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Secured Transactions in California Commercial Law Practice

Stay on top of changes and avoid procedural traps with this reliable, comprehensive guide to UCC Division 9.

Stay on top of changes and avoid procedural traps with this reliable, comprehensive guide to UCC Division 9.

  • Documenting secured transactions and perfecting security interests
  • Priorities and remedies
  • Bankruptcy proceedings and consumer transactions
  • Legal opinions
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Stay on top of changes and avoid procedural traps with this reliable, comprehensive guide to UCC Division 9.

  • Documenting secured transactions and perfecting security interests
  • Priorities and remedies
  • Bankruptcy proceedings and consumer transactions
  • Legal opinions

1

Statutes Governing Secured Transactions

Ellen A. Friedman

  • I.  INTRODUCTION  1.1
  • II.  UNIFORM COMMERCIAL CODE AND CALIFORNIA COMMERCIAL CODE  1.2
  • III.  COMMERCIAL CODE TERMINOLOGY  1.3
    • A.  Categories of Collateral
      • 1.  Accounts  1.4
      • 2.  Chattel Paper  1.5
      • 3.  Commercial Tort Claims  1.5A
      • 4.  Documents  1.6
      • 5.  Fixtures  1.7
      • 6.  General Intangibles  1.8
      • 7.  Goods  1.9
      • 8.  Instruments  1.10
      • 9.  Investment Property  1.11
      • 10.  Deposit Accounts  1.11A
      • 11.  Proceeds  1.12
    • B.  Parties to Secured Transaction
      • 1.  Secured Party  1.13
      • 2.  Debtor, Obligor, and Secondary Obligor  1.14
    • C.  Table: Defined Terms With Commercial Code Sections  1.15
  • IV.  SECURITY INTERESTS CREATED UNDER DIVISION 9  1.16
    • A.  Accounts, Chattel Paper, Notes, and Payment Intangibles
      • 1.  General Rule of Coverage  1.17
        • a.  Different Default Rights for Security Transfers and Outright Transfers  1.18
        • b.  Distinguishing Security Transfers From Sales  1.19
      • 2.  Limitations on Coverage of Division 9  1.20
    • B.  Leases
      • 1.  Leases as Security Interests Not Governed by Division 10  1.21
        • a.  When Lease Is Considered a Security Interest  1.22
        • b.  When Lease May Not Create Security Interest  1.23
        • c.  Nominal Additional Consideration  1.24
        • d.  Special Rule for Motor Vehicle Leases  1.25
      • 2.  Sale-Leaseback  1.26
      • 3.  Special Filing Requirements for Lease of Aircraft  1.27
      • 4.  Transfer of Lease; Transferee’s Rights  1.28
    • C.  Consignments  1.29
      • 1.  Actions Consignor Should Take to Protect Its Interest in Consigned Goods  1.29A
      • 2.  Form: Collateral Description  1.29B
      • 3.  Notice to Creditors  1.29C
      • 4.  Form: Notice to Secured Creditor  1.29D
      • 5.  Additional Considerations  1.29E
    • D.  Buyers, Lessees, and Licensees in Ordinary Course of Business  1.30
  • V.  SECURITY INTERESTS CREATED UNDER DIVISION 2 (SALES)  1.31
  • VI.  MOBILEHOMES, MANUFACTURED HOUSING, AND COMMERCIAL COACHES  1.32
  • VII.  REAL PROPERTY INTERESTS  1.33
    • A.  Personal Property Interests Distinguished  1.34
      • 1.  Transfer of Note and Deed of Trust  1.35
      • 2.  Assignment of Rents  1.36
    • B.  Security Interests in Fixtures  1.37
  • VIII.  MISCELLANEOUS EXCLUSIONS FROM DIVISION 9
    • A.  Setoff  1.38
    • B.  Loans on Insurance Policies  1.39
    • C.  Wage Assignments  1.40
    • D.  Judgments and Tort Claims  1.41
    • E.  Deposit Account Assignments  1.42
  • IX.  STATUTORY LIENS  1.43
  • X.  STATUTES OF LIMITATIONS  1.44
  • XI.  FEDERAL LAW AND FEDERAL GOVERNMENT TRANSACTIONS  1.45
  • XII.  STATE LAW PARALLEL TO FEDERAL LAW  1.46
    • A.  Transfers by Governmental Entities  1.47
    • B.  Assignment of Government Contract Rights  1.48
  • XIII.  SURETYSHIP  1.49
    • A.  Priority of Surety Against Secured Lender  1.50
    • B.  Federal Government Construction Contracts  1.51
  • XIV.  MULTISTATE TRANSACTIONS  1.52
    • A.  Perfection of Security Interests  1.53
    • B.  Issues Other Than Perfection
      • 1.  Appropriate Relation Rule  1.54
      • 2.  Agreement of Parties  1.55

2

The Security Agreement

Ellen A. Friedman

  • I.  REQUIREMENTS FOR ENFORCEABILITY OF SECURITY INTEREST  2.1
  • II.  FORMALITIES FOR SECURITY AGREEMENT CREATING NONPOSSESSORY SECURITY INTEREST
    • A.  Grant of Security Interest  2.2
      • 1.  General Rule—Explicit Granting Language Required  2.3
      • 2.  Explicit Granting Language Not Required  2.4
    • B.  Authentication  2.5
    • C.  Description of Collateral  2.6
      • 1.  Requirements for Sufficient Description  2.7
      • 2.  Effect of Limited Collateral Description  2.8
    • D.  Using Several Documents  2.9
  • III.  EVIDENCE OUTSIDE WRITTEN SECURITY AGREEMENT
    • A.  Course of Dealing and Usage of Trade  2.10
    • B.  Statute of Frauds and Parol Evidence Rule  2.11
  • IV.  APPLICATION OF SECURITY AGREEMENT TO OTHER OBLIGATIONS AND COLLATERAL
    • A.  Floating Lien in After-Acquired Property, Future Advances, and Proceeds of Collateral  2.12
    • B.  Restrictions on Use of After-Acquired-Property Clause
      • 1.  Consumer Goods  2.13
      • 2.  Exception for Accessions  2.14
      • 3.  Commercial Tort Claims  2.15
    • C.  Security Interest in Proceeds  2.16
    • D.  Dragnet Clauses  2.17
  • V.  EFFECT OF CONSUMER PROTECTION LAWS ON SECURITY INTEREST  2.18
  • VI.  FORMS OF WRITTEN SECURITY AGREEMENTS
    • A.  Introduction  2.19
    • B.  Commercial Security Agreement for Nonpossessory Security Interest
      • 1.  Form: Title and Preamble  2.20
      • 2.  Form: Common Definitions  2.21
      • 3.  Form: Definitions Related to Type of Collateral  2.22
      • 4.  Form: UCC Definitions Incorporated by Reference  2.23
      • 5.  Form: Grant of Security Interest  2.24
      • 6.  Form: Debtor’s Covenants  2.25
      • 7.  Form: Collection of Proceeds  2.26
      • 8.  Form: Secured Party’s Possession of Proceeds  2.27
      • 9.  Form: Power of Attorney  2.28
      • 10.  Form: Debtor’s Warranties and Representations  2.29
      • 11.  Form: Special Provision for Fixtures  2.30
      • 12.  Form: Termination of Agreement  2.31
      • 13.  Form: Default  2.32
      • 14.  Form: Remedies  2.33
      • 15.  Form: Attorney Fees and Costs  2.34
      • 16.  Form: Waiver by Secured Party  2.35
      • 17.  Form: Survival of Representations and Warranties  2.36
      • 18.  Form: Assignment  2.37
      • 19.  Form: Governing Law  2.38
      • 20.  Form: Entire Agreement  2.39
      • 21.  Form: Notices  2.40
      • 22.  Form: Signatures  2.41
    • C.  Security Agreement for Possessory Security Interest (Pledge Agreement for “Paper” Personal Property, Including Chattel Paper)
      • 1.  Form: Title and Preamble  2.42
      • 2.  Form: Definitions  2.43
      • 3.  Form: UCC Definitions Incorporated by Reference  2.44
      • 4.  Form: Grant of Security Interest  2.45
      • 5.  Form: Debtor’s Covenants  2.46
      • 6.  Form: Secured Party’s Possession of Proceeds  2.47
      • 7.  Form: Power of Attorney  2.48
      • 8.  Form: Debtor’s Warranties and Representations  2.49
      • 9.  Form: Secured Party’s Duties  2.50
      • 10.  Form: Termination  2.51
      • 11.  Form: Default  2.52
      • 12.  Form: Remedies  2.53
      • 13.  Form: Attorney Fees and Costs  2.54
      • 14.  Form: Waiver by Secured Party  2.55
      • 15.  Form: Survival of Representations and Warranties  2.56
      • 16.  Form: Assignment  2.57
      • 17.  Form: Governing Law  2.58
      • 18.  Form: Entire Agreement  2.59
      • 19.  Form: Notices  2.60
      • 20.  Form: Signatures  2.61
    • D.  Intellectual Property Security Agreement  2.62
      • 1.  Form: Title and Preamble  2.63
      • 2.  Form: Definitions  2.64
      • 3.  Form: Grant of Security Interest in Intellectual Property Collateral  2.65
      • 4.  Form: Incorporation of Loan Agreement Security Provision  2.66
      • 5.  Form: Signatures  2.67
      • 6.  Intellectual Property Collateral
        • a.  Form: Schedule I to Patent, Trademark, and Copyright Security Agreement  2.68
        • b.  Form: Schedule II to Patent, Trademark, and Copyright Security Agreement  2.69

3

Perfection

Ellen A. Friedman

  • I.  ATTACHMENT AND PERFECTION  3.1
    • A.  Attachment of Security Interest  3.2
      • 1.  Value Given  3.3
      • 2.  Debtor’s Rights in Collateral  3.4
      • 3.  Evidence of Intent to Pledge Collateral  3.5
    • B.  Perfection of Security Interest  3.6
  • II.  AUTOMATIC PERFECTION  3.7
    • A.  Consumer Goods  3.8
    • B.  Security Interests Arising Under Division 2 (Sales) and Division 10 (Leases)  3.9
    • C.  Interests in Estates  3.10
    • D.  Security Interest of Collecting Bank  3.11
    • E.  Assignment for Benefit of Creditors  3.12
    • F.  Sale of Payment Intangible or Promissory Note  3.12A
  • III.  METHODS OF PERFECTION  3.13
    • A.  Accounts
      • 1.  Requirement of Filing to Perfect Security Interest in Accounts  3.14
      • 2.  Limitations on Protection by Filing With Respect to Accounts  3.15
        • a.  Levy on Account  3.16
        • b.  Excluded Transfers  3.17
        • c.  Statute of Limitations on Underlying Obligation  3.18
    • B.  General Intangibles
      • 1.  General Rule of Perfection by Filing  3.19
      • 2.  Intellectual Property  3.20
        • a.  Patents  3.21
        • b.  Trademarks  3.22
        • c.  Copyrights  3.23
          • (1)  Registered and Unregistered Copyrights  3.24
          • (2)  Proceeds of Copyrighted Material  3.25
        • d.  Mask Works  3.26
        • e.  Trade Secrets  3.27
        • f.  Forms
          • (1)  Form: Patent Recordation Form Cover Sheet (Form PTO-1595)  3.28
          • (2)  Form: Trademark Recordation Form Cover Sheet (Form PTO-1594)  3.29
    • C.  Goods  3.30
      • 1.  Perfection of Security Interest by Filing  3.31
      • 2.  Automatic Perfection of Purchase Money Security Interest  3.32
      • 3.  Goods in Possession of Third Party  3.33
        • a.  Goods Under Negotiable Documents  3.34
        • b.  Goods Under Nonnegotiable Documents  3.35
        • c.  Goods Not Covered by Documents  3.36
        • d.  Temporary Perfection for Goods in Possession of Bailee That Has Not Issued Negotiable Document  3.37
    • D.  Negotiable Documents and Instruments
      • 1.  Perfection by Possession or Filing  3.38
      • 2.  Temporary Perfection for Negotiable Documents and Instruments  3.39
    • E.  Chattel Paper and Electronic Chattel Paper  3.40
      • 1.  Perfection of Security Interest in Tangible Chattel Paper by Possession or Filing  3.41
      • 2.  Perfection of Security Interest in Electronic Chattel Paper by Filing or Control  3.42
    • F.  Money  3.43
    • G.  Deposit Accounts
      • 1.  Perfection by Control  3.44
      • 2.  Key Elements of Control Account Agreement  3.44A
      • 3.  Form: Control Agreement for Deposit Account  3.45
    • H.  Letter-of-Credit Rights  3.46
    • I.  Insurance Policy  3.47
    • J.  Investment Property  3.48
      • 1.  Perfection by Possession of Certificated Securities  3.49
        • a.  Possession of Certificated Securities in Registered Form and Bearer Form  3.50
        • b.  Third Party Possession of Certificated Securities  3.51
      • 2.  Perfection by Control of Investment Property  3.52
        • a.  Certificated Securities  3.53
        • b.  Uncertificated Securities  3.54
        • c.  Security Entitlements  3.55
        • d.  Commodity Contracts  3.56
        • e.  Key Elements of Control Agreement for Investment Accounts  3.56A
        • f.  Form: Control Agreement for Investment Account  3.57
    • K.  Partnership Interest  3.58
    • L.  Proceeds  3.59
  • IV.  PROBLEMS WITH PERFECTION BY POSSESSION OR CONTROL
    • A.  Rights and Duties of a Secured Party in Possession or Control of Collateral  3.60
      • 1.  Rules That Apply Only to Secured Party in Possession  3.61
      • 2.  Rules That Apply to Secured Party in Either Possession or Control  3.62
    • B.  Liability of Pledgees Under Securities Laws  3.63
  • V.  PERFECTION UNDER STATUTES OTHER THAN THE COMMERCIAL CODE  3.64
    • A.  Motor Vehicles and Boats  3.65
      • 1.  Vehicles in Inventory  3.66
      • 2.  Trucks and Buses  3.67
    • B.  Mobilehomes, Commercial Coaches, Truck Campers, Floating Homes, and Manufactured Housing  3.68
      • 1.  Certificate of Origin by Manufacturer  3.69
      • 2.  Right to Payment for Inventory Creditor of Manufactured Homes and Mobilehomes  3.70
      • 3.  Antideficiency Protection for Mobilehomes  3.71
    • C.  Agricultural Implements  3.72
    • D.  Vessels
      • 1.  Undocumented Vessels  3.73
      • 2.  Documented Vessels  3.74
    • E.  Aircraft  3.75
  • VI.  HOW TO PERFECT BY COMMERCIAL CODE FILING
    • A.  Procedure for Filing Financing Statement  3.76
      • 1.  What to File  3.77
      • 2.  Where to File  3.78
      • 3.  When to File  3.79
      • 4.  Secretary of State’s Online Service  3.79A
      • 5.  What Constitutes Filing  3.80
      • 6.  Authorization Needed for Filing  3.81
      • 7.  Filing Fees for Mail or Counter Submissions  3.82
      • 8.  Forms
        • a.  Form: Cover Letter to Secretary of State [Deleted]  3.83
        • b.  Form: Financing Statement (Form UCC1)  3.84
        • c.  Form: Financing Statement Addendum (Form UCC1Ad)  3.84A
        • d.  Form: Financing Statement Additional Party (Form UCC1AP)  3.84B
        • e.  Form: Information Request (Form UCC11)  3.85
    • B.  Contents of Financing Statement  3.86
      • 1.  Debtor’s Name  3.87
        • a.  Individuals  3.88
        • b.  Partnerships  3.89
        • c.  Corporations  3.90
        • d.  Limited Liability Companies  3.91
        • e.  Trusts  3.91A
        • f.  Trade Names  3.92
      • 2.  Creditor’s Name  3.93
      • 3.  Description of Collateral  3.94
        • a.  General Requirements for Sufficient Indication of Collateral  3.95
        • b.  Special Requirements for Fixtures and As-Extracted Collateral or Timber to Be Cut  3.96
    • C.  Additional Fixture Filing  3.97
      • 1.  Requirements for Fixture Filing  3.98
      • 2.  Mortgage Effective as Fixture Filing  3.99
      • 3.  Waiver of Landlord’s or Mortgagee’s Interest in Fixtures  3.100
      • 4.  Form: Landlord’s or Mortgagee’s Waiver  3.101
    • D.  Protective Filing by Lessors, Consignors, Bailors, and Licensors  3.102
    • E.  Duration and Effectiveness of Financing Statement  3.103
      • 1.  Limited Effectiveness After Debtor’s Name Change  3.104
      • 2.  Loss of Perfection on Lapse of Financing Statement  3.105
    • F.  Change of Financing Statement  3.106
      • 1.  Continuation Statement  3.107
      • 2.  Partial Release of Collateral  3.108
      • 3.  Termination of Perfected Security Interest  3.109
        • a.  Filing Termination Statement  3.110
        • b.  Duty to File or Deliver Termination Statement to Debtor  3.111
      • 4.  Amendment of Financing Statement  3.112
      • 5.  Statement of Assignment by Secured Creditor  3.113
      • 6.  Form: Financing Statement Amendment (Form UCC3)  3.114
    • G.  Information Statements  3.115
  • VII.  TRANSITION RULES  3.116
    • A.  “In-Lieu” Financing Statements  3.117
    • B.  Transition Rules for 2010 Amendments  3.118

4

Priorities

Ellen A. Friedman

  • I.  SUMMARY OF PRIORITY RULES  4.1
  • II.  UNPERFECTED SECURITY INTERESTS  4.2
  • III.  PERFECTED SECURITY INTERESTS
    • A.  General Priority Rule  4.3
      • 1.  First to File  4.4
        • a.  Examples of Priority by Filing  4.5
        • b.  Advances by Assignee of Secured Creditor  4.6
        • c.  Financing Statement Without Security Interest  4.7
      • 2.  First to Perfect  4.8
      • 3.  First to Attach  4.9
    • B.  Priority of Purchase Money Security Interests
      • 1.  Goods Other Than Inventory or Livestock  4.10
        • a.  Interests in Software  4.11
        • b.  Multiple Interests  4.12
        • c.  Identifiable Proceeds of Collateral  4.13
      • 2.  Special Rules for Inventory Collateral  4.14
        • a.  Consignments of Inventory  4.15
        • b.  Terminology Used by Consignor  4.16
        • c.  Proceeds of Inventory Collateral  4.17
          • (1)  Limitation to Identifiable Cash Proceeds  4.18
          • (2)  Proceeds Must Be Received on or Before Delivery  4.19
    • C.  Special Rules for Specified Types of Collateral  4.20
      • 1.  Deposit Accounts  4.21
      • 2.  Investment Property  4.22
      • 3.  Letter-of-Credit Rights  4.23
      • 4.  Chattel Paper  4.24
      • 5.  Instruments  4.25
      • 6.  Negotiable Documents  4.26
  • IV.  SPECIAL PRIORITY PROBLEMS
    • A.  Proceeds of Collateral
      • 1.  Proceeds of Collateral Perfected by Filing  4.27
      • 2.  Proceeds of Collateral Not Perfected by Filing  4.28
        • a.  Continued Priority for Cash Proceeds or Same Type of Collateral  4.29
        • b.  Priority for Proceeds of Chattel Paper, Deposit Accounts, Negotiable Documents, Instruments, Investment Property, and Letter-of-Credit Rights  4.30
    • B.  Fixtures  4.31
      • 1.  First-To-File Rule  4.32
      • 2.  Purchase Money Priority
        • a.  Priority of Purchase Money Security Interest Over Prior Encumbrances  4.33
        • b.  Priority of Construction Mortgage Over Purchase Money Security Interest  4.34
      • 3.  Priority Over Owners and Prior Encumbrances
        • a.  Readily Removable Items  4.35
        • b.  Manufactured Homes  4.36
        • c.  Priority by Agreement  4.37
        • d.  Tenant’s Priority  4.38
      • 4.  Priority Over Subsequent Judicial Liens  4.39
      • 5.  Residual Rule  4.40
    • C.  Goods That Become Associated With Other Goods
      • 1.  Accessions  4.41
      • 2.  Commingled or Processed Goods  4.42
  • V.  LIEN CREDITORS
    • A.  Liens Under Commercial Code
      • 1.  Definition of Lien Creditor  4.43
      • 2.  Priority With Respect to Lien Creditor  4.44
        • a.  Priority in Advances After Lien Creditor Acquires Lien  4.45
        • b.  Priority of Possessory Liens  4.46
        • c.  Enforcement of Lien by Third Party Claims  4.47
    • B.  Liens Obtained by Filing With Secretary of State
      • 1.  Judgment Liens  4.48
        • a.  Scope of Judgment Lien  4.49
        • b.  Extinction of Judgment Lien  4.50
        • c.  Priority of Judgment Lien  4.51
          • (1)  Purchase Money Priority Over Judgment Lien  4.52
          • (2)  Priority in Advances After Judgment Lien Filed  4.53
      • 2.  Attachment Liens  4.54
    • C.  Tax Liens
      • 1.  Federal Tax Liens  4.55
        • a.  How to Locate Tax Lien  4.56
        • b.  Priority of Tax Lien  4.57
        • c.  Exceptions to Priority of Tax Lien
          • (1)  Commercial Transaction Financing Agreements  4.58
          • (2)  Obligatory Disbursement Agreements  4.59
          • (3)  Real Property Construction or Improvement Financing Agreement  4.60
          • (4)  Disbursements Within 45 Days After Filing  4.61
      • 2.  California Tax Liens  4.62
  • VI.  BUYERS, LESSEES, AND LICENSEES
    • A.  Buyers  4.63
      • 1.  Buyer in Ordinary Course of Business  4.64
        • a.  Purchase Made in Ordinary Course  4.65
        • b.  Buyer Without Knowledge of Security Interest  4.66
        • c.  Security Interest Created by Seller  4.67
      • 2.  Buyer Not in Ordinary Course of Business
        • a.  Perfected Security Interests  4.68
        • b.  Unperfected Security Interests  4.69
      • 3.  Disposition Authorized by Secured Party  4.70
      • 4.  Buyer of Aircraft  4.71
    • B.  Lessee of Goods and Licensees of General Intangibles  4.72
  • VII.  RESTITUTION  4.73
  • VIII.  SUBORDINATION  4.74
    • A.  Need for Subordination Agreement  4.75
    • B.  Types of Subordination  4.75A
    • C.  Levels of Subordination  4.75B
    • D.  Subordination Agreement
      • 1.  Form: Introduction, Recitals, and Definitions  4.76
      • 2.  Form: Payments on Junior Creditor Indebtedness  4.76A
      • 3.  Form: Priority of Liens  4.76B
      • 4.  Form: Consent to Junior Liens  4.76C
      • 5.  Form: Events of Default  4.76D
      • 6.  Form: Restrictions on Enforcement  4.76E
      • 7.  Form: Actions Affecting Agreements with Debtor and Waiver of Marshalling  4.76F
      • 8.  Form: Claims in Bankruptcy  4.76G
      • 9.  Form: Assurances, Agreement, Amendments, Notice, Severability, Successors, and Governing Law  4.76H
      • 10.  Form: Signatures and Acknowledgment  4.76I
  • IX.  UCC INSURANCE POLICIES  4.77
    • A.  Sample Provision in Loan Agreement  4.77A
    • B.  Coverage  4.78
    • C.  Exclusions  4.79
      • 1.  Excluded Methods of Perfection  4.80
      • 2.  Claims Arising Under Other Laws  4.81
  • X.  RIGHTS OF THIRD PARTIES
    • A.  Scope of Division 9, Chapter 4  4.82
    • B.  Other Law Governs Alienability of Debtors’ Rights  4.83
    • C.  Exceptions to General Rule  4.84
      • 1.  Prohibition of Transfer Does Not Prevent Transfer From Taking Effect  4.85
      • 2.  Assignment of Accounts, Chattel Paper, Payment Intangibles, and Promissory Notes  4.86
      • 3.  Ineffective Terms in Lease Agreement  4.87
      • 4.  Assignments of Promissory Notes, Health Care Insurance Receivables, and Certain General Intangibles  4.88
      • 5.  Restrictions on Assignment of Letter-of-Credit Rights  4.89
    • D.  Rights Acquired by Assignee of Accounts  4.90

5

Remedies

Ellen A. Friedman

Hill (“Buzz”) Blackett III

  • I.  INTRODUCTION
    • A.  Scope of Chapter  5.1
    • B.  Debtors, Obligors, and Secondary Obligors  5.2
  • II.  DEFAULT
    • A.  Definition of Default  5.3
    • B.  Limits on Security Agreement Provisions Related to Default
      • 1.  Acceleration Clause  5.4
      • 2.  Due-on-Sale Clause  5.5
      • 3.  Insolvency and Bankruptcy Clause  5.6
    • C.  Notice of Default  5.7
  • III.  SECURED PARTY’S REMEDIES ON DEFAULT
    • A.  Election of Remedies  5.8
      • 1.  Effect of Election on Guarantors  5.9
      • 2.  Remedies Provided in Security Agreement  5.10
      • 3.  Mixed Collateral, One-Action Rule, and Antideficiency Rules  5.11
        • a.  Rights of Creditor Secured by Mixed Collateral  5.12
        • b.  Rights of Creditor Secured by Fixtures Alone  5.13
      • 4.  Accessions  5.14
    • B.  Prejudgment Attachment  5.15
    • C.  Claim and Delivery  5.16
    • D.  Charging Orders  5.16A
    • E.  Informal Workout  5.17
    • F.  Collection of Accounts  5.18
  • IV.  REPOSSESSION
    • A.  Secured Creditor’s Right to Repossession  5.19
    • B.  Constitutionality of Repossession  5.20
    • C.  Breach of Peace  5.21
    • D.  Debtor’s Wrongful Retention  5.22
    • E.  Assembling the Collateral  5.23
    • F.  Secured Party’s Right to Render Collateral Unusable and Dispose of Collateral on Debtor’s Premises  5.24
  • V.  AFTER REPOSSESSION
    • A.  Secured Creditor’s Rights on Repossession  5.25
    • B.  Disposition of Collateral  5.26
      • 1.  Public or Private Dispositions  5.27
        • a.  Limitations on Private Sale  5.28
        • b.  Place of Sale  5.29
      • 2.  Notice of Disposition  5.30
        • a.  Application of Notice Requirement  5.31
        • b.  Contents of Notice  5.32
        • c.  Form: Form of Notice  5.33
        • d.  Persons Entitled to Notice  5.34
          • (1)  Waiver of Notice by Debtor or Secondary Obligor  5.35
          • (2)  Notice to Guarantor  5.36
          • (3)  Notice to Levying Creditor  5.37
          • (4)  Form: Third Party’s Request for Notice of Sale  5.38
        • e.  Time of Notice  5.39
        • f.  “Two-Try” Rule  5.40
        • g.  Effect of Failure to Provide Notice  5.41
      • 3.  Commercial Reasonableness of Disposition  5.42
        • a.  Relationship of Price to Reasonableness  5.43
          • (1)  When Sales Price Is Low  5.43A
          • (2)  Block Sale of Stock  5.44
          • (3)  Wholesale Liquidation Price  5.45
        • b.  Other Tests of Reasonableness  5.46
        • c.  Advertising or Solicitation  5.47
        • d.  Preparation of Collateral  5.48
        • e.  Credit Sale of Collateral  5.49
      • 4.  Effect of Sale  5.50
      • 5.  Transfer Statements  5.51
    • C.  Application of Proceeds of Collateral  5.52
      • 1.  Expenses of Sale  5.53
      • 2.  Junior Lienor’s Demand for Satisfaction  5.54
        • a.  Request for Stipulation by Debtor  5.55
        • b.  Form: Junior Lienor’s Demand for Satisfaction  5.56
      • 3.  Noncash Proceeds  5.57
      • 4.  Surplus and Deficiency  5.58
        • a.  Sale of Accounts, Chattel Paper, Payment Intangibles, and Promissory Notes  5.59
        • b.  Consumer Transactions  5.60
        • c.  Low-Price Dispositions to Related Parties  5.61
    • D.  Secured Party’s Retention of Collateral—Strict Foreclosure  5.62
      • 1.  Debtor’s Consent to Retention of Collateral  5.63
      • 2.  Notice of Proposal  5.64
  • VI.  WAIVERS BY DEBTORS AND OBLIGORS  5.65
    • A.  Nonwaivable Debtor Protections  5.66
    • B.  Waivable Debtor Protections  5.67
  • VII.  DEBTOR’S RIGHTS AND REMEDIES
    • A.  Secured Party’s Failure to Comply With Division 9
      • 1.  Effect on Collateral  5.68
      • 2.  Basic Remedy of Damages  5.69
      • 3.  Effect on Deficiency Judgment  5.70
      • 4.  Conversion  5.71
      • 5.  Accounting  5.72
      • 6.  Consumer Remedies  5.73
      • 7.  Effect of Automatic Stay in Bankruptcy  5.74
      • 8.  Redemption of Collateral  5.75
    • B.  Contract of Adhesion  5.76
    • C.  Secured Party’s Waiver and Estoppel by Conduct  5.77
    • D.  Lender Liability  5.78
      • 1.  Breach of Contract  5.79
      • 2.  Tort Theories
        • a.  Fraud, Negligent Misrepresentation, and Intentional Misrepresentation  5.80
        • b.  Control  5.81
        • c.  Duress  5.82
        • d.  Interference With Contract or Business Relationship  5.83
        • e.  Tort Liability in Connection With Breach of Contract  5.84
        • f.  Equitable Subordination  5.85
    • E.  Deepening Insolvency  5.86

6

The Secured Creditor and Bankruptcy

Ellen A. Friedman

  • I.  INTRODUCTION  6.1
  • II.  COMMENCING BANKRUPTCY PROCEEDINGS
    • A.  Jurisdiction of Bankruptcy Cases  6.2
    • B.  Who May Be a Debtor  6.3
    • C.  Who May File a Petition  6.4
    • D.  Appointment of Trustee  6.5
    • E.  Creditors’ Committee  6.6
  • III.  AUTOMATIC STAY
    • A.  Imposition of Automatic Stay  6.7
      • 1.  Operation of Stay  6.8
      • 2.  Exceptions to Automatic Stay  6.9
    • B.  Violation of Automatic Stay  6.10
    • C.  Relief From Automatic Stay  6.11
      • 1.  Local Rules  6.12
      • 2.  Determination of Request for Relief From Stay  6.13
        • a.  Preliminary Hearing  6.14
        • b.  Final Hearing  6.15
      • 3.  Criteria for Relief From Stay  6.16
        • a.  Lack of Adequate Protection  6.17
          • (1)  Statutory Forms of Adequate Protection  6.18
          • (2)  Equity Cushion as Adequate Protection  6.19
        • b.  Lack of Equity in Property That Is Not Necessary for Effective Reorganization  6.20
        • c.  Rights of Junior Lienholders  6.21
  • IV.  ACTIONS TAKEN BY TRUSTEE OR DEBTOR IN POSSESSION
    • A.  Use, Sale, or Lease of Property  6.22
      • 1.  In Ordinary Course of Business  6.23
      • 2.  Special Rules for Cash Collateral  6.24
        • a.  Adequate Protection for Cash Collateral  6.25
        • b.  Stipulation to Use of Cash Collateral  6.26
      • 3.  Not in Ordinary Course of Business  6.27
        • a.  Sale Free and Clear of Liens and Claims  6.28
        • b.  Bidding Procedure  6.29
    • B.  Debtor-in-Possession Financing  6.30
      • 1.  Priority of Financing  6.31
      • 2.  Court Approval of Financing  6.32
    • C.  Turnover of Property to Trustee  6.33
      • 1.  Property Subject to Turnover Powers  6.34
      • 2.  Effect of Seizure  6.35
        • a.  Accounts Receivable  6.36
        • b.  Bank Accounts Subject to IRS Levy  6.37
          • (1)  Majority View  6.38
          • (2)  Minority View  6.39
      • 3.  Turnover From Custodians  6.40
    • D.  Assumption or Rejection of Executory Contracts and Unexpired Leases  6.41
      • 1.  Ipso Facto Clauses Prohibited  6.42
      • 2.  Protective Effect of Automatic Stay  6.43
      • 3.  Limitations on Assumption and Assignment  6.44
        • a.  Financial Accommodations  6.45
        • b.  Assumption and Assignment Prohibited by Applicable Nonbankruptcy Law  6.46
          • (1)  Patents  6.47
          • (2)  Copyrights  6.48
          • (3)  Trademarks  6.49
          • (4)  Anti-Assignment Language  6.49A
      • 4.  Special Provision for Licensee’s Rights in Intellectual Property of Debtor Licensor  6.50
  • V.  SECURED CREDITOR’S CLAIM
    • A.  Filing Creditor’s Claim  6.51
      • 1.  Treatment of Secured Creditor’s Claim and Filing Proof of Claim  6.52
      • 2.  Form: Proof of Claim (United States Bankruptcy Court Official Form 410)   6.53
    • B.  Allowing Secured Claims  6.54
      • 1.  Bifurcation of Claim  6.55
      • 2.  Interest on Secured Claim  6.56
      • 3.  Recovery of Costs From Secured Claim  6.57
    • C.  Challenging Validity of Secured Claim  6.58
      • 1.  Assertion of Debtor’s Defenses  6.59
      • 2.  The “Strong-Arm” Clause  6.60
        • a.  Subordination of Unperfected Security Interests  6.61
        • b.  Superior Rights of Perfected Secured Creditors  6.62
        • c.  20-Day Grace Period for Purchase Money Security Interests  6.63
      • 3.  Trustee as Successor to Unsecured Creditor  6.64
        • a.  Uses of Trustee Avoiding Power  6.65
        • b.  Amount and Beneficiary of Avoided Interest  6.66
      • 4.  Effect of Exemptions of Debtor’s Property  6.67
      • 5.  Security Interests in After-Acquired Property  6.68
        • a.  Proceeds and Profits  6.69
        • b.  Rents and Hotel Revenues  6.70
    • D.  Avoiding Fraudulent Transfers  6.71
      • 1.  Constructive Fraud  6.72
        • a.  Reasonably Equivalent Value  6.73
        • b.  Insolvency  6.74
        • c.  Unreasonably Small Capital  6.75
        • d.  Self-Settled Trusts  6.75A
      • 2.  Remedies/Liability of Transferees  6.76
      • 3.  Leveraged Buyouts (LBOs)  6.77
  • VI.  PREFERENCES
    • A.  Preferential Transfers  6.78
      • 1.  Transfer to Creditor  6.79
      • 2.  For an Antecedent Debt  6.80
      • 3.  Made While Insolvent  6.81
      • 4.  Made Within 90 Days  6.82
      • 5.  Made Within 1 Year (Insider Preferences)  6.83
    • B.  Nonpreferential Transactions
      • 1.  Contemporaneous Exchange  6.84
      • 2.  Payment of Debt in Ordinary Course of Business  6.85
      • 3.  Payment on Fully Secured Debt  6.86
      • 4.  Enabling Loan—Purchase Money Security Interest  6.87
      • 5.  New Value Extended  6.88
        • a.  “Net Results” Test  6.89
        • b.  Release of Lien on Valueless Property  6.90
        • c.  When Transfer Made by Check for Purposes of New-Value Exception  6.91
      • 6.  Special Rule for Inventory and Receivables  6.92
        • a.  New Additions to Inventory  6.93
        • b.  Downward Fluctuation in Value of Collateral  6.94
        • c.  Increase in Value of Inventory  6.95
        • d.  Collateral Covered by Rule  6.96
      • 7.  Earmarking Doctrine  6.96A
      • 8.  Limit on Preference Lawsuit Amount and Venue  6.96B
      • 9.  Bankruptcy Code §547(i)  6.96C
  • VII.  PRIORITIES OF PAYMENT OF CLAIMS IN BANKRUPTCY
    • A.  Order of Priorities  6.97
      • 1.  Priority of Secured Creditors  6.98
      • 2.  List of Priorities  6.99
    • B.  Interest on Secured Claims  6.100
      • 1.  Contractual Rate of Interest  6.101
      • 2.  Solvent Debtor Exception  6.102
    • C.  Subordination  6.103
  • VIII.  REORGANIZATION AND CREDITORS’ PLANS
    • A.  Secured Creditor’s Rights in Reorganization  6.104
    • B.  Classification of Claims  6.105
    • C.  Acceptance and Confirmation of Chapter 11 Plan  6.106
      • 1.  Acceptance by Impaired Creditors  6.107
      • 2.  Confirmation Procedure  6.108
      • 3.  “Cram-Down” and Absolute Priority Rule  6.109
        • a.  Fair and Equitable Requirement  6.110
        • b.  New-Value Exception to Absolute Priority Rule  6.111
    • D.  Nonrecourse Lenders: The §1111(b) Election  6.112
  • IX.  DISCHARGE, REDEMPTION, AND REAFFIRMATION
    • A.  Discharge  6.113
    • B.  Redemption  6.114
    • C.  Reaffirmation  6.115
      • 1.  Restrictions on Approval of Agreement  6.116
      • 2.  Requirement of No Undue Hardship  6.117
      • 3.  Creditor’s Limited Right to Insist on Reaffirmation  6.118

7

Consumer Transactions

Ellen A. Friedman

  • I.  INTRODUCTION  7.1
  • II.  DEFINITIONS UNDER DIVISION 9  7.2
  • III.  SPECIAL RULES FOR ATTACHMENT AND PERFECTION IN CONSUMER TRANSACTIONS  7.3
    • A.  Description of Collateral  7.4
    • B.  After-Acquired-Property Clause  7.5
    • C.  Purchase Money Security Transactions
      • 1.  Consumer Goods  7.6
      • 2.  Consumer Transactions  7.7
    • D.  Buyers in Ordinary Course  7.8
    • E.  Deposit Accounts  7.9
    • F.  Consignment  7.10
  • IV.  REMEDIES IN CONSUMER TRANSACTIONS  7.11
    • A.  Notice of Disposition of Collateral  7.12
      • 1.  Form: Notice of Plan to Sell Property  7.13
      • 2.  Timing of Notice of Disposition of Collateral  7.14
    • B.  Notice After Disposition of Collateral  7.15
    • C.  Prohibition Against Partial Strict Foreclosure for Consumer Transactions  7.16
    • D.  Disposition of Consumer Goods  7.17
    • E.  Waivers
      • 1.  By Debtors and Obligors  7.18
      • 2.  By Secured Parties  7.19
    • F.  Damages  7.20
    • G.  Deficiency or Surplus  7.21
    • H.  Nonliability of Secured Creditors in Certain Circumstances  7.22
  • V.  OTHER STATUTES GOVERNING CONSUMER TRANSACTIONS  7.23
    • A.  Unruh Act
      • 1.  Definitions and Exclusions  7.24
      • 2.  Applicability of Unruh Act to Loans  7.25
      • 3.  Contract Requirements
        • a.  Required Form and Contents  7.26
        • b.  Prohibited Provisions  7.27
        • c.  Additional Requirements  7.28
        • d.  Related Matters Covered by Unruh Act  7.29
      • 4.  Additional Provisions of Unruh Act
        • a.  Buyer Cannot Waive Rights  7.30
        • b.  Penalties for Violation  7.31
        • c.  Correction of Violations  7.32
        • d.  Assignee’s Liability  7.33
      • 5.  Default and Remedies Under the Unruh Act
        • a.  Rights on Default Generally  7.34
        • b.  Notice of Intention to Sell or Retain Goods  7.35
        • c.  Right to Redeem  7.36
        • d.  Application of Proceeds  7.37
        • e.  Deficiency Judgments  7.38
    • B.  Rees-Levering Act
      • 1.  Coverage of the Act  7.39
      • 2.  Applicability to Loans From Banks or Other Supervised Financial Organizations  7.40
      • 3.  Contract Requirements  7.41
      • 4.  Other Requirements or Limitations  7.42
      • 5.  Defaults and Remedies Under Rees-Levering Act
        • a.  Default  7.43
        • b.  Notice of Intent to Sell  7.44
        • c.  Reinstatement  7.45
        • d.  Redemption  7.46
        • e.  Penalties for Violations  7.47
        • f.  Calculation of Obligation Amount  7.48
        • g.  Accounting  7.49
        • h.  Deficiency Judgments  7.50
    • C.  Vehicle Leasing Act
      • 1.  Applicability  7.51
      • 2.  Contract Requirements  7.52
      • 3.  Other Requirements or Limitations  7.53
      • 4.  Termination or Expiration of Lease  7.54
    • D.  Manufactured Housing Act of 1980
      • 1.  General Provisions  7.55
      • 2.  Defaults and Remedies  7.56
        • a.  Notice of Default  7.57
        • b.  Notice of Belief of Abandonment  7.58
        • c.  Notice of Sale  7.59
        • d.  Sale Proceeds and Deficiency Judgment  7.60
    • E.  Notice to Cosigners
      • 1.  Notice Required; Other Considerations  7.61
      • 2.  Form: Notice to Cosigner (CC §1799.91(a))  7.61A
    • F.  Truth in Lending Act and Regulations  7.62
      • 1.  Lease Contracts  7.63
      • 2.  Disclosure Requirements  7.64
      • 3.  Liability for Violations  7.65
      • 4.  Assignee Liability  7.66
      • 5.  Correction of Errors  7.67
      • 6.  Bona Fide Error  7.68
    • G.  Consumer Leasing Act (Federal)  7.69
    • H.  Equal Credit Opportunity Act  7.70
    • I.  FTC “Holder” Rule  7.71
    • J.  Debt Collection Statutes  7.72

8

Agricultural Financing

Ellen A. Friedman

  • I.  INTRODUCTION  8.1
    • A.  Types of Loans  8.2
    • B.  Role of the Government  8.3
  • II.  AGRICULTURAL FINANCING UNDER DIVISION 9
    • A.  Scope of Division 9 and Important Definitions  8.4
      • 1.  Farm Products  8.5
      • 2.  Agricultural Lien  8.6
    • B.  Attachment and Perfection of Security Interests and Agricultural Liens  8.7
      • 1.  Attachment of Security Interest in Crops  8.8
      • 2.  Perfection of Security Interests and Agricultural Liens  8.9
    • C.  Priority of Security Interest in Farm Products  8.10
      • 1.  Mortgage on Real Property  8.11
      • 2.  Buyers of Farm Products  8.12
      • 3.  Purchase Money Security Interest in Livestock  8.13
      • 4.  Effect of Leasing Arrangement  8.14
        • a.  Use of Subordination Agreement  8.15
        • b.  Form: Subordination Agreement  8.16
    • D.  Interests in Cooperatives  8.17
    • E.  Assignment of Proceeds  8.18
      • 1.  Form: Assignment of Proceeds  8.19
      • 2.  Form: Acceptance of Assignment  8.20
    • F.  Special Considerations for Dairy Cattle  8.21
      • 1.  Dairy Cattle Supply Lien  8.22
      • 2.  Milk Pooling Plan Rights  8.23
      • 3.  Milk-Check Assignment  8.24
        • a.  Form: Milk-Check Assignment  8.25
        • b.  Form: Acceptance of Milk-Check Assignment  8.26
    • G.  Farm Equipment as Collateral  8.27
    • H.  Subsidies and Other Government Payments  8.28
  • III.  NON-CODE RESTRICTIONS AND LIENS
    • A.  Marketing Order Restrictions  8.29
    • B.  Statutory Liens
      • 1.  Producer’s Lien  8.30
        • a.  Poultry and Fish Supply Lien  8.31
        • b.  Agricultural Chemical and Seed Lien  8.32
      • 2.  Possessory Lien  8.33
      • 3.  Livestock Service Lien  8.34
      • 4.  Harvester’s Lien  8.35
      • 5.  Thresher Worker’s Lien  8.36
      • 6.  Breeder’s Lien
        • a.  Attachment and Perfection of Breeder’s Lien  8.37
        • b.  Form: Verified Claim for Propagating Service  8.38
    • C.  State Department of Agriculture Liens  8.39
    • D.  Liens After Farmer Sells or Delivers Livestock  8.40
    • E.  PACA Trust Fund Rights  8.41
      • 1.  Notice of Trust  8.42
      • 2.  Presumption of Trust  8.43
      • 3.  Disgorgement of Money Received Out of Trust  8.44
      • 4.  Personal Liability for Breach of Trust  8.45
      • 5.  Post-Default Agreements  8.45A
    • F.  Plant Variety Protection Act and Federal Seed Act  8.46
    • G.  Federal Farm Products Rule  8.47
      • 1.  Methods of Protecting Security Interest in Farm Products  8.48
        • a.  Direct Notification Method  8.49
        • b.  Central Filing System  8.50
      • 2.  California Practice  8.51
    • H.  Water Rights as Personal Property Collateral  8.52

9

Legal Opinions

Ellen A. Friedman

Hill (“Buzz”) Blackett III

  • I.  INTRODUCTION  9.1
  • II.  LEGAL OPINION RESOURCES  9.1A
  • III.  PRELIMINARY CONSIDERATIONS  9.2
    • A.  Golden Rule  9.3
    • B.  Cost  9.4
    • C.  Confidential Matters  9.5
    • D.  Timing  9.6
    • E.  Customary Practice  9.7
    • F.  Reliance  9.8
    • G.  Liability for Opinion  9.9
    • H.  Reasoned Opinions  9.10
    • I.  Factual Basis of Opinion  9.11
    • J.  Qualifications; Knowledge Limitations  9.12
    • K.  Law Covered  9.13
    • L.  Date of Opinion  9.14
  • IV.  DUE DILIGENCE  9.15
  • V.  SPECIFIC OPINIONS WITH RESPECT TO SECURED TRANSACTIONS  9.16
    • A.  Security Interest and Remedies Opinions  9.17
    • B.  Scope and Elements of Security Interest Opinion  9.18
    • C.  Attachment Portion of Security Interest Opinion  9.19
    • D.  Perfection Portion of Security Interest Opinion  9.20
    • E.  Perfection by Filing  9.21
    • F.  Perfection by Possession  9.22
    • G.  Perfection by Control  9.23
    • H.  Perfection by Notice  9.24
    • I.  Priority Opinions  9.25
    • J.  Remedies Opinions  9.26
  • VI.  MODEL OPINION LETTER FROM BORROWER’S COUNSEL FOR SECURED TRANSACTION
    • A.  Introduction  9.27
    • B.  Model Opinion Letter From Borrower’s Counsel for Secured Transaction
      • 1.  Form: Capacity of Borrower’s Counsel; Scope of Due Diligence  9.28
      • 2.  Form: Assumptions: Accuracy of Borrower’s Representations, Legal Capacity of Signers, Genuineness of Signatures, Authenticity of Documents  9.29
      • 3.  Form: Assumptions: Valid Existence, Good Standing, Qualification to Conduct Business, Authority, Due Execution  9.30
      • 4.  Form: Assumptions: Possession of Collateral  9.31
      • 5.  Form: Assumptions: Borrower’s Rights in Collateral  9.32
      • 6.  Form: Assumptions: Advance to Borrower Made  9.33
      • 7.  Form: Assumptions: Collateral Existence, Description  9.34
      • 8.  Form: Assumptions: Loan Documents Valid, Binding, Enforceable  9.35
      • 9.  Form: Scope of Counsel’s Knowledge  9.36
      • 10.  Form: If Borrower Organized Outside California  9.37
      • 11.  Form: Opinion: Borrower’s Valid Existence, Good Standing, Power, and Authority  9.38
      • 12.  Form: Opinion: Borrower’s Qualification as Foreign Entity  9.39
      • 13.  Form: Opinion: Execution, Delivery, Performance of Loan Documents; Enforceability of Loan Documents  9.40
      • 14.  Form: Opinion: No Violation, No Default, No Lien Created, No Governmental Consent or Approval Required  9.41
      • 15.  Form: Opinion: Security Interest Created, Collateral Description Sufficient, Security Interest Perfected  9.42
      • 16.  Form: Opinion: Perfection of Security Interest in Insurance Policy Rights  9.43
      • 17.  Form: Opinion: Perfection of Security Interest in Certificated Securities  9.44
      • 18.  Form: Opinion: Perfection of Security Interest in Uncertificated Securities  9.45
      • 19.  Form: Opinion: Perfection of Security Interest in Securities Held by Securities Intermediary  9.46
      • 20.  Form: Opinion: Perfection of Security Interest in Deposit Accounts  9.47
      • 21.  Form: Opinion: Perfection of Security Interest in Letter of Credit Rights  9.48
      • 22.  Form: Qualifications: Bankruptcy, Equitable Principles, Etc.  9.49
      • 23.  Form: Qualifications: Local Law, Antitrust, Securities, Tax, Etc.  9.50
      • 24.  Form: Qualifications: Fixtures  9.51
      • 25.  Form: Qualifications: Illegality, Copyrights, Negative Pledges, Governmental Obligations, Commercial Tort Claims  9.52
      • 26.  Form: Qualifications: Proceeds  9.53
      • 27.  Form: Qualifications: Title to or Location of Collateral  9.54
      • 28.  Form: Qualifications: Notice Periods, Notice Waivers  9.55
      • 29.  Form: Qualifications: Waivers, Releases, Disclaimers  9.56
      • 30.  Form: Qualifications: Accessions, Commingled Goods  9.57
      • 31.  Form: Qualifications: Choice of Forum, Arbitration, Jury Trial Waiver  9.58
      • 32.  Form: Qualifications: Limited to California and Federal Law  9.59
      • 33.  Form: Qualifications: No Obligation to Update  9.60
      • 34.  Form: Qualifications: No Reliance by Third Parties  9.61
      • 35.  Form: Signature  9.62

SECURED TRANSACTIONS IN CALIFORNIA COMMERCIAL LAW PRACTICE

(2d Edition)

January 2020

TABLE OF CONTENTS

 

File Name

Book Section

Title

CH01

Chapter 1

Statutes Governing Secured Transactions

01-029B

§1.29B

Collateral Description

01-029D

§1.29D

Notice to Secured Creditor

CH02

Chapter 2

The Security Agreement

02-020

§§2.20-2.41

Title and Preamble

 

§2.21

Common Definitions

 

§2.22

Definitions Related to Type of Collateral

 

§2.23

UCC Definitions Incorporated by Reference

 

§2.24

Grant of Security Interest

 

§2.25

Debtor’s Covenants

 

§2.26

Collection of Proceeds

 

§2.27

Secured Party’s Possession of Proceeds

 

§2.28

Power of Attorney

 

§2.29

Debtor’s Warranties and Representations

 

§2.30

Special Provision for Fixtures

 

§2.31

Termination of Agreement

 

§2.32

Default

 

§2.33

Remedies

 

§2.34

Attorney Fees and Costs

 

§2.35

Waiver by Secured Party

 

§2.36

Survival of Representations and Warranties

 

§2.37

Assignment

 

§2.38

Governing Law

 

§2.39

Entire Agreement

 

§2.40

Notices

 

§2.41

Signatures

02-042

§§2.42-2.61

Title and Preamble

 

§2.43

Definitions

 

§2.44

UCC Definitions Incorporated by Reference

 

§2.45

Grant of Security Interest

 

§2.46

Debtor’s Covenants

 

§2.47

Secured Party’s Possession of Proceeds

 

§2.48

Power of Attorney

 

§2.49

Debtor’s Warranties and Representations

 

§2.50

Secured Party’s Duties

 

§2.51

Termination

 

§2.52

Default

 

§2.53

Remedies

 

§2.54

Attorney Fees and Costs

 

§2.55

Waiver by Secured Party

 

§2.56

Survival of Representations and Warranties

 

§2.57

Assignment

 

§2.58

Governing Law

 

§2.59

Entire Agreement

 

§2.60

Notices

 

§2.61

Signatures

02-063

§§2.63-2.69

Title and Preamble

 

§2.64

Definitions

 

§2.65

Grant of Security Interest in Intellectual Property Collateral

 

§2.66

Incorporation of Loan Agreement Security Provision

 

§2.67

Signatures

 

§2.68

Schedule I to Patent, Trademark, and Copyright Security Agreement

 

§2.69

Schedule II to Patent, Trademark, and Copyright Security Agreement

CH03

Chapter 3

Perfection

03-045

§3.45

Control Agreement for Deposit Account

03-057

§3.57

Control Agreement for Investment Account

03-101

§3.101

Landlord’s or Mortgagee’s Waiver

CH04

Chapter 4

Priorities

04-076

§4.76

Introduction, Recitals, and Definitions

04-076A

§4.76A

Payments on Junior Creditor Indebtedness

04-076B

§4.76B

Priority of Liens

04-076C

§4.76C

Consent to Junior Liens

04-076D

§4.76D

Events of Default

04-076E

§4.76E

Restrictions on Enforcement

04-076F

§4.76F

Actions Affecting Agreements with Debtor and Waiver of Marshalling

04-076G

§4.76G

Claims in Bankruptcy

04-076H

§4.76H

Assurances, Agreement, Amendments, Notice, Severability, Successors, and Governing Law

04-076I

§4.76I

Signatures and Acknowledgment

04-077A

§4.77A

Sample Provision in Loan Agreement

CH05

Chapter 5

Remedies

05-033

§5.33

Form of Notice

05-038

§5.38

Third Party’s Request for Notice of Sale

05-056

§5.56

Junior Lienor’s Demand for Satisfaction

CH07

Chapter 7

Consumer Transactions

07-013

§7.13

Notice of Plan to Sell Property

07-061A

§7.61A

Notice to Cosigner (CC §1799.91(a))

07-071

§7.71

FTC “Holder” Rule

CH08

Chapter 8

Agricultural Financing

08-016

§8.16

Subordination Agreement

08-019

§8.19

Assignment of Proceeds

08-020

§8.20

Acceptance of Assignment

08-025

§8.25

Milk-Check Assignment

08-026

§8.26

Acceptance of Milk-Check Assignment

08-038

§8.38

Verified Claim for Propagating Service

CH09

Chapter 9

Legal Opinions

09-028

§§9.28-9.62

Capacity of Borrower’s Counsel; Scope of Due Diligence

 

§9.29

Assumptions: Accuracy of Borrower’s Representations, Legal Capacity of Signers, Genuineness of Signatures, Authenticity of Documents

 

§9.30

Assumptions: Valid Existence, Good Standing, Qualification to Conduct Business, Authority, Due Execution

 

§9.31

Assumptions: Possession of Collateral

 

§9.32

Assumptions: Borrower’s Rights in Collateral

 

§9.33

Assumptions: Advance to Borrower Made

 

§9.34

Assumptions: Collateral Existence, Description

 

§9.35

Assumptions: Loan Documents Valid, Binding, Enforceable

 

§9.36

Scope of Counsel’s Knowledge

 

§9.37

If Borrower Organized Outside California

 

§9.38

Opinion: Borrower’s Valid Existence, Good Standing, Power, and Authority

 

§9.39

Opinion: Borrower’s Qualification as Foreign Entity

 

§9.40

Opinion: Execution, Delivery, Performance of Loan Documents; Enforceability of Loan Documents

 

§9.41

Opinion: No Violation, No Default, No Lien Created, No Governmental Consent or Approval Required

 

§9.42

Opinion: Security Interest Created, Collateral Description Sufficient, Security Interest Perfected

 

§9.43

Opinion: Perfection of Security Interest in Insurance Policy Rights

 

§9.44

Opinion: Perfection of Security Interest in Certificated Securities

 

§9.45

Opinion: Perfection of Security Interest in Uncertificated Securities

 

§9.46

Opinion: Perfection of Security Interest in Securities Held by Securities Intermediary

 

§9.47

Opinion: Perfection of Security Interest in Deposit Accounts

 

§9.48

Opinion: Perfection of Security Interest in Letter of Credit Rights

 

§9.49

Qualifications: Bankruptcy, Equitable Principles, Etc.

 

§9.50

Qualifications: Local Law, Antitrust, Securities, Tax, Etc.

 

§9.51

Qualifications: Fixtures

 

§9.52

Qualifications: Illegality, Copyrights, Negative Pledges, Governmental Obligations, Commercial Tort Claims

 

§9.53

Qualifications: Proceeds

 

§9.54

Qualifications: Title to or Location of Collateral

 

§9.55

Qualifications: Notice Periods, Notice Waivers

 

§9.56

Qualifications: Waivers, Releases, Disclaimers

 

§9.57

Qualifications: Accessions, Commingled Goods

 

§9.58

Qualifications: Choice of Forum, Arbitration, Jury Trial Waiver

 

§9.59

Qualifications: Limited to California and Federal Law

 

§9.60

Qualifications: No Obligation to Update

 

§9.61

Qualifications: No Reliance by Third Parties

 

§9.62

Signature

 

Selected Developments

January 2020 Update

In the past year, Congress enacted the Small Business Reorganization Act of 2019 (Pub L 116-54, 133 Stat 1079), which is intended to streamline the chapter 11 bankruptcy process for small businesses, and also enacted the Family Farmer Relief Act of 2019 (Pub L 116-51, 133 Stat 1075), which will increase the income and debt requirements for chapter 12 bankruptcy to $10,000,000. See §6.1.

The Supreme Court held that the licensee of a trademark will be permitted to continue to use the trademark after the debtor has rejected the license, resolving the split between the First and Seventh Circuit courts on this issue. Mission Prod. Holdings, Inc. v Tempnology, LLC (2019) 587 U.S. ___, 139 S Ct 1652. See §6.50.

Effective February 19, 2020, a trustee’s case for undoing a preferential transfer of the debtor’s property must be “based on reasonable due diligence in the circumstances of the case and taking into account a party’s known or reasonably knowable defenses” under 11 USC §547(c). Pub L 116-54, 133 Stat 1079. See §6.78.

Effective January 1, 2020, the Rosenthal Fair Debt Collection Practices Act no longer defines “debt collector” to exclude an attorney or counselor at law. Stats 2019, ch 545. See §7.72.

About the Authors

ELLEN A. FRIEDMAN is a partner at Friedman & Springwater LLP in San Francisco. Ms. Friedman practices primarily commercial lending and general insolvency law. She graduated magna cum laude from Princeton University in 1982 and graduated from Vanderbilt University School of Law in 1985, where she was elected to the Order of the Coif. Ms. Friedman was a member of the UCC Committee of the Business Law Section of the State Bar of California between 1999 and 2001. She was Co-Chair of the Insolvency Law Committee for the 2008–2009 term and served as a Vice-Chair of the Executive Committee of the Business Law Section of the State Bar of California from 2010 to 2012. She has lectured or written for the American Bar Association, Executive Enterprises, the Practicing Law Institute, ALI/ABA Professional Education Systems, Inc., the Business Law Section of the California State Bar, and the Bar Association of San Francisco (Commercial Law and Bankruptcy Section). Ms. Friedman was the author of a previous version of Taking Security Interests in Personal Property (Cal CEB Action Guide Spring 2003), originally written by Randy Rogers. She is also the update author of “Security Interests in Trade Secrets,” Trade Secrets Practice in California, chap 9 (2d ed Cal CEB).

HILL (“BUZZ”) BLACKETT III received his B.A. in 1973 from Dartmouth College and his J.D. in 1977 from the University of California, Hastings College of the Law, San Francisco. He is of counsel at Friedman & Springwater LLP in San Francisco. His practice focuses on bankruptcy, workouts, reorganizations, and debtor-creditor relations. Mr. Blackett is a past co-chair of the UCC Committee of the Business Law Section of the State Bar of California (1997–1998) and has been a frequent author and speaker on commercial and bankruptcy law topics. He is the current President of the Board of Directors of GRID Alternatives, a California nonprofit that installs solar electrical systems in low-income housing, and a member of the Board of Directors of the Ann Martin Center, a California nonprofit that provides psychological and educational therapy and testing services. Mr. Blackett is coauthor of chapter 5 (Remedies) and chapter 9 (Legal Opinions).

About the 2020 Update Author

ELLEN A. FRIEDMAN is the 2020 update author of this title. See Ms. Friedman’s biography in the About the Authors section.

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