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Secured Transactions

Terms in this set (74)

commercial consignments of goods worth $1000 or more to persons who (1) deal in goods of that kind under a name other than the consignor's (2) are not auctioneers and (3) are generally not known by their creditors to be substantially engaged in selling the goods of others

- Elvis, a music promoter, delivers compact discs worth $1,500 by the band No Tolerance to CD Barn to be sold on consignment. If the compact discs are not sold, CD Barn (the consignee) may return them to Elvis (the consignor). Unless CD Barn is generally known by its creditors to be substantially engaged in selling the goods of others, Elvis must comply with the provisions of Article 9 to protect his interest in the compact discs against the creditors of CD Barn. (Note: Elvis does not need to comply with Article 9 if the goods are worth less than $1,000 or the consignor used the goods for personal, family, or household use).

-(Note: In a typical consignment, the consignor (i.e., the owner of the goods, such as a manufacturer or wholesaler) retains title to the goods and delivers them to the consignee (e.g., a retailer) for sale to the public. If the goods are not sold, the consignee may return them to the consignor. In cases where a creditor of the consignee would have difficulty distinguishing inventory that a consignee is selling on consignment from inventory that the consignee actually owns, Article 9 considers the consignment to be a security interest and requires the consignor to comply with the provisions of Article 9 to give notice to the consignee's creditors.)
As a general rule, the rules for priority previously discussed (e.g., first to file or perfect, special PMSI rules) apply to accessions.

- Special priority rule: A security interest in an accession is subordinate to a security interest in the whole which is perfected by compliance with the requirements of a certificate-of-title statute.

-Essay: security interest in whole perfected under certificate of title prevails over security interests in accessions
- ex: C1 who had security interest in "vehicles and accessories now and hereafter installed" had priority over a PMSI in the GPSs installed

- ex: Bank has a perfected security interest in debtor's piece of equipment. Subsequently, Finance Company finances a new motor for this equipment and takes a security interest in the motor. Finance Company files a financing statement perfecting its security interest within 20 days of debtor receiving the motor. Finance Company would have priority over Bank with respect to the motor because of the special PMSI rule (had Finance Company not filed within 20 days, Bank would have had priority as the first to file or perfect).

- Debtor owns an automobile subject to a security interest in favor of Bank. This security interest is perfected by notation on the certificate of title. Finance Company finances a new motor for the automobile, taking a security interest in the motor, and perfects by filing a financing statement within 20 days of debtor receiving the motor. Bank would have priority as to the motor.