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Secured Transactions Assignment 29

Secured Transactions Assignment 29. Lienors vs. Secured Creditors: Future Advances. The Big Picture. Part Two: The Creditor Third Party Relationship Chapter 9: Competitions for Collateral Assignment 28: Lien Creditors vs. Secureds: The Basics

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Secured Transactions Assignment 29

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  1. Secured TransactionsAssignment 29 Lienors vs. Secured Creditors: Future Advances

  2. The Big Picture Part Two: The Creditor Third Party Relationship Chapter 9: Competitions for Collateral Assignment 28: Lien Creditors vs. Secureds: The Basics Assignment 29: Lien Creditors vs. Secured: Future Advances Assignment 31: Preferences Assignment 32: Secured Creditors vs. Secured Creditors Assignment 36: Buyers vs. Secured Creditors Land, Fixtures, Agriculture, and Minerals

  3. Definitions “Advance” means payment of money to borrower as a loan

  4. Definitions “Advance” means payment of money to borrower as a loan “Future advance” means an advance made after (1) the initial advance or (2) the note and security agreement are signed.

  5. Definitions “Advance” means payment of money to borrower as a loan “Future advance” means an advance made after (1) the initial advance or (2) the note and security agreement are signed. “Non-advance” means an amount that was not advanced to the borrower, but that the borrower is obligated to pay

  6. Definitions “Advance” means payment of money to borrower as a loan “Future advance” means an advance made after (1) the initial advance or (2) the note and security agreement are signed. “Non-advance” means an amount that was not advanced to the borrower, but that the borrower is obligated to pay Interest

  7. Definitions “Advance” means payment of money to borrower as a loan “Future advance” means an advance made after (1) the initial advance or (2) the note and security agreement are signed. “Non-advance” means an amount that was not advanced to the borrower, but that the borrower is obligated to pay Interest Attorneys fees incurred in collection

  8. Definitions “Advance” means payment of money to borrower as a loan “Future advance” means an advance made after (1) the initial advance or (2) the note and security agreement are signed. “Non-advance” means an amount that was not advanced to the borrower, but that the borrower is obligated to pay Interest Attorneys fees incurred in collection Other expenses of the loan paid to third parties

  9. Priority Rules General rule (UCC and Real Estate law): All advances and non-advances have the same priority. Shutze v. Credithrift.

  10. Priority Rules General rule (UCC and Real Estate law): All advances and non-advances have the same priority. Shutze v. Credithrift. UCC exception: Future advances have priority over intervening liens only if made: 1. Within 45 days after lienor “became a lien creditor”

  11. Priority Rules General rule (UCC and Real Estate law): All advances and non-advances have the same priority. Shutze v. Credithrift. UCC exception: Future advances have priority over intervening liens only if made: 1. Within 45 days after lienor “became a lien creditor” 2. Without knowledge of the lien, or

  12. Priority Rules General rule (UCC and Real Estate law): All advances and non-advances have the same priority. Shutze v. Credithrift. UCC exception: Future advances have priority over intervening liens only if made: 1. Within 45 days after lienor “became a lien creditor” 2. Without knowledge of the lien, or 3. Pursuant to commitment entered into without knowledge of the lien

  13. Priority Rules General rule (UCC and Real Estate law): All advances and non-advances have the same priority. Shutze v. Credithrift. UCC exception: Future advances have priority over intervening liens only if made: 1. Within 45 days after lienor “became a lien creditor” 2. Without knowledge of the lien, or 3. Pursuant to commitment entered into without knowledge of the lien Real estate exception (minority rule): Future advances have priority over intervening liens only if made: 2. Without knowledge of the lien, or 3. Pursuant to commitment without knowledge of the lien.

  14. Priority Rules Non-advances (real and personal property exceptions): A non-advance has the priority of the advance to which it relates

  15. Uni Imports v. Exchange “The marshal’s service served the writ on Exchange, but Exchange refused to turn over any of Aparcor’s assets, contending that it had priority status.” Page 482.

  16. Uni Imports v. Exchange “The marshal’s service served the writ on Exchange, but Exchange refused to turn over any of Aparcor’s assets, contending that it had priority status.” Page 482. How can Exchange bank refuse to permit a levy?

  17. Uni Imports v. Exchange “The marshal’s service served the writ on Exchange, but Exchange refused to turn over any of Aparcor’s assets, contending that it had priority status.” Page 482. How can Exchange bank refuse to permit a levy? Page 9: “An officer may force an entry into any enclosure except the dwelling house of the judgment debtor in order to levy . . . on the debtor’s goods . . . .”

  18. Uni Imports v. Exchange “The marshal’s service served the writ on Exchange, but Exchange refused to turn over any of Aparcor’s assets, contending that it had priority status.” Page 482. How can Exchange bank refuse to permit a levy? Page 9: “An officer may force an entry into any enclosure except the dwelling house of the judgment debtor in order to levy . . . on the debtor’s goods . . . .” Page 8. “The sheriff’s duty is to execute the writ according to the plaintiff’s instructions.

  19. Uni Imports v. Exchange “The marshal’s service served the writ on Exchange, but Exchange refused to turn over any of Aparcor’s assets, contending that it had priority status.” Page 482. How can Exchange bank refuse to permit a levy? Page 9: “An officer may force an entry into any enclosure except the dwelling house of the judgment debtor in order to levy . . . on the debtor’s goods . . . .” Page 8. “The sheriff’s duty is to execute the writ according to the plaintiff’s instructions. The writ is in the ‘exclusive control’ of the judgment creditor; the sheriff must follow the creditor’s reasonable instructions regarding the time and manner of making the levy . . . .”

  20. Uni Imports v. Exchange “The marshal’s service served the writ on Exchange, but Exchange refused to turn over any of Aparcor’s assets, contending that it had priority status.” Page 482. How can Exchange bank refuse to permit a levy? Page 9: “An officer may force an entry into any enclosure except the dwelling house of the judgment debtor in order to levy . . . on the debtor’s goods . . . .” Page 8. “The sheriff’s duty is to execute the writ according to the plaintiff’s instructions. The writ is in the ‘exclusive control’ of the judgment creditor; the sheriff must follow the creditor’s reasonable instructions regarding the time and manner of making the levy . . . .” Answer: Soft levy or this “execution” is garnishment.

  21. Problem 29.1, page 492 Carol loans $1K secured. BCA gets $45K judgment lien Assume boat worth about $32K. What effect if Bob advances $31K? 1K

  22. Problem 29.1, page 492 Carol loans $1K secured. BCA gets $45K judgment lien Assume boat worth about $32K. What effect if Bob advances $31K? 45K 1K

  23. Problem 29.1, page 492 Carol loans $1K secured. BCA gets $45K judgment lien Boat is worth about $32K. 45K 32K 1K

  24. Problem 29.1, page 492 Carol loans $1K secured. BCA gets $45K judgment lien Boat is worth about $32K. What result if Carol doesn’t advance? 45K 32K 1K

  25. Problem 29.1, page 492 Carol loans $1K secured. BCA gets $45K judgment lien Boat is worth about $32K. What result if Carol doesn’t advance? BCA recovers $31K. 45K 32K 32K 1K 1K

  26. Problem 29.1, page 492 Carol loans $1K secured. BCA gets $45K judgment lien Boat is worth about $32K. What result if Carol advances $31K? Will the new debt be secured? 45K 32K 1K

  27. Problem 29.1, page 492 Carol loans $1K secured. BCA gets $45K judgment lien Boat is worth about $32K. What result if Carol advances $31K? Will the new debt be secured? Yes, if there is a security agreement. 45K 32K 1K §9-203(b). [A] security interest is enforceable . . . only if . . . (3)(A) the debtor has authenticated a security agreement . . .

  28. Problem 29.1, page 492 Carol loans $1K secured. BCA gets $45K judgment lien Boat is worth about $32K. What result if Carol advances $31K? Will the new debt be secured? Yes, if there is a security agreement. What priority will it have? 45K 32K 1K

  29. Problem 29.1, page 492 Carol loans $1K secured. BCA gets $45K judgment lien Boat is worth about $32K. What result if Carol advances $31K? Will the new debt be secured? Yes, if there is a security agreement. What priority will it have? 45K 32K 1K 9-317(a)(2). A security interest . . . is subordinate to . . . a person that becomes a lien creditor before the earlier of the time (A) the security interest . . . is perfected; or (B) one of the conditions in §9-203(b)(3) is met and a financing statement . . . is filed.

  30. Problem 29.1, page 492 45K Carol loans $1K secured. BCA gets $45K judgment lien Boat is worth about $32K. What result if Carol advances $31K? If Carol has a future advance clause, her advance has priority because made within 45 days. 32K 32K

  31. Problem 29.1, page 492 45K Carol loans $1K secured. BCA gets $45K judgment lien Boat is worth about $32K. What result if Carol advances $31K? If Carol has a future advance clause, her advance has priority because made within 45 days. What title passes at the sale? 32K 32K

  32. Problem 29.1, page 492 45K Carol loans $1K secured. BCA gets $45K judgment lien Boat is worth about $32K. What result if Carol advances $31K? If Carol has a future advance clause, her advance has priority because made within 45 days. What title passes at the sale? Buyer takes subject to $32K. 32K 32K 32K 32K After Before

  33. Problem 29.1, page 492 45K Carol loans $1K secured. BCA gets $45K judgment lien Boat is worth about $32K. What result if Carol advances $31K? If Carol has a future advance clause, her advance has priority because made within 45 days. What title passes at the sale? Buyer takes subject to $32K. What can BCA expect from this sale? 32K 32K 32K 32K After Before

  34. Problem 29.1, page 492 45K Carol loans $1K secured. BCA gets $45K judgment lien Boat is worth about $32K. What result if Carol advances $31K? If Carol has a future advance clause, her advance has priority because made within 45 days. What title passes at the sale? Buyer takes subject to $32K. What can BCA expect from this sale? Nothing. Bob beat the execution! 32K 32K 32K 32K After Before

  35. Problem 29.1, page 492 45K Carol loans $1K secured. BCA gets $45K judgment lien Boat is worth about $32K. What result if Carol advances $31K? If Carol has a future advance clause, her advance has priority because made within 45 days. What title passes at the sale? Buyer takes subject to $32K. What can BCA expect from this sale? Nothing. Bob beat the execution! 32K 32K 32K 32K After Before What’s the policy for allowing Carol to advance with knowledge of the lien?

  36. Problem 29.1, page 492 45K Carol loans $1K secured. BCA gets $45K judgment lien Boat is worth about $32K. What result if Carol advances $31K? If Carol has a future advance clause, her advance has priority because made within 45 days. What title passes at the sale? Buyer takes subject to $32K. What can BCA expect from this sale? Nothing. Bob beat the execution! 32K 32K 32K 32K After Before What’s the policy for allowing Carol to advance with knowledge of the lien?So secured beats tax lien

  37. Problem 29.1, page 492 Future advance SA Secured 45 days Tax lien Notice of tax lien 26 U.S.C. §6323(d). Even though notice of a [tax] lien has been filed, such lien shall not be valid with respect to a security interest that came into existence after tax lien filing by reason of disbursements made before the 46th day after the tax lien filing . . .

  38. Problem 29.1, page 492 Future advance SA Secured 45 days Tax lien Notice of tax lien 26 U.S.C. §6323(d). Even though notice of a [tax] lien has been filed, such lien shall not be valid with respect to a security interest that came into existence after tax lien filing by reason of disbursements made before the 46th day after the tax lien filing . . .but only if such security interest . . . is protected under local law against a judgment lien arising, as of the time of the tax lien filing, out of an unsecured obligation

  39. Problem 29.1, page 492 Future advance SA Secured 45 days Tax lien Notice of tax lien 26 U.S.C. §6323(d). Even though notice of a [tax] lien has been filed, such lien shall not be valid with respect to a security interest that came into existence after tax lien filing by reason of disbursements made before the 46th day after the tax lien filing . . . but only if such security interest . . . is protected under local law against a judgment lien arising, as of the time of the tax lien filing, out of an unsecured obligation Future advance beats the tax lien . . . .

  40. Problem 29.1, page 492 Future advance SA Secured 45 days Judgment Levy 26 U.S.C. §6323(d). Even though notice of a [tax] lien has been filed, such lien shall not be valid with respect to a security interest that came into existence after tax lien filing by reason of disbursements made before the 46th day after the tax lien filing . . . but only if such security interest . . . is protected under local law against a judgment lien arising, as of the time of the tax lien filing, out of an unsecured obligation Future advance beats the tax lien provided it would beat a judgment lien.

  41. Problem 29.2, page 492 We represent BCA. Sheriff’s sale is a few days from now. Deficiency may be collectible. 45K 32K 32K ? ? After Before

  42. Problem 29.2, page 492 We represent BCA. Sheriff’s sale is a few days from now. Deficiency may be collectible. If BCA doesn’t know the amount of Carol’s lien, what should BCA bid at the sale? 45K 32K 32K ? ? After Before

  43. Problem 29.2, page 492 We represent BCA. Sheriff’s sale is a few days from now. Deficiency may be collectible. If BCA doesn’t know the amount of Carol’s lien, what should BCA bid at the sale? Impossible to calculate. 45K 32K 32K 1K 1K After Before

  44. Problem 29.2, page 492 We represent BCA. Sheriff’s sale is a few days from now. Deficiency may be collectible. If BCA doesn’t know the amount of Carol’s lien, what should BCA bid at the sale? Impossible to calculate. How can we find out the amount of Carol’s lien? 45K 32K 32K ? ? After Before

  45. Problem 29.2, page 492 We represent BCA. Sheriff’s sale is a few days from now. Deficiency may be collectible. If BCA doesn’t know the amount of Carol’s lien, what should BCA bid at the sale? Impossible to calculate. How can we find out the amount of Carol’s lien? §9-210? 45K 32K 32K ? ? After Before

  46. Problem 29.2, page 492 We represent BCA. Sheriff’s sale is a few days from now. Deficiency may be collectible. If BCA doesn’t know the amount of Carol’s lien, what should BCA bid at the sale? Impossible to calculate. How can we find out the amount of Carol’s lien? §9-210? If we somehow found out it is $1K now, does that help? 45K 32K 32K 1K ? After Before

  47. Problem 29.2, page 492 We represent BCA. Sheriff’s sale is a few days from now. Deficiency may be collectible. If BCA doesn’t know the amount of Carol’s lien, what should BCA bid at the sale? Impossible to calculate. How can we find out the amount of Carol’s lien? §9-210? If we somehow found out it is $1K now, does that help? It could change before the sale! 45K 32K 32K 32K 32K After Before

  48. Problem 29.2, page 492 We represent BCA. Sheriff’s sale is a few days from now. Deficiency may be collectible. If BCA doesn’t know the amount of Carol’s lien, what should BCA bid at the sale? Impossible to calculate. How can we find out the amount of Carol’s lien? §9-210? If we somehow found out it is $1K now, does that help? It could change before the sale! What do we do? 45K 32K 32K ? ? After Before

  49. Problem 29.2, page 492 We represent BCA. Sheriff’s sale is a few days from now. Deficiency may be collectible. If BCA doesn’t know the amount of Carol’s lien, what should BCA bid at the sale? Impossible to calculate. How can we find out the amount of Carol’s lien? §9-210? If we somehow found out it is $1K now, does that help? It could change before the sale! What do we do? Scream for equity. 45K 32K 32K ? ? After Before

  50. Problem 29.2, page 492 We represent BCA. Sheriff’s sale is a few days from now. Deficiency may be collectible. If BCA doesn’t know the amount of Carol’s lien, what should BCA bid at the sale? Impossible to calculate. How can we find out the amount of Carol’s lien? §9-210? If we somehow found out it is $1K now, does that help? It could change before the sale! What do we do? Scream for equity. But see §9-625(a)! §9-625(a). If it is established that a secured party is not proceeding in accordance with this article, a court may order or restrain . . . disposition of collateral on appropriate terms and conditions.

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