secured transactions assignment 36
DESCRIPTION
Secured Transactions Assignment 36. Buyers against Secured Creditors. Secured Party. Security Interest. Debtor. Seller. Buyer. Item. Item. Secured Party. Security Interest. Debtor. Seller. Buyer. Item. Item. Assignment 35. Assignment 36. - PowerPoint PPT PresentationTRANSCRIPT
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Secured TransactionsAssignment 36
Buyers against Secured Creditors
2
SecuredParty
Seller Debtor
Security Interest
Item BuyerItem
3
SecuredParty
BuyerSeller Debtor ItemItem
Assignment 35 Assignment 36
Security Interest
4
Main Rule:Security Interests Survive
Sale of Collateral
5
§9-201. A security agreement is effective according to its
terms . . . against purchasers of the collateral . . . .
Main Rule:Security Interests Survive
Sale of Collateral
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§9-201. A security agreement is effective according to its
terms . . . against purchasers of the collateral . . . .
§9-315(a)(1). A security interest . . . continues in collateral notwithstanding sale . . .
Main Rule:Security Interests Survive
Sale of Collateral
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§9-201. A security agreement is effective according to its
terms . . . against purchasers of the collateral . . . .
§9-315(a)(1). A security interest . . . continues in collateral notwithstanding sale . . . unless the secured party authorizes the disposition free of the security interest . . . .
Exception 1
Main Rule:Security Interests Survive
Sale of Collateral
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Exception 2: Buyer in Ordinary Course
SecuredParty
BuyerDebtor Collateral
Security Interest
§9-320(a). A buyer in ordinary course of business . . .
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Exception 2: Buyer in Ordinary Course
SecuredParty
BuyerDebtor Collateral
Security Interest
§9-320(a). A buyer in ordinary course of business . . .
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Exception 2: Buyer in Ordinary Course
SecuredParty
BuyerDebtor Collateral
Security Interest
§9-320(a). A buyer in ordinary course of business . . . takes free of a security interest . . .
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Exception 2: Buyer in Ordinary Course
SecuredParty
BuyerDebtor Collateral
Security Interest
§9-320(a). A buyer in ordinary course of business . . . takes free of a security interest created by the buyer’s seller . . .
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Exception 2: Buyer in Ordinary Course
SecuredParty
BuyerDebtor Collateral
Security Interest
§9-320(a). A buyer in ordinary course of business . . . takes free of a security interest created by the buyer’s seller . . .
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Exception 2: Buyer in Ordinary Course
SecuredParty
BuyerDebtor Collateral
Security Interest
§9-320(a). A buyer in ordinary course of business . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
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Exception 2: Buyer in Ordinary Course§9-320(a). A buyer in ordinary course of business . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
SecuredParty
BuyerDebtor Collateral
Security Interest
But not if the buyer “has knowledge that the sale violates the rights of another person in the goods.” §1-201(b)(9)
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Exception to 9-320(a) exception: Possession
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§9-320(e). Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under Section 9-313.
Exception to 9-320(a) exception: Possession
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Exception to 9-320(a) exception: Possession§9-320(e). Subsections (a) and (b) do not affect a security
interest in goods in the possession of the secured party under Section 9-313.
DeeringPossession
Mill Fabrics
Security InterestTanbro case, 1976
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§9-320(e). Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under Section 9-313.
DeeringPossession
TanbroBIOCMill Fabrics Sale
Security InterestTanbro case, 1976
Exception to 9-320(a) exception: Possession
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§9-320(e). Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under Section 9-313.
DeeringPossession
TanbroBIOCMill Fabrics Sale
Security InterestTanbro case, 1976
Exception to 9-320(a) exception: Possession
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§9-320(e). Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under Section 9-313.
DeeringPossession
TanbroBIOCMill Fabrics Sale
Security InterestTanbro case, 1976
Revised Article 9, 2001
Exception to 9-320(a) exception: Possession
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§9-320(e). Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under Section 9-313.
DeeringPossession
TanbroBIOCMill Fabrics Sale
Security InterestTanbro case, 1976
Revised Article 9, 2001
Would you buy and pay for something that seller doesn’t have in its possession?
Exception to 9-320(a) exception: Possession
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§9-320(e). Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under Section 9-313.
DeeringPossession
TanbroBIOCMill Fabrics Sale
Security InterestTanbro case, 1976
Revised Article 9, 2001
Would you buy and pay for something that seller doesn’t have in its possession? Ebay
Exception to 9-320(a) exception: Possession
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Exception 3: Consumer to Consumer§9-320(b). A buyer of goods
Secured
BuyerDebtor CollateralSecurity Interest
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Exception 3: Consumer to Consumer§9-320(b). A buyer of goods
Secured
BuyerDebtor CollateralSecurity Interest
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Exception 3: Consumer to Consumer§9-320(b). A buyer of goods from a person who used or bought
the goods for use primarily for personal, family, or household purposes . . .
Secured
BuyerDebtor CollateralSecurity Interest
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Exception 3: Consumer to Consumer§9-320(b). A buyer of goods from a person who used or bought
the goods for use primarily for personal, family, or household purposes . . .
Secured
BuyerConsumer CollateralSecurity Interest
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Exception 3: Consumer to Consumer§9-320(b). A buyer of goods from a person who used or bought
the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected,
Secured
BuyerConsumer CollateralSecurity Interest
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Exception 3: Consumer to Consumer§9-320(b). A buyer of goods from a person who used or bought
the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys:
(1) without knowledge of the security interest;
Secured
BuyerConsumer CollateralSecurity Interest
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Exception 3: Consumer to Consumer§9-320(b). A buyer of goods from a person who used or bought
the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys:
(1) without knowledge of the security interest;
(2) for value;
Secured
BuyerConsumer CollateralSecurity Interest
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Exception 3: Consumer to Consumer§9-320(b). A buyer of goods from a person who used or bought
the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys:
(1) without knowledge of the security interest;
(2) for value;
(3) primarily for the buyer’s personal, family, or household purposes
Secured
ConsumerConsumer CollateralSecurity Interest
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Exception 3: Consumer to Consumer§9-320(b). A buyer of goods from a person who used or bought
the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys:
(1) without knowledge of the security interest;
(2) for value;
(3) primarily for the buyer’s personal, family, or household purposes; and
(4) before the filing of a financing statement covering the goods.
Secured
ConsumerConsumer CollateralSecurity Interest
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Exception 4: Unperfected Security Interest§9-317(b). A buyer . . . takes free of a security interest . . . if
the buyer gives value and receives delivery of the collateral without knowledge of the security interest . . . and before it is perfected.
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Exception 4: Unperfected Security Interest§9-317(b). A buyer . . . takes free of a security interest . . . if
the buyer gives value and receives delivery of the collateral without knowledge of the security interest . . . and before it is perfected.
35SI
Exception 4: Unperfected Security Interest§9-317(b). A buyer . . . takes free of a security interest . . . if
the buyer gives value and receives delivery of the collateral without knowledge of the security interest . . . and before it is perfected.
Notice:
A secured creditor with knowledge has priority over an unperfected secured creditor
Secured
Secured with knowledge
Debtor
Unperfected SI
§9-322(a)
36SI
Exception 4: Unperfected Security Interest§9-317(b). A buyer . . . takes free of a security interest . . . if
the buyer gives value and receives delivery of the collateral without knowledge of the security interest . . . and before it is perfected.
Notice:
A secured creditor with knowledge has priority over an unperfected secured creditor
But a buyer with knowledge doesn’t have priority over an unperfected secured creditor
Secured
Secured with knowledge
Debtor
Unperfected SI
Sale
Secured
Buyer with knowledge
Debtor
Unperfected SI
§9-322(a) §9-317(b)
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Exception 5: Future Advances§9-323(d). A buyer of goods other than a buyer in the ordinary
course of business . . .
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Exception 5: Future Advances§9-323(d). A buyer of goods other than a buyer in the ordinary
course of business takes free of a security interest to the extent that it secures [future] advances . . . .
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Exception 5: Future Advances§9-323(d). A buyer of goods other than a buyer in the ordinary
course of business takes free of a security interest to the extent that it secures [future] advances made after the earlier of
(1) the secured party acquires knowledge of the buyer’s purchase; or
(2) 45 days after the purchase.
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Exception 5: Future Advances§9-323(d). A buyer of goods other than a buyer in the ordinary
course of business takes free of a security interest to the extent that it secures [future] advances made after the earlier of
(1) the secured party acquires knowledge of the buyer’s purchase; or
(2) 45 days after the purchase.
Sale45 days
Subject to theseadvances
Subject to if S withoutknowledge
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Exception 5: Future Advances§9-323(d). A buyer of goods other than a buyer in the ordinary
course of business takes free of a security interest to the extent that it secures [future] advances made after the earlier of
(1) the secured party acquires knowledge of the buyer’s purchase; or
(2) 45 days after the purchase.
(e) Subsection (d) does not apply if the advance is made pursuant to a commitment entered into without knowledge of the buyer’s purchase and before the expiration of the 45-day period.
Sale45 days
Subject to theseadvances
Subject to if S withoutknowledge
Subject to if S committed
without knowledge before 46th day
Exception 5: Future Advances§9-323(d). A buyer of goods other than a buyer in the ordinary
course of business takes free of a security interest to the extent that it secures [future] advances made after the earlier of
(1) the secured party acquires knowledge of the buyer’s purchase; or
(2) 45 days after the purchase.
(e) Subsection (d) does not apply if the advance is made pursuant to a commitment entered into without knowledge of the buyer’s purchase and before the expiration of the 45-day period.
Sale45 days
Subject to theseadvances
Subject to if S withoutknowledge
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Exception 5: Future Advances§9-323(d). A buyer of goods other than a buyer in the ordinary
course of business takes free of a security interest to the extent that it secures [future] advances made after the earlier of
(1) the secured party acquires knowledge of the buyer’s purchase; or
(2) 45 days after the purchase.
(e) Subsection (d) does not apply if the advance is made pursuant to a commitment entered into without knowledge of the buyer’s purchase and before the expiration of the 45-day period.
Sale45 days
Subject to theseadvances
Subject to if S withoutknowledge
Example: Buyer at an execution sale
Subject to if S committed
without knowledge before 46th day
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SecurityInterest
Problem 36.1.a, page 613
All Sea-sons RV
Eddy
Eddy gives SI to All Seasons, sale prohibited
$17K
45
SecurityInterest
Problem 36.1.a, page 613
All Sea-sons RV
Sunrise RVEddy
Eddy gives SI to All Seasons, sale prohibited
Eddy sells to Sunrise in violation of SA
RV
Lindy
$17K
46
SecurityInterest
Problem 36.1.a, page 613
All Sea-sons RV
Sunrise RVEddy
Eddy gives SI to All Seasons, sale prohibited
Eddy sells to Sunrise in violation of SA
Sunrise sells to Card in ordinary course
Card$23K
Lindy
RV
Lindy
$17K
47
SecurityInterest
Problem 36.1.a, page 613
a. Card sues All Seasons to remove lien. How good is her case? Card loses. In re Sunrise RV, 105 B.R. 587 (1989)
§9-320(a). A buyer in ordinary course of business . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
All Sea-sons RV
Sunrise RVEddy
Eddy gives SI to All Seasons, sale prohibited
Eddy sells to Sunrise in violation of SA
Sunrise sells to Card in ordinary course
Card$23K
Lindy
RV
Lindy
$17K
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SecurityInterest
Problem 36.1.a, page 613
a. Card sues All Seasons to remove lien. How good is her case? Card loses. In re Sunrise RV, 105 B.R. 587 (1989)
§9-320(a). A buyer in ordinary course of business . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
All Sea-sons RV
Sunrise RVEddy
Eddy gives SI to All Seasons, sale prohibited
Eddy sells to Sunrise in violation of SA
Sunrise sells to Card in ordinary course
Card$23K
Lindy
RV
Lindy
$17K
49
SecurityInterest
Problem 36.1.a, page 613
a. Card sues All Seasons to remove lien. How good is her case? Card loses. In re Sunrise RV, 105 B.R. 587 (1989)
§9-320(a). A buyer in ordinary course of business . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
All Sea-sons RV
Sunrise RVEddy
Eddy gives SI to All Seasons, sale prohibited
Eddy sells to Sunrise in violation of SA
Sunrise sells to Card in ordinary course
Card$23K
Lindy
RV
Lindy
$17K
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SecurityInterest
Problem 36.1.b, page 613
b. What if Card had demanded certificate of title?
Sunrise has certificate showing Eddy as owner, All Seasons as secured. Back shows signature from Eddy; no place for All Seasons to sign.
Sunrise: “We discharge the lien, you get clear title by mail in two weeks.”
All Sea-sons RV
Sunrise RVEddy
Eddy gives SI to All Seasons, sale prohibited
Eddy sells to Sunrise in violation of SA
Sunrise sells to Card in ordinary course
Card$23K
Lindy
RV
Lindy
$17K
51
SecurityInterest
Problem 36.1.b, page 613
b. What if Card had demanded certificate of title? Who has it?
Sunrise: “We discharge the lien, you get clear title by mail in two weeks.”
All Sea-sons RV
Sunrise RVEddy
Eddy gives SI to All Seasons, sale prohibited
Eddy sells to Sunrise in violation of SA
Sunrise sells to Card in ordinary course
Card$23K
Lindy
RV
Lindy
$17K
52
SecurityInterest
Problem 36.1.b, page 613
b. What if Card had demanded certificate of title? Who has it?
Maybe All Seasons. Maybe Sunrise. Eddy has transferred ownership, but All Seasons has not released lien, page 424.
Sunrise: “We discharge the lien, you get clear title by mail in two weeks.”
All Sea-sons RV
Sunrise RVEddy
Eddy gives SI to All Seasons, sale prohibited
Eddy sells to Sunrise in violation of SA
Sunrise sells to Card in ordinary course
Card$23K
Lindy
RV
Lindy
$17K
53
SecurityInterest
Problem 36.1.b, page 613
b. What if Card had demanded certificate of title? Who has it?
Maybe All Seasons. Maybe Sunrise. Eddy has transferred ownership, but All Seasons has not released lien, page 424.
Sunrise: “We discharge the lien, you get clear title by mail in two weeks.”
All Sea-sons RV
Sunrise RVEddy
Eddy gives SI to All Seasons, sale prohibited
Eddy sells to Sunrise in violation of SA
Sunrise sells to Card in ordinary course
Card$23K
Lindy
RV
Lindy
$17K
54
Problem 36.2.a, page 613
Mall Store
a. Card is buying a reconditioned piano from a store in the Mall. She wants you to represent her at the closing. Is there anything to her fears? Same as with the Lindy.
Card
$10K
55
Problem 36.2.a, page 613
Mall Store
a. Card is buying a reconditioned piano from a store in the Mall. She wants you to represent her at the closing. Is there anything to her fears?
Card$10K
56
SecurityInterest
Problem 36.2.a, page 613
§9-320(a). A buyer in ordinary course of business . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
b. Can we deal with problem by a thorough UCC search?
No. Filing would be against Eddy. §507(a).
All Sea-sons RV
Mall StoreEddy
a. Card is buying a reconditioned piano from a store in the Mall. She wants you to represent her at the closing. Is there anything to her fears? Same as with the Lindy.
Card
$10K
57
SecurityInterest
Problem 36.2.a, page 613
§9-320(a). A buyer in ordinary course of business . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
b. Can we deal with problem by a thorough UCC search?
No. Filing would be against Eddy. §507(a).
All Sea-sons RV
Mall StoreEddy
a. Card is buying a reconditioned piano from a store in the Mall. She wants you to represent her at the closing. Is there anything to her fears? Same as with the Lindy.
Card
$10K
58
SecurityInterest
Problem 36.2.b, page 613
§9-320(a). A buyer in ordinary course of business . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
b. Can we deal with problem by a thorough UCC search?
No. Filing would be against Eddy. §507(a).
All Sea-sons RV
Mall StoreEddy
a. Card is buying a reconditioned piano from a store in the Mall. She wants you to represent her at the closing. Is there anything to her fears? Same as with the Lindy.
Card
$10K
59
SecurityInterest
Problem 36.2.b, page 613
§9-320(a). A buyer in ordinary course of business . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
b. Can we deal with problem by a thorough UCC search?
Difficult. Filing would be against Eddy. §9-507(a). Could be automatic perfection. §9-309(1).
All Sea-sons RV
Mall StoreEddy
a. Card is buying a reconditioned piano from a store in the Mall. She wants you to represent her at the closing. Is there anything to her fears? Same as with the Lindy.
Card
$10K
60
SecurityInterest
Problem 36.2.c, page 613
c. What should we do?
Tell her fears are irrational? Like an Airline crash victim.
Send her to a shrink? Take her money, so some investigation. But what if a guardian is appointed?
All Sea-sons RV
Mall StoreEddy
§9-320(a). A buyer in ordinary course of busi-ness . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Card
$10K
61
SecurityInterest
Problem 36.2.c, page 613
c. What should we do?
Tell her fears are irrational? Like an Airline crash victim.
Send her to a shrink? Take her money, so some investigation. But what if a guardian is appointed?
All Sea-sons RV
Mall StoreEddy
§9-320(a). A buyer in ordinary course of busi-ness . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Card
$10K
62
SecurityInterest
Problem 36.2.c, page 613
c. What should we do?
Tell her fears are irrational? Like an Airline crash victim.
Send her to a shrink? Take her money, so some investigation. But what if a guardian is appointed?
All Sea-sons RV
Mall StoreEddy
§9-320(a). A buyer in ordinary course of busi-ness . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Card
$10K
63
SecurityInterest
Problem 36.2.c, page 613
c. What should we do?
Tell her fears are irrational? Like an Airline crash victim.
Send her to a shrink? Take her money, so some investigation. But what if a guardian is appointed?
All Sea-sons RV
Mall StoreEddy
§9-320(a). A buyer in ordinary course of busi-ness . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Card
$10K
64
SecurityInterest
Problem 36.2.c, page 613
c. What should we do?
Tell her fears are irrational? Like an Airline crash victim.
Send her to a shrink? Weyrauch: She won’t go.
Take her money, so some investigation. But what if a guardian is appointed?
All Sea-sons RV
Mall StoreEddy
§9-320(a). A buyer in ordinary course of busi-ness . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Card
$10K
65
SecurityInterest
Problem 36.2.c, page 613
c. What should we do?
Tell her fears are irrational? Like an Airline crash victim.
Send her to a shrink? Weyrauch: She won’t go.
Take her money, do some investigation? But what if a guardian is appointed?
All Sea-sons RV
Mall StoreEddy
§9-320(a). A buyer in ordinary course of busi-ness . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Card
$10K
66
SecurityInterest
Problem 36.2.c, page 613
c. What should we do?
Tell her fears are irrational? Like an Airline crash victim.
Send her to a shrink? Weyrauch: She won’t go.
Take her money, do some investigation? But what if a guardian is appointed?
All Sea-sons RV
Mall StoreEddy
§9-320(a). A buyer in ordinary course of busi-ness . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Card
$10K
67
SecurityInterest
Problem 36.2.d, page 613
d. Could this problem occur with new goods?
Yes. Dealer sells encumbered inventory in bulk.
What is the policy for “created by the buyer’s seller” exception?
Wrongfully sold collateral is like stolen goods. Don’t make a market for it. Void title rule.
Inventorylender
Mall store 2Mall store 1
§9-320(a). A buyer in ordinary course of busi-ness . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Card
$10K
68
SecurityInterest
Problem 36.2.d, page 613
d. Could this problem occur with new goods?
Yes. Dealer sells encumbered inventory in bulk.
What is the policy for “created by the buyer’s seller” exception?
Wrongfully sold collateral is like stolen goods. Don’t make a market for it. Void title rule.
Inventorylender
Mall store 2Mall store 1
§9-320(a). A buyer in ordinary course of busi-ness . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Card
$10K
Bulk sale
69
SecurityInterest
Problem 36.2.d, page 613
d. Could this problem occur with new goods?
Yes. Dealer sells encumbered inventory in bulk.
What is the policy for “created by the buyer’s seller” exception?
Wrongfully sold collateral is like stolen goods. Don’t make a market for it. Void title rule.
Inventorylender
Mall store 2Mall store 1
§9-320(a). A buyer in ordinary course of busi-ness . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Card
$10K
Bulk sale
70
SecurityInterest
Problem 36.2.d, page 613
d. Could this problem occur with new goods?
Yes. Dealer sells encumbered inventory in bulk.
What is the policy for “created by the buyer’s seller” exception?
Wrongfully sold collateral is like stolen goods. Don’t make a market for it. Void title rule. “Secureds need certainty.”
Inventorylender
Mall store 2Mall store 1
§9-320(a). A buyer in ordinary course of busi-ness . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Card
$10K
Bulk sale
71
SecurityInterest
Problem 36.2.d, page 613
d. Could this problem occur with new goods?
Yes. Dealer sells encumbered inventory in bulk.
What is the policy for “created by the buyer’s seller” exception?
Wrongfully sold collateral is like stolen goods. Don’t make a market for it. Void title rule. “Secureds need certainty.”
Truth in Lending Act §170 chargeback is a partial solution.
Inventorylender
Mall store 2Mall store 1
§9-320(a). A buyer in ordinary course of busi-ness . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Card
$10K
Bulk sale
72
Truth in Lending Act §170a. Subject to . . . (b), a card issuer [bank] . . . shall be subject
to all claims . . . arising out of any transaction in which the credit card is used as a method of payment . . . if
73
Truth in Lending Act §170a. Subject to . . . (b), a card issuer [bank] . . . shall be subject
to all claims . . . arising out of any transaction in which the credit card is used as a method of payment . . . if
(3) The place where the initial transaction occurred was in the same State as the mailing address previously provided by the cardholder or was within 100 miles from such address . . . .
74
Truth in Lending Act §170a. Subject to . . . (b), a card issuer [bank] . . . shall be subject
to all claims . . . arising out of any transaction in which the credit card is used as a method of payment . . . if
(3) The place where the initial transaction occurred was in the same State as the mailing address previously provided by the cardholder or was within 100 miles from such address . . . .
b. The amount of claims . . . asserted by the cardholder may not exceed the amount of credit outstanding with respect to such transaction at the time the cardholder first notifies the card issuer . . . of such claim.
75
Truth in Lending Act §170a. Subject to . . . (b), a card issuer [bank] . . . shall be subject
to all claims . . . arising out of any transaction in which the credit card is used as a method of payment . . . if
(3) The place where the initial transaction occurred was in the same State as the mailing address previously provided by the cardholder or was within 100 miles from such address . . . .
b. The amount of claims . . . asserted by the cardholder may not exceed the amount of credit outstanding with respect to such transaction at the time the cardholder first notifies the card issuer . . . of such claim.
Scenario: Alecia buys piano. Alecia pays her entire credit card balance. Inventory lender finds Alecia and claims. It is too late for Alecia to claim against the credit card issuer.
76
Problem 36.5, page 614
Davis DeptStore
Beavis
TV
Davis sells TV to Beavis
77
SecurityInterest
Problem 36.5, page 614
Davis DeptStore
Beavis
FSFiled
Davis sells TV to Beavis; takes PMSI and files financing statement.
78
SecurityInterest
Problem 36.5, page 614
Davis DeptStore
ButtheadBeavisTV, etc.
$960
FSFiled
Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value.
79
SecurityInterest
Problem 36.5, page 614
Can Davis repossess the TV from Butthead?
Davis DeptStore
ButtheadBeavisTV, etc.
$960
FSFiled
Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value.
80
SecurityInterest
Problem 36.5, page 614
Can Davis repossess the TV from Butthead? Yes, §9-201 and §9-315(a)(1).
Davis DeptStore
ButtheadBeavisTV, etc.
$960
FSFiled
Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value.
81
SecurityInterest
Problem 36.5, page 614
Can Davis repossess the TV from Butthead? Yes, §9-201 and §9-315(a)(1).
Does Consumer to Consumer exception save Butthead? §9-320(b).
Davis DeptStore
ButtheadBeavisTV, etc.
$960
FSFiled
Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value.
82
SecurityInterest
Problem 36.5, page 614
Can Davis repossess the TV from Butthead? Yes, §9-201 and §9-315(a)(1).
Does Consumer to Consumer exception save Butthead? §9-320(b). No, because Davis filed a financing statement.
Davis DeptStore
ButtheadBeavisTV, etc.
$960
FSFiled
Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value.
83
SecurityInterest
Problem 36.5, page 614
Can Davis repossess the TV from Butthead? Yes, §9-201 and §9-315(a)(1).
Does Consumer to Consumer exception save Butthead? §9-320(b). No, because Davis filed a financing statement.
Must Davis give Butthead his money back?
Davis DeptStore
ButtheadBeavisTV, etc.
$960
FSFiled
Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value.
84
SecurityInterest
Problem 36.5, page 614
Can Davis repossess the TV from Butthead? Yes, §9-201 and §9-315(a)(1).
Does Consumer to Consumer exception save Butthead? §9-320(b). No, because Davis filed a financing statement.
Must Davis give Butthead his money back? No. Davis didn’t get the money. The money is collateral, §9-315(a)(2).
Davis DeptStore
ButtheadBeavisTV, etc.
$960
FSFiled
Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value.
85
SecurityInterest
Problem 36.5, page 614
Can Davis repossess the TV from Butthead? Yes, §9-201 and §9-315(a)(1).
Does Consumer to Consumer exception save Butthead? §9-320(b). No, because Davis filed a financing statement.
Must Davis give Butthead his money back? No. Davis didn’t get the money. The money is collateral, §9-315(a)(2).
Davis DeptStore
ButtheadBeavisTV, etc.
$960
FSFiled
Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value.
Moral: Never give your name at a garage sale
86
Problem 36.8, page 615
FosterMarketing
Mall StoreBIOC
InventoryLender
SecurityInterest
$150K
100%financed
87
SecurityInterest
Problem 36.8, page 615Deutsche
Credit
FosterMarketing
FosterManufacturing
Mall StoreBIOC
InventoryLender
SecurityInterest
$150K
Deal: Foster Marketing takes subject to Deutsche’s SI. §1-302(a).
“Subjectto SI”
100%financed
88
SecurityInterest
Problem 36.8, page 615
§9-320(a). A buyer in ordinary course of business (Mall Store) . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
DeutscheCredit
FosterMarketing
FosterManufacturing
Mall StoreBIOC
InventoryLender
SecurityInterest
$150K
Deal: Foster Marketing takes subject to Deutsche’s SI. §1-302(a).
100%financed
“Subjectto SI”
89
SecurityInterest
Problem 36.8, page 615
§9-320(a). A buyer in ordinary course of business (Mall Store) . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Will this work to defeat the Inventory Lender?
DeutscheCredit
FosterMarketing
FosterManufacturing
Mall StoreBIOC
InventoryLender
SecurityInterest
$150K
Deal: Foster Marketing takes subject to Deutsche’s SI. §1-302(a).
100%financed
“Subjectto SI”
90
SecurityInterest
Problem 36.8, page 615Deutsche
Credit
All QuipRSS, Inc.CasePower
RSS, Inc. and All Quip have identical officers and directors. Case Power was a BFP.
100%financed
Equipment Equipment“Subject
to SI”
91
SecurityInterest
Problem 36.8, page 615
§9-320(a). A buyer in ordinary course of business [Case Power] . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
DeutscheCredit
All QuipRSS, Inc.CasePower
RSS, Inc. and All Quip have identical officers and directors. Case Power was a BFP.
100%financed
Equipment Equipment“Subject
to SI”
92
SecurityInterest
Problem 36.8, page 615
§9-320(a). A buyer in ordinary course of business [Case Power] . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Will this work to defeat the Inventory Lender?
DeutscheCredit
All QuipRSS, Inc.CasePower
RSS, Inc. and All Quip have identical officers and directors. Case Power was a BFP.
100%financed
Equipment Equipment“Subject
to SI”
93
SecurityInterest
Problem 36.8, page 615
§9-320(a). A buyer in ordinary course of business [Case Power] . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Will this work to defeat the Inventory Lender? Deutsche Credit v. Case Power & Equipment, 876 P.2d 1190 (Ariz. App. 1994).
DeutscheCredit
All QuipRSS, Inc.CasePower
RSS, Inc. and All Quip have identical officers and directors. Case Power was a BFP. Court held for Deutsche.
100%financed
Equipment Equipment“Subject
to SI”
94
SecurityInterest
Problem 36.8, page 615Deutsche
Credit
All QuipRSS, Inc.CasePower
RSS, Inc. and All Quip have identical officers and directors. Case Power was a BFP. Court held for Deutsche.
100%financed
Court: “We do not wish our holding here to be read as giving parties a license to engage in practices similar to those employed by RSS and All Quip. In our opinion, such title transfers between closely held corporations with common ownership will, upon scrutiny, often reveal a pattern of abuse of the corporate form sufficient to justify piercing the corporate veil.”
Equipment Equipment“Subject
to SI”
95
SecurityInterest
Problem 36.8, page 615
§9-320(a). A buyer in ordinary course of business (Mall Store) . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Ethical problem here? Paolella, 587. “Unless the creditor has become the alter ego of the debtor, he will not be held to an ethical duty in excess of the morals of the marketplace.”
DeutscheCredit
FosterMarketing
FosterManufacturing
Mall StoreBIOC
InventoryLender
SecurityInterest
$150K
Deal: Foster Marketing takes subject to Deutsche’s SI
100%financed
“Subjectto SI”
96
SecurityInterest
Problem 36.8, page 615
§9-320(a). A buyer in ordinary course of business (Mall Store) . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Ethical problem here? Paolella, 587. “Unless the creditor has become the alter ego of the debtor, he will not be held to an ethical duty in excess of the morals of the marketplace.”
DeutscheCredit
FosterMarketing
FosterManufacturing
Mall StoreBIOC
InventoryLender
SecurityInterest
$150K
Deal: Foster Marketing takes subject to Deutsche’s SI
100%financed
“Subjectto SI”
97
SecurityInterest
Problem 36.8, page 615
§9-320(a). A buyer in ordinary course of business (Mall Store) . . . takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.
Ethical problem here? Paolella, 580. “Unless the creditor has become the alter ego of the debtor, he will not be held to an ethical duty in excess of the morals of the marketplace.”
DeutscheCredit
FosterMarketing
FosterManufacturing
Mall StoreBIOC
InventoryLender
SecurityInterest
$150K
Deal: Foster Marketing takes subject to Deutsche’s SI
100%financed
“Subjectto SI”