TX Secured Transactions

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Security Interest Definition: The right to keep or sell the collateral if the debtor defaults on his obligation to the creditor.
Collateral Definition: Property subject to the security interest
Tangible Collateral (4) Classification: 1. Consumer Goods
2. Inventory
3. Farm Products
4. Equiptment
Consumer Goods Defintion: Goods used or bought for personal, family or household purposes.
Inventory Defintion: Goods held for sale or lease - or used short term.
Farm Products Definition: Goods used or produced in farming in the hadns of farmer. Uniquely, the only category that can change in the same persons hands.
Equiptment Definition: Goods used in Business - long term.
Primary Use Test: The primary use to which the debtor puts the property.
Original Use Test: The original use to which the debtor puts the property.
Intangible Collateral (8) Classifications: 1. Instruments
2. Documents
3. Chattel Paper
4. Accounts
5. Deposit Accounts
6. Investment Property
7. Commercial Tort Claims
8. General Intangibles
Instruments Definition: UCC Article 3 instruments OR "promissory notes".
Documents Defintion: UCC Article 7 commodity paper such as warehouse receipts, bills of lading, or delivery orders. Bills of lading is a receipt issued by a common carrier.
Chattel Paper Defintion: Writing(s) evidencing:
A. Obligation (acknowledgement of debt); AND
B. Security Interest
Accounts (A/R) Defintion: Right to payment with no writting or insufficent writing to be an instrument or chattal paper.
Deposit Accounts Defintion: Accounts maintained with a bank. (i.e. savings, passbook, non-negotiable CDs)
Investment Property Defitition: Certificated,uncertificated, or securities account. (i.e. stocks, bonds, mutual funds)
Commercial Tort Claims Definition: Tort claims filed by and arising from business. NO After Aquired Tort Claims
General Intangibles: Catchall category for non-goods, including patents, trademarks, goodwill, copyright, and licensing.
Proceeds: Whatever is acquired under disposition of collateral.
As against a DEBTOR, rights are established by: CREATION and ATTACHMENT
As against THIRD PARTIES, rights are established by: CREATION, ATTACHEMENT and PERFECTION
STEP ONE - Creation How? (3): 1. Possession
2. Security Agreement
3. Control
Security Agreement Requirements (3): - authenticated record
- signed by debtor
- reasonably identifying the collateral
NO SUPERGENERIC DESCRIPTION
Control Definition: Power to deal with deposit accounts, electronic chattel paper, letter of credit right, or investment property
STEP TWO - Attachment Requirements (2): 1. Secured party must give value (including pre-existing debt).
2. Debtor has rights in the collateral
Attachment After Acquired Property Clause (AAPC w/2 exceptions): Future collateral for a present loan EXCEPT
- commercial tort claims
- 10 day rule for additional security for consumer goods
Attachment Future Advance Clauses: Present collateral for a future loan. No attachment until S gives value.
STEP THREE - Perfection Methods of Perfection (5): 1. Filing (Financing Statement)
2. Possession
3. Control
4. Automatic
5. Temporacy (Grace)
Perfection by FILING Record to Be Filed: Finacing Statement. Must contain:
1. Names of S/D (D-signature not required)
2. Addresses (not required if accepted)
3. Description (super generic is effective)
Filing Seriously Misleading Test: Based on the filing office's search logic, a seriously misleading filing is ineffective.
Perfection by FILING Where?: Where: Central location in the state of the debtor, but real estate collateral must be filed locally
Perfection by FILING Time Frame?: Time: Last for 5 years, and amendments filed within 6 months of termination.
Perfection by POSSESSION, Exceptions (5): Possession, except
- Accounts,
- Deposit Accounts,
- Electronic Chattel Paper,
- Letter of Credit Rights
- General Intangibles
Secured Party Duty to Debtor regarding POSSESSION: Duty of Reasonable Care
Reimbursement for Reasonable Expenses
Simultaneous Satisfy Requirements for Attachement and Perfection (2): 1. Possession
2. Control
PERFECTION: Automatic Main Type Only: PMSI in CONSUMER GOODS
Note: PMSI in inventory or equiptment must be filed.
PERFECTION: Temprorary Four Months (2): Four Months
1. Goods and debtor move to different state
2. Organization changes its name (not new legal entity)
PERFECTION: Temprorary Twenty Days (2):: 20 days from the debtors receipt of PROCEEDS, UNLESS
1. Same Office
2. Identifiable Cash Proceeds
3. Filing Perfected

20 days for instruments, negotiable documents, and certificated securities.
1. New Value
2. Delivery to Debtor for Disposition
Priorities: Secured Party v. Judicial Lein Creditor.: Key is Pefection. 20 day grace period for PMSI(E/I)

Exception: If value in STEP TWO was preexisting debt within 90 days of declaring Bankrupcy.
Priorities: Secured Party v. Purchaser. (5 Rules): 1. Garage Sale Rule
2. Business Purchaser
3. BOIC
4. HDC
5. Future Advance Purchaser
Garage Sale Rule: In Consumer to Consumer transaction, the purchaser prevails unless perfection. Automatic Perfection ineffective.
Business Purchaser Rule: If there is a business purchaser, the secured party prevails. Automatic Perfection Effective
Buyer In Ordinary Course (BIOC Rule): Purchaser wins even if filing by secured party
Holder in Due Course Rule: HDC takes fee of personal defenses and claims (even over earlier perfected security interests)
Future Advance Purchasers Rule: COMPLEX: Forget unless come across this in practice.
Priorites: Secured Party v. Secured Party: First to file or perfect has priority in collateral.
Priorites: Secured Party v. Secured Party, Superpriority Exceptions: 1. PMSI Inventory
- Notice
- No Grace
2. PMSI Equiptment
- Grace 20 Days
- No Notice
3. Puchaser of Chattel Paper (with Possession)over Secured Taking Proceeds
Priorites: Secured Party v. Secured Party, Investment Property: Securty property with control (or possession) prevails over filing
Priorites: Secured Party v. Secured Party, Proceeds: Filing Collateral: achieved by filing finacing statement
- First in time, same date as original if extends beyond 20 day temporary

Nonfiling Collateral: acheived by possession or control. Prioriity iff
1. Prioritiy in Original
2. Securitn in Proceeds Perfected AND
3. Proceeds are case or of same type as original collateral
Fixtures: Personal property which become real estate by affixation.
Priorites: Secured Party v. Secured Party, Fixtures (H): Generally, first to file prevails.

ExCEPT:
1. PMSI secured party who makes fixture filing w/in 20 days will prevail over prior real estate filing

EXCEPTION, SUPER SUPER PRIORITY: A construction mortgagee prevails so long as recorded before goods became fixtures, and goods become fixtures before completion.
Accessions: Added value to main property chattel
Priorites: Secured Party v. Secured Party, Assessions: First to file. PMSI Super Priority Apply

EXCEPT: Security interest in whole car has priorty in accession when TITLED
Rights on Default Define Default: Usually failure to pay or maintain insurance; damage to chattel
Rights on Default Include (2): 1. Sue on Debt
2. Take Possession, Sell by Disposition, Sue on Deficiency
Rights on Default Posession: a. Self help (w/o breach of peace)
b. Replevin (TX: writ of sequestration) state involvement
Rights on Default Disposition (H): Commercial Reasonableness
Factors:
1. Advertising
2. Cleaning or Repair of Collateral
3. Convenieence of Time and Place of Public Auction
4. People in that market are contacted.
Rights on Default Notice, To Whom?: Unless the collateral is perishable or threatens to decline rapidly, the secured party must give notice to debtor, surety, and other secured parties before sale.
Rights on Default Notice, Contents/Nonconsumer Goods?: Noncomsumer Goods:
1. Debtor / Secured Party
2. Collateral
3. Method of Disposition
4. Time and Place of Disposition
Rights on Default Notice, Contents/Consumer Goods?: 1. Liability for Deficiency Judgment
2. Telephone for Redemption
3. Telephone for Additional Info
Acceptance of Collateral as Satisfaction: Consumer Transactions: parties can agree to voluntary turnover for FULL satsifaction only

Nonconsumer Transactions: parties can agree for an agreed credit with debtor acknowledging deficiency.

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