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Secured Transactions Assignment 26

Secured Transactions Assignment 26. Priority Under State Law. The Big Picture. Part Two: The Creditor Third Party Relationship Chapter 6-7: Perfection Chapter 8: Priority Assignment 26: Priority Under State Law. The Big Picture. Part Two: The Creditor Third Party Relationship

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Secured Transactions Assignment 26

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  1. Secured TransactionsAssignment 26 Priority Under State Law

  2. The Big Picture Part Two: The Creditor Third Party Relationship Chapter 6-7: Perfection Chapter 8: Priority Assignment 26: Priority Under State Law

  3. The Big Picture Part Two: The Creditor Third Party Relationship Chapter 6-7: Perfection Chapter 8: Priority Assignment 26: Priority Under State Law Chapter 9: Specific Priority Rules Assignment 28: Lien Creditors against Secureds Assignment 29: Future Advances Assignment 31: Preferences Assignment 32: Secureds against Secureds Assignment 36: Buyers against Secureds Land, Fixtures, Agriculture and Minerals

  4. The Big Picture Assignment 26 revisits three prior assignments:

  5. The Big Picture Assignment 26 revisits three prior assignments: Assignments 4 and 5: Foreclosure sale Assignment 3: Possession pending foreclosure

  6. The Big Picture Assignment 26 revisits three prior assignments: Assignments 4 and 5: Foreclosure sale Assignment 3: Possession pending foreclosure but in the three-party context

  7. The Rules Governing Foreclosure Subordinate Under which sale held Prior

  8. The Rules Governing Foreclosure Subordinate • Sale discharges the lien under which the sale is held and all subordinate liens, §9-617 • The buyer takes subject to prior liens • The proceeds go: • To the expenses of sale • To the lien under which the sale is held • To subordinate liens • To the debtor Under which sale held Prior

  9. The Rules Governing Foreclosure Subordinate • Sale discharges the lien under which the sale is held and all subordinate liens, §9-617 • The buyer takes subject to prior liens • The proceeds go: • To the expenses of sale • To the lien under which the sale is held • To subordinate liens • To the debtor Prior Before After

  10. The Rules Governing Foreclosure Subordinate • Sale discharges the lien under which the sale is held and all subordinate liens, §9-617 • The buyer takes subject to prior liens • The proceeds go by §9-615(a) Prior Before After

  11. The Rules Governing Foreclosure Subordinate • Sale discharges the lien under which the sale is held and all subordinate liens, §9-617 • The buyer takes subject to prior liens • The proceeds go by §9-615(a) • a. To the expenses of sale Prior Before After

  12. The Rules Governing Foreclosure Subordinate • Sale discharges the lien under which the sale is held and all subordinate liens, §9-617 • The buyer takes subject to prior liens • The proceeds go by §9-615(a) • a. To the expenses of sale • b. To the lien under which the sale is held Prior Before After

  13. The Rules Governing Foreclosure Subordinate • Sale discharges the lien under which the sale is held and all subordinate liens, §9-617 • The buyer takes subject to prior liens • The proceeds go by §9-615(a) • a. To the expenses of sale • b. To the lien under which the sale is held • c. To subordinate liens Prior Before After

  14. The Rules Governing Foreclosure Subordinate • Sale discharges the lien under which the sale is held and all subordinate liens, §9-617 • The buyer takes subject to prior liens • The proceeds go by §9-615(a) • a. To the expenses of sale • b. To the lien under which the sale is held • c. To subordinate liens • d. To the debtor (ignoring unsecureds) Prior Before After

  15. The Rules Governing Foreclosure Subordinate • Sale discharges the lien under which the sale is held and all subordinate liens, §9-617 • The buyer takes subject to prior liens • The proceeds go by §9-615(a) • a. To the expenses of sale • b. To the lien under which the sale is held • c. To subordinate liens • d. To the debtor (ignoring unsecureds) • No proceeds go to prior (“senior”) liens. Prior Before After

  16. The Rules Governing Possession 1. §9-609. After default, a secured party may take possession of the collateral. 2. A judgment creditor has the right to levy on any property of the debtor 3. When rights to possession clash, the holder of the prior perfected lien has the right to possession. Grocer’s Supply v. Intercity Investment 4. The holder of a prior perfected lien must either foreclose or stand aside so that the holder of a junior lien may do so. Frierson v. United Farm Agency 5. The exercise of dominion and control over collateral a secured party has the right to possess is wrongful and constitutes conversion

  17. The Rules Governing Possession 1. §9-609. After default, a secured party may take possession of the collateral. 2. A judgment creditor has the right to levy on encumbered or unencumbered property. The sheriff takes possession. 3. When rights to possession clash, the holder of the prior perfected lien has the right to possession. Grocer’s Supply v. Intercity Investment 4. The holder of a prior perfected lien must either foreclose or stand aside so that the holder of a junior lien may do so. Frierson v. United Farm Agency 5. The exercise of dominion and control over collateral a secured party has the right to possess is wrongful and constitutes conversion

  18. The Rules Governing Possession 1. §9-609. After default, a secured party may take possession of the collateral. 2. A judgment creditor has the right to levy on encumbered or unencumbered property. The sheriff takes possession. 3. The senior secured party “is entitled, by virtue of its priority, to take possession of collateral from the junior secured party.” §9-609, comment 5. 4. The holder of a prior perfected lien must either foreclose or stand aside so that the holder of a junior lien may do so. Frierson v. United Farm Agency 5. The exercise of dominion and control over collateral a secured party has the right to possess is wrongful and constitutes conversion

  19. The Rules Governing Possession 1. §9-609. After default, a secured party may take possession of the collateral. 2. A judgment creditor has the right to levy on encumbered or unencumbered property. The sheriff takes possession. 3. The senior secured party “is entitled, by virtue of its priority, to take possession of collateral from the junior secured party.” §9-609, comment 5. 4. Limit on 3: The prior creditor must either foreclose or stand aside so that the junior creditor can foreclose. Frierson v. United Farm Agency 5. The exercise of dominion and control over collateral a secured party has the right to possess is wrongful and constitutes conversion

  20. The Rules Governing Possession 1. §9-609. After default, a secured party may take possession of the collateral. 2. A judgment creditor has the right to levy on encumbered or unencumbered property. The sheriff takes possession. 3. The senior secured party “is entitled, by virtue of its priority, to take possession of collateral from the junior secured party.” §9-609, comment 5. 4. Limit on 3: The prior creditor must either foreclose or stand aside so that the junior creditor can foreclose. Frierson v. United Farm Agency 5. Wrongful exercise of dominion and control over another’s collateral constitutes conversion

  21. Notification date

  22. Notification date Notice date Sale date 10 days §9-612 A secured party must send notice to the debtor of disposition, §9-611(b)

  23. Notification date Notification date Sale date 10 days §9-612 A secured party must send notice to the debtor of disposition, §9-611(b) “Notification date” is the date on which the secured party sends that notice, §9-611(a)(1)

  24. Notification date Notification date Sale date 10 days §9-612 A secured party must send notice to the debtor of disposition, §9-611(b) “Notification date” is the date on which the secured party sends that notice, §9-611(a)(1) The secured party must also send notice to other lien holders who perfected by filing or notation as of the record date

  25. Notification date Record date Notification date Sale date 10 days, §9-611(c)(3)(B) 10 days §9-612 A secured party must send notice to the debtor of disposition, §9-611(b) “Notification date” is the date on which the secured party sends that notice, §9-611(a)(1) The secured party must also send notice to other lien holders who perfected by filing or notation as of the record date The record date is ten days before the notification date. §9-611(c)(3)(B).

  26. Notification date Record date Notification date Sale date 10 days, §9-611(c)(3)(B) 10 days §9-612 A secured party must send notice to the debtor of disposition, §9-611(b) “Notification date” is the date on which the secured party sends that notice, §9-611(a)(1) The secured party must also send notice to other lien holders who perfected by filing or notation as of the record date The record date is ten days before the notification date. §9-611(c)(3)(B). Main rule: Notify easy-to-find lien holders, perfected as of the record date.

  27. Notification date Search request Notification date Sale date 20-30 days, §9-611(e)(1) 10 days §9-612 Safe harbor steps: 1. Send a search request 20-30 days before notification date

  28. Notification date Search request Notification date Sale date 20-30 days, §9-611(e)(1) 10 days §9-612 • Safe harbor steps: • Send a search request 20-30 days before notification date • If no search report by notification date, notify only the debtor and requesters

  29. Notification date Search request Search report As of date Notification date Sale date 20-30 days, §9-611(e)(1) 10 days §9-612 • Safe harbor steps: • Send a search request 20-30 days before notification date • If no search report by notification date, notify only the debtor and requesters • If search report, notify the creditors listed

  30. Notification date Search request Search report As of date Notification date Sale date 20-30 days, §9-611(e)(1) 10 days §9-612 • Safe harbor steps: • Send a search request 20-30 days before notification date • If no search report by notification date, notify only the debtor and requesters • If search report, notify the creditors listed • Record date doesn’t matter

  31. Problem 26.1, page 450 $200 sale expense 29K 25K 10K 17K How much should Kinski bid? If she is the high bid, what title does she get?

  32. Problem 26.1, page 450 $200 sale expense • Sale discharges the lien under which the sale is held and all subordinate liens • The buyer takes subject to prior liens 29K 25K 25K 10K 17K 17K After Before How much should Kinski bid? If she is the high bid, what title does she get?

  33. Problem 26.1, page 450 $200 sale expense • Sale discharges the lien under which the sale is held and all subordinate liens • The buyer takes subject to prior liens 29K 25K 25K 10K 17K 17K After Before How much should Kinski bid? If she is the high bid, what title does she get?

  34. Problem 26.1, page 450 $200 sale expense • Sale discharges the lien under which the sale is held and all subordinate liens • The buyer takes subject to prior liens 29K 25K 25K 10K 8K 17K 17K After Before How much should Kinski bid? Up to $8K

  35. Problem 26.1, page 450 $200 sale expense • Sale discharges the lien under which the sale is held and all subordinate liens • The buyer takes subject to prior liens 29K 25K 25K 10K 8K 17K 17K After Before How much should Kinski bid? Up to $8K Expenses of sale?

  36. Problem 26.1, page 450 29K $200 sale expense • Sale discharges the lien under which the sale is held and all subordinate liens • The buyer takes subject to prior liens • The proceeds go: • To the expenses of sale • To the lien under which the sale is held • To subordinate liens • To the debtor 25K 10K 25K 17K 17K After Before How much should Kinski bid? Up to $8K Expenses of sale? Paid from proceeds

  37. Problem 26.2, page 450 $200 sale expense • Sale discharges the lien under which the sale is held and all subordinate liens • The buyer takes subject to prior liens • The proceeds go: • To the expenses of sale • To the lien under which the sale is held • To subordinate liens • To the debtor 8K 30K 75K 60K After Before How much should a buyer bid?

  38. Problem 26.2, page 450 $200 sale expense • Sale discharges the lien under which the sale is held and all subordinate liens • The buyer takes subject to prior liens • The proceeds go: • To the expenses of sale • To the lien under which the sale is held • To subordinate liens • To the debtor 8K 30K 30K 75K 75K 60K 60K After Before How much should a buyer bid? Zero?

  39. Problem 26.2, page 450 $200 sale expense • Sale discharges the lien under which the sale is held and all subordinate liens • The buyer takes subject to prior liens • The proceeds go: • To the expenses of sale • To the lien under which the sale is held • To subordinate liens • To the debtor 8K 30K 30K 75K 75K 60K 60K After Before How much should a buyer bid? Zero? Expenses of sale?

  40. Problem 26.2, page 450 $200 sale expense • Sale discharges the lien under which the sale is held and all subordinate liens • The buyer takes subject to prior liens • The proceeds go: • To the expenses of sale • To the lien under which the sale is held • To subordinate liens • To the debtor 8K 30K 30K 75K 75K 60K 60K After Before How much should a buyer bid? Zero? Expenses of sale? Paid by levying creditor.

  41. Problem 26.2, page 450 $200 sale expense • Sale discharges the lien under which the sale is held and all subordinate liens • The buyer takes subject to prior liens • The proceeds go: • To the expenses of sale • To the lien under which the sale is held • To subordinate liens • To the debtor • Anyone want to bid $10? 8K 30K 30K 75K 75K 60K 60K After Before How much should a buyer bid? Zero? Expenses of sale? Paid by levying creditor.

  42. Problem 26.3, page 450 $200 sale expense We represent Diamond Head Bank, $270k first ? 400k 270k

  43. Problem 26.3, page 450 $200 sale expense We represent Diamond Head Bank, $270k first a. Should we be concerned about this sale? ? 400k 270k

  44. Problem 26.3, page 450 $200 sale expense We represent Diamond Head Bank, $270k first a. Should we be concerned about this sale? ? 400k 400k 270k 270k After Before

  45. Problem 26.3, page 450 $200 sale expense • We represent Diamond Head Bank, $270k first • a. Should we be concerned about this sale? Miami sheriff sales ? 400k 400k 270k 270k After Before

  46. Problem 26.3, page 450 $200 sale expense • We represent Diamond Head Bank, $270k first • a. Should we be concerned about this sale? Miami sheriff sales • Can we protect ourselves by buying at the sale? ? 400k 400k 270k 270k After Before

  47. Problem 26.3, page 450 $200 sale expense • We represent Diamond Head Bank, $270k first • a. Should we be concerned about this sale? Miami sheriff sales • Can we protect ourselves by buying at the sale? Yes, but we are bidding additional money ? 400k 400k 270k 270k After Before

  48. Problem 26.3, page 450 $200 sale expense • We represent Diamond Head Bank, $270k first • a. Should we be concerned about this sale? Miami sheriff sales • Can we protect ourselves by buying at the sale? Yes, but we are bidding additional money • Can we prevent the sale? ? 400k 400k 270k 270k After Before

  49. Problem 26.3, page 450 $200 sale expense • We represent Diamond Head Bank, $270k first • a. Should we be concerned about this sale? Miami sheriff sales • Can we protect ourselves by buying at the sale? Yes, but we are bidding additional money • Can we prevent the sale? Maybe, Grocers Supply. ? 400k 400k 270k 270k After Before

  50. Problem 26.3, page 450 $200 sale expense • We represent Diamond Head Bank, $270k first • a. Should we be concerned about this sale? Miami sheriff sales • Can we protect ourselves by buying at the sale? Yes, but we are bidding additional money • Can we prevent the sale? Maybe, Grocers Supply. ? 400k 400k 270k 270k After Before d. Were we entitled to sale notice?

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