Secured Transactions MEE Outline

1. Start with UCC Article 9 -- "Article 9 of the UCC governs security interests in personal
property or fixtures by contract."

2. Classify the Collateral-Article 9 classifies goods into 4 categories: consumer goods,

3. Then go straight into Attachment. Since we can't have perfection without attachment,
we start here -- "Attachment gives the creditor rights against the debtor & creates a
secured transaction. Attachment requires: (1) value given from the creditor to the
debtor; (2) debtor must have rights in the collateral; & (3) there must be a binding
security agreement. To create a binding security agreement, the agreement must: (1) be
authenticated, typically through a signature; (2) evidence an intent to enter into an
agreement; & (3) sufficiently describe the collateral."

4. Next up is Perfection. Sometimes we will only need to analyze whether the interest
attached. However, we will talk about perfection when we have a situation of priority
among competing secured parties (e.g: creditors) "Perfection gives a creditor right in
the collateral against other creditors. Perfection can occur through filing a financing
statement/ possession/ control/ automatic perfection, which ______." (NOTE: I am going
to pick one based on the facts, & not go into all 4 ways. Here, let's assume we have a
purchase money security interest in equipment.)

5. Last up, Priority. "As between 2 perfected interests, generally the rule is that the first
to file or perfect has the superior interest. However, purchase money security interests
(i.e. where the seller is also the creditor who takes interest in the collateral) have
priority over all other perfected interests. For equipment, perfection must occur within 20
days of the debtor receiving possession."
 Here’s the priorities:

1. Secured beats unsecured

2. Perfected beats unperfected and judicial liens (judicial liens will also
lose to someone who perfects after the lien if they’ve already attached)

3. Perfected v Perfected - whoever filed first

4. PMSI (seller) beats PMSI (lender)

5. Buyers in ordinary course of business beat Perfected

6. Authorized buyers beat perfected

7. Garage sale buyers beat perfected

8. Perfected beats buyers NOT in ordinary course

9. PMSI in goods (auto perfect) will BEAT garage sale buyers ONLY
IF it was nevertheless filed (despite auto perfect )

10. Buyer of chattel paper will beat someone who has right to chattel paper as
proceeds if the buyer bought it in good faith as part of their usual business

 When in doubt remember this: more u protect yourself, the more people you can beat
out. If someone has the same level of protection as u, it’s whoever got there first.
Secured Transactions MEGATHREAD MEE:

Okay my friends and lovers… I was on Quora the other day reading some shit and I came across a topic that was
suggested to me: How do employers view law school graduates who don’t pass the Bar?
The top comment said: I assume if they send in a resume with a JD and no bar admission that they did something
illegal or got disbarred, so it’s best for them to keep that off their resume.
And that was upvoted like 37 thousand times.
RED ALERT: People will LITERALLY think we are criminals if we don’t pass this bar.
So let’s get into Secured Transactions – the most hated and feared topic in UBE’s young and turbulent history.
A note up top: Do not hide from Secured. It will probably be on the test.But once you embrace it, you will realize
they only test about 5 things and it’s actually way easier than almost all the other MEE topics. Lots of people told me
that when the Secured MEE came up a year ago they just put on the basic rules and did some simple analysis and
almost got full points – so that is LIFE FUEL for us.
Another random note: Don’t get depressed by those Themis essay graders. As a joke last cycle, we submitted full
BARBRI model answers to have the Themis graders review and they unironically gave us like 3’s and 4’s. A lot of
them are the grumpiest shitheads and a 4/6 with those Themis graders is like a 100%.
Okay let’s start at the beginning: What the hell is the UCC and what the hell is Article 9?
There are 11 articles which govern business transactions. Some talk about sales of goods, others bulk transfers and lines
of credit. Article 9, the most boring one, talks about secured transactions. All states have adopted Article 9 in one form
or another, and some provide even stricter provisions for consumer transactions (protecting the little guy who just
wants to buy for his family and house).
MEE Free Point Tip: You actually have to memorize some opening sentence because they expect you to write it on
EVERY secured question and you will get points for it. ALWAYS start the Secured essay off with some sentence like:
“Article 9 of the UCC governs any transaction regardless of its form that creates a security interest. This includes
security interests in both tangible and intangible property.” Bingo… you are already at a 1.5/6. Now let’s get you some
more points.
What actually is a secured transaction and why would I ever need to secure my transactions?
We can start with an example to see why. Let’s say you want to buy a Tesla but you don’t have the money to buy it.
And let’s say a lender just hands you the money because of your wild charisma and good looks. No problem, right?
No problem for you. The lender is now sitting there… completely UNSECURED and naked. What will happen?!
*Cut to 6 months later* You’re riding around Echo Park in your new Model 3 which you never paid for, chewing
opiates, blasting CHVRCHES, and trying to buy Burning Man tickets online to join your RV camp “Enchanted Booty
Forest.” When the lender tries to find you he realizes you’ve changed your name to Kevin Tipcorn and have been
pretending you’re legally blind for the last 6 months.
Now what does he have to do to get his money back?
You guessed it. Now he has to go through a multi-year expensive process to get a judgment on your stupid ass
and initiate collections proceedings. And guess what… most states don’t even allow cars to be seized in
collections proceedings for unsecured debt.
But Mr. Goats… isn’t there a way for him to easily get the Tesla back by just showing up and repossessing it
from you at 5AM while you are sleeping?
Enter stage left…. SECURED TRANSACTIONS LAW.
The whole theory behind Secured is that if you have property you have a bundle of sticks aka a bunch of random legal
rights in that property. Sometimes you have a lot of sticks and have the right to sell or transfer or leverage the property,
sometimes you hardly have any sticks.
Secured Transactions always begins when I give you one of my sticks. And it seems like a small stick at first – all I’m
giving you is an interest in my stuff that you can use to enforce your loan if I don't pay you. A small “encumbrance”
against my property if you will. No big deal right? It’s just words on a sheet of paper haha like who cares.
You’re dead ass fucking wrong it’s not a big deal. The Lender is now secured and he has an ownership position on
you, and if you play with his money he is coming to SLIDE on your goofy ass with 50 certified gang members from
Chiraq. Self-help with no due process IS often allowed for secured parties (so long as they don’t disturb the peace by
doing anything violent, illegal, or against public policy).
One day you will wake up and the Tesla is just gone.
Okay… okay… I’ll give the lender a security interest in my Tesla. Can I at least still drive it while he has the
security interest?
Yes. There are two types of security interests: possessory and non-possessory. One of them.. you get to keep the shit
while you pay for it. The other, you don’t. Most security interests are possessory because people want to use collateral
while they pay it off. Imagine having a car loan and not actually being able to use the car.
Okay, got it. Who are the key players I need to look out for?
The debtor is the person who takes the loan and provides the collateral. The creditor is the lender or seller (who can
be secured or unsecured as we saw earlier).
Okay great… so you are a lender and want to have an ownership interest in someone else’s property. You want
their sticks. But what kind of collateral can you get an ownership interest in to make sure they pay up?
You can get it in (1) tangible collateral, and (2) intangible collateral. Don’t let this scare you, it’s pretty simple.
Tangible collateral is stuff you can actually SEE and touch. Examples:
(1) Consumer goods for personal use (like jewelry or automobiles)
(2) Equipment – aka goods USED by a business, but not SOLD. (Chairs, Macbook Air you do work on, espresso
machines everyone uses in the morning, desks, restaurant kitchen equipment)
(3) Inventory – goods HELD FOR SALE by a business (remember the difference between inventory and
equipment… equipment is USED and inventory is actually sold). Examples: Hammers at an Ace Hardware Store.
Pentagrams and forbidden Aleister Crowley texts at a Satanist store. Fancy designer donuts.
(4) Farm Products – goods which are UNIQUE to farming operations. Livestock, feed, agricultural products,
fertilizer, MONSANTO approved genetically engineered seeds that are ruining the food supply, etc.
Real World Analysis: My Secured professor ambushed me one class when I was a little stoned and hadn’t read and
started asking me to explain to the class what Farm Products were. And my squirrel brain malfunctioned and I kept just
saying “a Tractor” and he was like “SnooGoats…. A tractor is clearly equipment. Give me another example of farm
products” and I said “a plow.” Then he just gave me a blank stare of disappointment. My social status in the class went
down by about 50 points that day. I had to pull my hoodie up to hide my tears from everyone and turn on How to Train
Your Dragon 2 and watch it for the rest of class to recover.
(5) Fixtures. Something attached to a building in such a permanent way that it is considered part of the real property.
(examples: built-in brick oven at a pizza shop, bigass glorious chandelier that obviously no one is removing if property
gets sold). Remember fixtures by this simple idea: think of a window that has fancy curtains and is attached to a rod…
the rod is probably a fixture since it is literally stuck to the wall, but the curtains are probably not since you can just
take them off. Oh and they actually tested some wild shit about fixtures on one MEE. The only thing you need to
remember is that you can’t really “repossess” a brick oven attached to a pizza store unless you tear it out and destroy
the whole building, so the law has decided an ownership interest in the “property” like a mortgage (remember property
law?) is superior to an ownership interest in “fixtures” (remember Article 9?) unless you file “a fixture filing” lol. Just
try to remember that, it only came up once on the past MEE’s I think.
(6) Computer Software. I don’t think they’ve ever tested this but correct me if I’m wrong.
Okay but most of the problems on previous MEE’s involve some type of weird right to payment… so can I get
an interest in collateral that I can’t see or touch as well?
Yes, the intangible collateral categories are as follows:
(1) Accounts receivable: This is like unpaid invoices, money owed from customers to the business. The MEE problem
usually just says “Accounts Receivable” but I kind of remember this one by imagining a mafia Don giving you the
rights to collect payment from people he is extorting.
(2) Chattel paper: This is the weird one. Chattel means “movable property” (remember torts). Basically this is like
when you’re trying to buy something like furniture or jewelry and you have to make a bunch of smaller payments but
still get to keep it. The Security Interest papers (saying we will take your shit back) and the debt obligation papers
(outlining how you have to pay and when) get thrown together and that little bundle is called: *Chattel Paper* (Don't
worry they usually just call it chattel paper)
(3) Deposit accounts: Checking’s accounts, savings accounts.
(4) Investment property: Stocks and bonds!
Okay… TikTok has given me the attention span of a highly advanced sea otter. Please stop boring me with all
these categories and tell me how I can actually create an enforceable Security Interest
The first step is Attachment, which has three simple and easy steps which can happen IN ANY ORDER (you can
remember THREE because most people have three main attachment styles/love languages in relationships... gift giving,
spending time, and physical touch):
(1) The secured party must give VALUE (this generally just means that loaned money is transferred to the buyer but it
can also be access to a line of credit or even a service!). In the actual MEE you can just say something like “value was
given (the loan).”
MEE Trick: One lender gave some money as a GIFT not a loan, and then he was like “ok, I’m attaching your bicycle
thanks” and he COULDN’T… NOT PROPER VALUE. UCC wants there to be like a mutual exchange going on here
kind of like in Contracts.
(2) The debtor actually must have RIGHTS in the collateral. You need ownership or at the very least the rights to
transfer it. Imagine if I tried to secure my loan with your car lmao.
MEE Trick: Yes… sometimes debtors try to allow the creditor to attach stuff to other people’s property. In the F22
MEE this dude tried to take out a loan and give the lender his MOMS PORTABLE WELDING MACHINE. And
earlier in the problem she literally said “you don’t have any right to touch my machine, transfer it, or give it to anyone.”
The guy simply did not give a fuck, and attachment failed.
(3) Finally, the debtor must agree to give the secured party a Security Interest.
Wait… how can I agree to give someone a Security Interest?
The most common way is for you and the secured party to get together at a Michelin star restaurant to finalize
everything and sign a Security Agreement. The purpose of a security agreement is to show the whole world that this
was a VOLUNTARY agreement not created by force or some implied agreement.
This is getting way too complicated. So the lender needs to give me a loan with value, I need to have rights in
what I’m giving to collateralize my loan, AND now I need to sign a Security Agreement? What do I need to put
in the Security Agreement?
The security agreement can be insanely simple. Example:
“I, Snoogoats, grant an interest in my Goat Food to u/ElevenWarriors1234”
(maybe the goat food collateral is Farm Products if I’m running a goat farm or maybe it’s Inventory if I’m a
Wholesale goat food seller… in my case I actually do both so you’d have to analyze both categories)
Most banks have these enormous boilerplate Security Agreements with 7,000 pages describing all possible remedies,
but it really can be that simple.
The Security Agreement needs ONLY two small things to be valid:
(1) It must describe the collateral
(2) It must be ~*Authenticated*~
Step one. Describe the collateral. Okay great I’ll just write “all of the debtor’s assets” or “all personal property
of the debtor” and then I can’t miss anything! Haha this secured stuff is easy.
Don’t even think about it. Google “Dunning-Kreuger effect” and realize that your overconfidence has just caused you
to commit a huge error with this little “shortcut” you just tried to cook up.
The UCC says for a description to be adequate it has to “reasonably identify what is described” such that the
collateral is “objectively and reasonably determinable.” It will always be reasonable if you refer to one of our
appropriate “collateral categories” we talked about earlier (farm goods, inventory, etc.)
Saying “All assets” = Bad. We can’t determine what this means. No states allow these super-generic descriptions in
security agreements because they can give an opening for the Secured Party and the Debtor to team up and manipulate
the agreement later on to screw over third parties. This is high-level Secured Transactions fuckery we are trying to
prevent here so keep your head on a swivel.
“All equipment” = This works. We can determine what your equipment is.
“Certain cars” or “Some cars” = Bad, how the hell would we know what certain cars you were talking about?
“All cars” = Good. Broad descriptions are actually good for the Secured party because if they get TOO specific they
may forget certain collateral and then their interest doesn’t attach! Oh no!
Great! I described it sufficiently and reasonably. Now the debtor just has to sign it? (Keep in mind these
agreements need to be signed by the debtor because they are the party who will be taken down if they fuck this up lol)
Yes. The UCC uses the word “authentication” to allow for regular signatures or electronic signatures
MEE Trick Alert: Yes… sometimes the MEE actually tries to sneak in some weird electronic signature (aka
fingerprint, initials, some strange mechanically generated hologram). These all work for authentication.
I don’t think I want to do all that work. Are there any alternatives to signing a Security Agreement?
Yes. Possession and control.
Possession of tangible objects, and CONTROL of intangible objects like bank accounts (because you can’t hold a
bank account in your hand).
Example: If you give a pawn shop your fancy Audemars watch to secure a pawn loan… this is possession because it
shows your INTENT to encumber the property. No Security Agreement needed, you already showed the whole world
your intent to encumber it by giving it to the pawn shop. Boom. But you aren’t really going to perfect by possession in
a place like a restaurant… because then you’d constantly have to be seizing the restaurants collateral that they need to
use. Every day your hands would just be filled with hot dogs and buns and ketchup. Even if you did seize it, you’d only
have a few days worth, so it would be impractical not to file a financing statement.
Okay now onto control. You can get control of intangible objects like a bank account by gaining legal control over it
and being able to withdraw from it (even if the debtor can as well). Easy.
Okay but wait go back… I will file a financing statement for the hot dog vendor. But by the time we finish our
agreement all the hot dogs and ketchup I secure will have been eaten by hungry customers =( do I need a new
Security Agreement every day for his ever-shifting inventory? I will run out of paper =(
No. You can include an “after-acquired” property clause in the Security Agreement to allow you to have an interest
in inventory the hot dog shop acquires AFTER the signing of the agreement. Otherwise you’d only attach what they
owned at the time of signing (a few days’ worth of hot dogs and buns).
What happens if I take all the time to get a security interest but they just sell the shit that I got the security
interest in?
You’re in luck. If you run into a double dirty dealer who tries to switch the game up on you and sell all your shit and
transform it to trick you… his lack of knowledge about UCC-Article 9 will be his downfall. You are an order of the
coif CALI award winner lender headed to a prestigious Federal Clerkship going against some idiot named Randy who
works part-time at an Alpaca Adventure store. If he sells the collateral or transforms it somehow you get automatic
perfection for 20 days in whatever he transformed it into!! But it becomes unperfected on the 21st day unless you file
a financing statement. It's called proceeds.
Okay great! I’m fully attached and can even get after-acquired property and proceeds! This business owner is
definitely not running off with my money or I will take all his hot dogs and buns. But wait a second… what
happens if other people try to attach their interests to this SAME collateral?! How do I establish my dominance?
Attaching gives a lender rights against a debtor. Perfection gives a lender rights against the WORLD (aka other people
that would try to claim an interest in the collateral if our hot dog vendor went bankrupt)
So let’s perfect. And to do this we need to file a financing statement.
Where do I file the Financing Statement?
The Secretary of State office or other appropriate state filing office (the problem will sometimes say you need to file it
in other offices. Mechanics liens need to be filed somewhere else I think, etc.)
Okay i'm outside the SOS building… what do I put on this Statement?
Okay, focus in you sleep deprived galaxy IQ tera-geniuses. We need THREEthings.
The name of the debtor (THIS IS THE MOST IMPORTANT ONE… why? Because the whole POINT of a Financing
Statement is to put people on notice of your Security Interest… and every statement is INDEXED BY THE
DEBTOR’S NAME. SO IF YOU MESS THIS UP… YOU DEFEATED THE WHOLE PURPOSE!!!! (Sorry for the
intensity I had a White Monster Energy drink)
If the error in the debtor's name is seriously misleading, it will be an improper filing statement and destroy any hope
you ever had at Perfection.
So for the names of companies it has to be the name they filed their articles of incorporation under in the State’s
business directory website. For human debtors – the name on their driver’s license. You guys get the picture.
MEE Trick: The name will be wrong, but it will be saved by a “safe harbor provision.” For example they will list
Dart, Incorporated. But it’s actually called like Dart & Dart, Inc. Then the problem will say… “The standard search
logicfor the filing office actually would have still found it if you searched “Dart, Incorporated.” Voila. Our seriously
misleading error has now been rendered harmless, and the Financing Statement is saved!!!
The name of the secured party (or a representative). Self-explanatory, and an error here won’t be seriously
misleading since it’s indexed by the debtor’s name.
An indication of the collateral: An indication of collateral in a Financing Statement is sufficient if it provides notice
that a person may have a Security Interest in the collateral indicated. Super-generic descriptions are ALLOWED.
MEE SUPER TRICK ALERT: In a financing statement… you CAN put super-generic indications of collateral such
as “all assets” because the purpose of a Financing statement is to put people on notice that there MAY be a security
interest. The MEE will usually test on this if they test financing statements* You can hit them with a power
sentence like “The purpose of an F/S is to begin the inquiry of putting a third person on notice, not end it. Therefore,
super-generic descriptions of collateral are sufficient to allow a third party to understand they must dig deeper.” I think
that should probably get you an extra half-point. Hit them with T14 energy even if you went to George Washington
Online Law School.
Note: When in doubt, just analyze attachment and perfection for everyone involved. Just knowing up to here in
this outline should reliably get you a 3/6 on the essay and keep you in the game.
But let’s try to get a 4/6 by learning a few more small things.
Let’s talk about who would win in a Battle Royale to the death between different types of security interests. This
is called priority. Imagine one day a huge business just realizes it can no longer operate. Bear Stearns style. Assets
frozen. Employees are walking out with boxes, it’s all over the news.
Then 40 secured creditors all roll up at once.
But how do we determine who is the King of the Jungle and who eats first.
We will begin with a simple illustration. With a man named Michael Walterson Biocob. Mr. Biocob walks into the
Moncler store one Saturday and purchases a beautiful down jacket made from the fur of a baby camels ankles for
$4,700. As he pays and walks out he is grabbed by two men. He asks “What is the meaning of this? Who are you?! I’ve
paid for this coat!” And they throw him to the ground and say “We’re from First Bank. We have a security interest
with Moncler and they haven’t paid us for our goods. We are repossessing it from you, give us the jacket NOW!”
Obviously, this would be absolutely insane and disruptive to commerce, so the UCC made the BIOCOB (Buyer in
Ordinary Course of Business) have an APEX PREDATOR level interest above everyone (NO ONE has priority over
the BIOCOB).
How do I become a BIOCOB?
(1) You have to buy the goods in good faith. This is kind of a stoner thought but you basically have to think you are a
BIOCOB to be a BIOCOB lol. IT’S A MINDSET. In Tony Robbins book PERSONAL POWER (yes I listened on
Audible at 1.8x speed) he has a chapter on MINDSET and he said if him or his wife get upset he only allows them 15
seconds to be sad because life is too short lmao. That is the type of time we need to be on these next 10 days.
(2) Without knowledge the sale violates the security interest of someone else (but you can KNOW the security interest
EXISTS)
MEE TRICK ALERT: They always test this. Basically, someone will be aware that there is a security interest. That is
FINE. You can still be a BIOCOB if you’re aware. So long as you are not aware the sale is violating anyone’s
rights.
(3) From a seller that is in the business of selling goods of that kind.
MEE Trick Alert: You guessed it. The NCBE will give us someone who actually is NOT in the business of selling
goods of that kind. They will literally say “this is the first time the seller has ever sold goods like this”
In fact, the BIOCOB is so powerful … if you’re a BIOCOB and transfer it to someone else… THEY WILL BECOME
A BIOCOB. Protection for everyone! This is called the Shelter Principle. (There was one MEE where a dude bought
this badass space telescope then gave it to his friend and the friend had superior interests over everyone too).
Okay BIOCOB is up top… who is up next in line of priority?
You guessed it. The perfected interest. Remember that Perfection = Attachment + Filing. Perfected is what every
security interest should strive to be.
What happens if two Perfected interests go head to head?
You can remember this by thinking about a Prefect from Gryffindor and a Prefect from Slytherin battling in the
hallways of Hogwarts. The first in time, first in right rule controls this: The first one to file the financing statement
and put the world on notice wins!
MEE Pro-Tip: Circle dates on the problem itself and write them in the margin on your paper so you know which
interests were perfected and when so you can easily answer priority questions. It’s easy to see who filed first if you
write down the dates! If you’re freaking out and you don’t you could get confused.
Okay let’s do an easier one… who wins between a perfected and unperfected interest?
This is a slam dunk. The perfected wins every time. Now you’re seeing why it’s important we wait in line at the
Secretary of State to file that financing statement.
The perfected interest is pretty powerful. Besides Michael BIOCOB, can anyone defeat him in open combat?
Yes. And his name is Jeremy PMSI. He doesn’t know who you are and he doesn’t know what you want. If you’re
looking for ransom, he doesn’t have money. But what he does have is a very special skill that makes him a nightmare
for perfected security interests like you: SUPER-PRIORITY.
A purchase-money security interest comes from the simple principle: If I loan you money to actually buy the shit, I
need to cut the whole damn line and be first. We want lenders to LEND and therefore we bump them ahead of other
interests.
So if someone is giving someone else money to buy collateral… Jeremy PMSIhas appeared on the test.
Who wins between Jeremy PMSI and a Secured Creditor? (This is boring but stay focused).
Depends, but generally the PMSI.
Let’s run all the battles that could happen Gladiator Style.
Perfected PMSI vs. The World: Any PMSI will pretty much kick the shit out of any competing interest so long as it’s
perfected at least within 20 days of the debtor receiving possession. (This 20 day rule exists because most of these
loans are “point of sale” transactions that happen when the person is buying the shit and not like carefully planned out
lines of credit so they allow you a grace period to perfect). This is the main rule you need to know. PMSI reigns
supreme.
But there are two special sub-rules:
A PMSI in Consumer Goods vs. the WORLD: A PMSI in consumer goods is automatically perfected, NO FILING
REQUIRED for the first 20 days (but you still have to file before day 21 to retain your SUPERPRIORITY status)
MEE Lifehack: dear God please remember this consumer goods PMSI rule, it shows up a lot.
PMSI in Inventory: A PMSI in inventory collateral will win against a conflicting perfected security interest in the
SAME inventory if (1) the PMSI is perfected, and (2) notice is provided to prior creditors. Perfection + Notice. Not so
bad, right.
Okay Goats I won’t realistically remember any of that narcy pseudointellectual wall of text… just explain to me
how a lien creditor fits into all this.
The lien creditor is basically the Secured Party, just on a very subtle microdose of psilocybin. The lien creditor has the
same priority rules as the perfected security interest AKA first to file, first to perfect. If a party becomes a lien
creditor before a secured party perfects or files, the lien creditor wins.
The only weird note to remember: They also get priority over future advances secured before the lien or future
advances within 45 days of the lien being filed. (I talk about future advances below, but it's just distributions in lines of
credit basically). You're never going to remember that but in case you have a photographic memory it may help.
Okay what about two unperfected interests? Two lazy non-filers in a stoner war with each other.
Since they both haven’t filed, the first of them to ATTACH wins this battle.
Now let’s talk about the incel of the jungle… the unsecured security interest.
The unsecured interest loses against literally everyone besides the debtor who screwed him over.
And finally… the last major topic we must discuss: What can the Secured Party do if you go broke or steal their
loan and spend all your money on Online Poker and your Dominatrix girlfriend you met on Twitter?
This is what we’ve been waiting for. This is the Secured Party’s chance to shine. Their multiple days of strange and
esoteric preparation has finally paid off.
They have TWO options:
(1) They can repossess the property. They just can’t breach the peace. Some states ban breaking into anything to get
it back, other states say ANY opposition, however slight, will constitute a breach of the peace. So if a dude comes out
and is like “you can’t take my Tesla!” this will be enough opposition in some states for you to be considered "breaching
the peace."
(2) They can sell it in a commercially reasonable manner (they can’t sell DaVinci’s Salvator Mundi painting with
the orb for $900 for example. They need to travel to some secret underground lair and sell it to a ruler in Qatar for $900
million dollars).
And that’s it – that is all we need to know to reliably get a 4/6 on every single essay. It wasn’t that bad. You can
stop reading here if you want - I know this stuff is bone-chilling.
But Goats… I want to get a 5 or 6. I want to be a baller and wear Cuban link chains and drive around in foreign
cars. I want to go to sex-fueled parties in the Hollywood Hills with M. Night Shamalyan and a ChatGPT robot
that makes me sushi with a mannequin hand.
Okay if you insist we’ll do a few more quick topics in case they come up.
Debtor’s Rights After Default: What rights does the debtor have if they fuck it all up and go broke? They can (1) give
up the collateral to the secured party, (2) keep the collateral by fully paying the debt (called redemption), or (3) if it’s
consumer goods and they’ve paid 60% of it the loan they can give the secured party the goods back to sell in a
“reasonable manner” and hope that covers the rest of the loan.
Future Advances Clause. A security interest can say something like “I’m lending you all this money and future
advances too... I want it ALL secured and I want my priority to RELATE BACK (for you civ pro fans) to the
ORIGINAL disbursement." That's allowed.
Side-Note on Property Law: The whole trick with this in property law is that if the advances are MANDATORY
disbursements (I’m giving you $30,000 every month to build a building) they relate back to the first disbursement and
have priority over junior interests. If they are DISCRETIONARY (I’m giving you $30k and I might give you more if
the building is pretty enough for my liking)… then they are subordinate to interests that come after the first 30k. It is
some wildly complicated bullshit but for property remember MANDATORY v. DISCRETIONARY.
But in Secured they will test this scenario: I loan u/CautiousSarcasm $1 million to buy a bigass wrecking ball for their
company. I have a line of credit with them because it needs upkeep too and I put that I have a security interest in “the
wrecking ball and all future advances.” Then Grossman slides in and loans Cautious another $1 million and takes a
security interest in “all assets.” So I’m first, Grossman is second. But then a year later I have to loan Cautious another
$1 million. Grossman becomes irate because his Jets lost or whatever the hell that team he loves is, and he says he has
priority over my second loan. He doesn’t… I HAVE PRIORITY BECAUSE I HAVE A FUTURE ADVANCES
CLAUSE. GO DOLPHINS. So in Secured they don't care about mandatory v. discretionary disbursements and it is
proper so long as you properly describe that you want a future advance in the financing statement (some Secured
genius please correct me if I made this up, but I manically googled that and I think it's right).
Accessions: When one good is united with another good, they become accessions and the security interest continues in
the accession. In the MEE they tested GPS units which got attached to trucks or some shit. So if you have a security
interest in GPS units and they get attached to trucks, congrats, YOU STILL HAVE A SECURITY INTEREST IN THE
GPS.
Here's where it gets fucked up.. what if my GPS units that I have an interest in get combined with YOUR TRUCKS.
Now we just have like one super transformer good, but who has priority over who? Usually the person who has the
security interest of the "whole" is preferred because then you'd have to like make sure none of your huge ass trucks
were encumbered by small ass GPS units and stuff. But sometimes when it is nebulous you have to look at the
Financing statements and see EXACTLY how they described the collateral and whether "proper filing practices were
observed" and make the arguments on both sides. This won't be on the test obviously but if you ever run into this in the
real world you will know (none of you ever will).
Specification: The parties can define between themselves what constitutes as a default in an initial agreement. The SP
can be like "if you fuck up in THIS specific way, I'm taking all your shit."
Consignment: This is like if you have some weirdo super-seller on E-Bay help you sell your used socks or something.
Basically, he has the same rights as you do in what you give to him for priority purposes.
Right to directly collect from account debtor: If you default, they can go DIRECTLY to people who owe you and
collect from them. They can cut you out of the picture basically and just start collecting savage mode style.
Disguised Lease: This is what I'll leave you with. This one is kind of funny. The UCC has these "substance over
form" rules and sometimes people try to fuck around and create these fake "leases" so they don't have to be part of the
UCC Article 9 rules. The security agreement will say like "you get this huge tractor that I am leasing to you! The
tractor is worth $120,000... pay me $10,000 every month for a year. Then on the last day just pay me $1. This is a lease
and not a secured transaction =)" Newsflash: The UCC is not impressed by your idiotic attempt to trick them with
this fake ass lease. It can and WILL be considered a secured transaction and fall under the purview of Article
9.You are looking for things such as nominal consideration and the debtor basically paying you the FULL value of the
goods in installments. I don't know why people would want to avoid the UCC rules this much but it has something to
do with taxes that I didn't understand. But this sometimes comes up on the MEE.