rule §9-316(e)
i. Security interest in a fixture has priority over a mortgage or owner’s interest, as long as a
proper fixture filing is filed before the mortgagee’s interest or owner’s interest is
recorded (filed)
f. Fixture “Readily Moveable” Rules §9-3316(e)
i. For readily moveable items, all a fixture security interest has to do to get priority is to
perfect by any method, and do so before the goods become fixtures
ii. Readily moveable:
1. Factory or office machinery
2. Equipment not primarily used or leased for use in the operation of the real
property
3. Replacements of domestic appliances that are consumer goods
g. Other § 9-334 Fixture Priority Rules
i. Fixture priority v. judicial liens §9-334(e)(3)
ii. Fixture priority v. manufactured home transaction §9-334(e)(4)
iii. Fixture priority by consent or right to remove §9-334(f)
iv. Crop priority §9-334(i)

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 Chapter 11: Default (Before Foreclosure Sale)

A. What is a Default?
a. Default is a matter of contract
b. It is whatever the agreement says it is
c. Most important kind of default is missing a payment on the loan or credit obligation
d. Can also be:
i. Loss or damage to the collateral
ii. Failing to keep insurance on the collateral
iii. Failing to keep the collateral in good condition and repair
iv. Failing to inform the secured party of any name change or change of debtors location
v. Death, dissolution or bankruptcy of the debtor
B. Rights upon Default?
a. Judicial Enforcement §9-601
i. Upon default, secured party can:
1. Reduce a claim to judgment
a. Sue debtor in court and get money judgment for the amount of debt
2. Foreclose the claim or judicially enforce it
a. Getting the collateral with courts help
b. Self-Help Repossession and Duty Not to Breach the Peace §9-609
i. Repossess collateral on your own with no court help
ii. Cannot breach the peace
c. Collecting Account and Other Financial Collateral §9-607
i. Secured party entitled to proceeds (a)
ii. Stepping into a debtor/secured party’s shoes (a)(3)
26
 1. Secured party can demand payment from the underlying account debtor, but if
there is a security interest that goes with such obligation, then the secured party
steps into those shoes as well
iii. Commercial reasonableness standard (c)
1. Secured party can deduct its expenses from whatever amount is collected before
applying it to the debt
iv. Expenses come off the top
C. Redemption §9-623
a. Secured party lets debtor have collateral back
b. Who (a)
i. Primarily the debtor who can redeem the collateral
c. How (b)
i. Pay everything that’s owed plus expenses
d. When (c)(2)
i. Can occur beginning any time after the secured party has repossessed the collateral

Chapter 12: Default (From Foreclosure Sale to End)

A. General Commercial Reasonableness Standard §9-610

a. Once there’s a default, a secured party is entitled to sell the collateral
b. Secured party has leeway as to whether it needs to do anything to the collateral before selling it
c. Every aspect of a disposition of collateral, including the method, manner, time, place and other
terms, must be commercially reasonable
d. Commercially reasonable not defined in the code
e. Sale can be public or private
B. Pre-Sale Notice Requirements §9-611
a. Required recipients
i. Debtor
ii. Secondary obligors
iii. Other secured parties
b. Notice:
i. Those who have sent authenticated notice of a claim of an interest in collateral
ii. Those that have filed a financing statement identifying the debtor and the collateral being
sold
iii. Those listed on the certificate of title of a car or truck
iv. Exception:
1. Collateral perishable or may rapidly decline in value
v. How much notice:
1. Reasonable time
2. In commercial transactions:
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 a. After default: 10 days or more before the earliest time of sale in the notice
C. Effects of the Foreclosure Sale
a. Application of Sale Proceeds/Deficiency or Surplus §9-615
i. Expenses come off the top
ii. Next comes the foreclosing secured party’s debt
iii. Next comes payment of lower priority secured claims (if notice has been sent to
foreclosing party)
iv. Debtor gets surplus/or debtor owes deficiency
b. Title Conveyance and Discharge of Security Interests §9-617
i. Time transferred from debtor to buyer
ii. Foreclosing secured party’s security interest is discharged
iii. Junior parties’ security interests are discharged, too
D. Strict Foreclosure §9-622
a. Debtor must consent to it
b. Secured party must send notice of proposal to other parties, and not receive any objections
c. If the debtor is a consumer debtor, the debtor cannot have possession of the collateral
d. Strict foreclosure must not be forbidden by consumer 60% rule
e. Effect of strict foreclosure
E. Remedies for Article 9 Violations §9-625
a. General Money Damages –Basic Rule
i. A debtor can recover any actual damages for a secured party’s violation of any provision
of Article 9
b. Damages: Eligible Plaintiffs and Consumer Minimum Penalty §9-623(c)
c. Rules on Elimination of Deficiency and Recovery of Surplus §9-626

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