July 12, 2010

Ordinary building materials transform from goods to real property.

Fixtures

 General Rule – Secured creditor wins only if:  1. Perfected before the real estate interest is recorded,

 General Rule – Secured creditor wins only if:  1. Perfected before the real estate interest is recorded, and  2. Perfected using a fixture filing [a financing statement that describes land and is filed in land records where land is located]

 Special rule for purchase-money security interest – PMSI creditor can defeat a prior recorded real property interest if:

 1. PMSI creditor perfected with fixture filing,

 Special rule for purchase-money security interest – PMSI creditor can defeat a prior recorded real property interest if:  1. PMSI creditor perfected with fixture filing,  2. PMSI creditor perfected with 20 days of installation, and

 Special rule for purchase-money security interest – PMSI creditor can defeat a prior recorded real property interest if:  1. PMSI creditor perfected with fixture filing,  2. PMSI creditor perfected with 20 days of installation, and  3. Real property interest is not a construction mortgage.

Perfected interest in crops defeats a real property interest.

 Secured Creditor vs. Debtor

 What is default?  Not making timely payments.

 What is default?  Not making timely payments.  Other conduct as described in the security agreement.

 No judicial process needed.  Self-help remedy [very rare in U.S. law]

 Creditor does NOT need to give debtor notice before repossessing.

 Limitation = No breach of the peace

 Creditor’s choices after a proper repossession:  1. Sell the collateral, or  2. Strict foreclosure.

 1. Notice of Sale

 a. When requirement waived

 1. Notice of Sale  a. When requirement waived ▪ 1. Perishable collateral

 1. Notice of Sale  a. When requirement waived ▪ 1. Perishable collateral ▪ 2. Collateral rapidly decreasing in value

 1. Notice of Sale  a. When requirement waived ▪ 1. Perishable collateral ▪ 2. Collateral rapidly decreasing in value ▪ 3. Collateral normally sold in recognized market

 1. Notice of Sale  a. When requirement waived  b. Contents of notice

 1. Notice of Sale  a. When requirement waived  b. Contents of notice ▪ 1. Description of debtor and secured creditor

 1. Notice of Sale  a. When requirement waived  b. Contents of notice ▪ 1. Description of debtor and secured creditor ▪ 2. Description of collateral

 1. Notice of Sale  a. When requirement waived  b. Contents of notice ▪ 1. Description of debtor and secured creditor ▪ 2. Description of collateral ▪ 3. Method of sale

 1. Notice of Sale  a. When requirement waived  b. Contents of notice ▪ 1. Description of debtor and secured creditor ▪ 2. Description of collateral ▪ 3. Method of sale ▪ 4. Inform debtor about right to accounting

 1. Notice of Sale  a. When requirement waived  b. Contents of notice ▪ 1. Description of debtor and secured creditor ▪ 2. Description of collateral ▪ 3. Method of sale ▪ 4. Inform debtor about right to accounting ▪ 5. Time and place of auction or earliest date of private sale

 1. Notice of Sale  a. When requirement waived  b. Contents of notice ▪ 1. Description of debtor and secured creditor ▪ 2. Description of collateral ▪ 3. Method of sale ▪ 4. Inform debtor about right to accounting ▪ 5. Time and place of auction or earliest date of private sale ▪ 6. If consumer goods, explain debtor’s liability for any deficiency

 1. Notice of Sale  a. When requirement waived  b. Contents of notice  c. When notice given

 1. Notice of Sale  a. When requirement waived  b. Contents of notice  c. When notice given  d. Who gets notice

 1. Notice of Sale  a. When requirement waived  b. Contents of notice  c. When notice given  d. Who gets notice ▪ 1. Debtor (unless waived after default)

 1. Notice of Sale  a. When requirement waived  b. Contents of notice  c. When notice given  d. Who gets notice ▪ 1. Debtor (unless waived after default) ▪ 2. Sureties

 1. Notice of Sale  a. When requirement waived  b. Contents of notice  c. When notice given  d. Who gets notice ▪ 1. Debtor (unless waived after default) ▪ 2. Sureties ▪ 3. Unless collateral consumer goods, other creditors who filed, noted on certificate of title, or gave notice to creditor selling the collateral

 2. Debtor’s Right to Redeem Collateral

 a. Creditor not yet sell (or have contract to sell)

 2. Debtor’s Right to Redeem Collateral  a. Creditor not yet sell (or have contract to sell)  b. Strict foreclosure has not occurred

 2. Debtor’s Right to Redeem Collateral  a. Creditor not yet sell (or have contract to sell)  b. Strict foreclosure has not occurred  c. Debtor has not waived right after default

 2. Debtor’s Right to Redeem Collateral  a. Creditor not yet sell (or have contract to sell)  b. Strict foreclosure has not occurred  c. Debtor has not waived right after default  d. Debtor pays entire debt still owed

 2. Debtor’s Right to Redeem Collateral  a. Creditor not yet sell (or have contract to sell)  b. Strict foreclosure has not occurred  c. Debtor has not waived right after default  d. Debtor pays entire debt still owed  e. Debtor pays all creditor’s reasonable expenses

 3. Standard of care for sale -- reasonable

 4. May creditor purchase collateral?  Yes, if public sale (auction).  No, if private sale (unless no real debate on sale price).

 5. Application of sale proceeds:

 a. Creditor’s reasonable expenses

 5. Application of sale proceeds:  a. Creditor’s reasonable expenses  b. Balance of debt

 5. Application of sale proceeds:  a. Creditor’s reasonable expenses  b. Balance of debt  c. Subordinate secured creditors in the same collateral

 5. Application of sale proceeds:  a. Creditor’s reasonable expenses  b. Balance of debt  c. Subordinate secured creditors in the same collateral  d. Surplus (if any) to debtor

 6. If deficiency, creditor sues debtor but is unsecured for the deficiency.

 7. Creditor’s liability if not follow rules

 a. Debtor’s actual damages

 7. Creditor’s liability if not follow rules  a. Debtor’s actual damages  b. If consumer goods, at least finance charge (interest) plus 10% of principal

 7. Creditor’s liability if not follow rules  a. Debtor’s actual damages  b. If consumer goods, at least finance charge (interest) plus 10% of principal  c. Possible restriction on creditor’s ability to recovery deficiency

 Requirements:

 1. Debtor consents

 Requirements:  1. Debtor consents  2. Notice to debtor and other creditors

 Requirements:  1. Debtor consents  2. Notice to debtor and other creditors  3. No timely objection

 Requirements:  1. Debtor consents  2. Notice to debtor and other creditors  3. No timely objection  4. Special rule for consumer goods if debtor has paid 60% of price – creditor must resell within 90 days of repossession