Secured Transactions

Lien

For our purposes, a “lien” is an interest in property of whatever kind that secures payment or performance of an obligation.

Security Interest

Code Sections

1-201(b)(35); 9-109(a)(1). 

• (35)“Security interest” means an interest in personal property or fixtures which secures payment or performance of an obligation. “Security interest” includes any interest of a consignor and a buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction that is subject to Article 9. “Security interest” does not include the special property interest of a buyer of goods on identification of those goods to a contract for sale under Section 2–401, but a buyer may also acquire a “security interest” by complying with Article 9. Except as otherwise provided in Section 2–505, the right of a seller or lessor of goods under Article 2 or 2A to retain or acquire possession of the goods is not a “security interest”, but a seller or lessor may also acquire a “security interest” by complying with Article 9. The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under Section 2–401 is limited in effect to a reservation of a “security interest.” Whether a transaction in the form of a lease creates a “security interest” is determined pursuant to Section 1–203. 

9-109(a)(1)

• § 9–109. Scope.  

(a)[General scope of article.] Except as otherwise provided in subsections (c) and (d), this article applies to:  

(1) a transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract; 

Security Agreement

9-102(a)(74)

• § 9–102.Definitions and Index of Definitions. 

(a)[Article 9 definitions.] In this article: 

(74)“Security agreement” means an agreement that creates or provides for a security interest. 

Debtor

9-102(a)(28)

• § 9–102.Definitions and Index of Definitions. 

(a)[Article 9 definitions.] In this article: 

(28)“Debtor” means: 

(A)a person having an interest, other than a security interest or other lien, in the collateral, whether or not the person is an obligor; 

(B)a seller of accounts, chattel paper, payment intangibles, or promissory notes; or 

(C)a consignee. 

Obligor

9-102(a)(59)

• § 9–102.Definitions and Index of Definitions. 

(a)[Article 9 definitions.] In this article: 

(59)“Obligor” means a person that, with respect to an obligation secured by a security interest in or an agricultural lien on the collateral, (i) owes payment or other performance of the obligation, (ii) has provided property other than the collateral to secure payment or other performance of the obligation, or (iii) is otherwise accountable in whole or in part for payment or other performance of the obligation. The term does not include issuers or nominated persons under a letter of credit. 

Creditor

1-201(b)(13)

• § 1–201.General Definitions. 

b)Subject to definitions contained in other articles of [the Uniform Commercial Code] that apply to particular articles or parts thereof: 

(13)“Creditor” includes a general creditor, a secured creditor, a lien creditor, and any representative of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy, a receiver in equity, and an executor or administrator of an insolvent debtor’s or assignor’s estate. 

Secured Party

9-102(a)(73)

• § 9–102.Definitions and Index of Definitions. 

(a)[Article 9 definitions.] In this article: 

(73)“Secured party” means: 

(A)a person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding; 

(B)a person that holds an agricultural lien; 

(C)a consignor; 

(D)a person to which accounts, chattel paper, payment intangibles, or promissory notes have been sold; 

(E)a trustee, indenture trustee, agent, collateral agent, or other representative in whose favor a security interest or agricultural lien is created or provided for; or 

(F)a person that holds a security interest arising under Section 2–401, 2–505, 2–711(3), 2A–508(5), 4–210, or 5–118. 

Collateral

9-102(a)(12)      

• § 9–102.Definitions and Index of Definitions. 

(a)[Article 9 definitions.] In this article:  

(12)“Collateral” means the property subject to a security interest or agricultural lien. The term includes: 

(A)proceeds to which a security interest attaches; 

(B)accounts, chattel paper, payment intangibles, and promissory notes that have been sold; and 

(C)goods that are the subject of a consignment. 

Scope of Article 9

9-109(a)  

• § 9–109.Scope. 

  (a)[General scope of article.] Except as otherwise provided in subsections (c) and (d), this article applies to: 

(1)a transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract; 

(2)an agricultural lien;  

(3)a sale of accounts, chattel paper, payment intangibles, or promissory notes; 

(4)a consignment; 

(5)a security interest arising under Section 2–401, 2–505, 2–711(3), or 2A–508(5), as provided in Section 9–110; and  

(6)a security interest arising under Section 4–210 or 5–118. 

What is 9-109(a)(1) requirements as it relates to a “security interest”?

Must relate to “personal property or FIXTURES” and it must arise “by contract.”

With few exceptions, to what does Article 9 apply?

“With few exceptions” Article 9 “applies only to consensual [i.e, contractual] interests in personal property [or fixtures]”.

What does Article 9 NOT govern and with what is it generally not concerned?

Article 9 does NOT govern the creation of liens that arise by operation of non-contractual common-law principles or by statutes (such as “artisans or mechanics liens”),  In addition, Article 9 is generally not concerned with the creation of liens (contractual or otherwise) on Real Property. A prototypical example of a contractual lien on Real Property is a “mortgage.”  

Fixtures

9-102(a)(41)

• § 9–102.Definitions and Index of Definitions. 

(a)[Article 9 definitions.]

(41)“Fixtures” means goods that have become so related to particular real property that an interest in them arises under real property law.

To gain priority over a mortgage lien covering a Fixture a security-interest holder must be the first to file in the office in which local real-property records are kept (often the local county recorder of deeds office).  The secured party’s filing in relation to a Fixture is known as a “Fixture Filing.”

How does a security-interest holder gain priority over a mortgage lien covering a fixture?

A security-interest holder must be the first to file in the office in which local real-property records are kept (often the local county recorder of deeds office).  The secured party’s filing in relation to a Fixture is known as a “Fixture Filing.”

Fixture Filing

9-102(a)(40)

• § 9–102.Definitions and Index of Definitions. 

(a)[Article 9 definitions.]

(40)“Fixture filing” means the filing of a financing statement covering goods that are or are to become fixtures and satisfying Section 9–502(a) and (b). The term includes the filing of a financing statement covering goods of a transmitting utility which are or are to become fixtures.

To gain priority over a mortgage lien covering a Fixture a security-interest holder must be the first to file in the office in which local real-property records are kept (often the local county recorder of deeds office).  The secured party’s filing in relation to a Fixture is known as a “Fixture Filing.”