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I. Course Summary and Class Structure
This course will cover a complex area of the law that virtually every lawyer will encounter at some point in his or her career--and perhaps quite often. Knowledge of this law will empower you to control some difficult situations (and prove your above-average intelligence to your colleagues!). The course will introduce you to the law governing the rights of creditors to take “security interests” in the movable (personal) property of those who owe them money or other obligations (“obligors” or “debtors”). In the event of nonpayment of the obligation (“default”), such security interests generally allow the “secured” creditor to take the debtor’s property (“repossession”), dispose of it by sale or otherwise (“foreclosure”), and use the sale proceeds to cover the unpaid obligation. The rights of creditors to take and enforce security interests in personal property are governed by Article 9 of the Uniform Commercial Code, as enacted by Illinois and every other state. The focus of this course will be the provisions of Article 9 in its uniform version, from which Illinois has not diverged significantly.
In making our way through the coursebook, we will spend most of our time working through problems to see how these rules apply to realistic fact scenarios that you might encounter in practice or on the bar exam. The cases in the book are for illustration only--I will generally NOT discuss them or ask you to discuss them in class. The focus of this class and this subject matter is the collection of statutes in Article 9 of the UCC and their application to real-life problems. To maximize the potential for productive classroom discussion, I have tried to limit the length of assignments, and you should be thoroughly prepared to discuss the problems, although I will strive not make anyone uncomfortable when called on in class. I suggest that, the first time the coursebook calls for reference to a section of Article 9 or other law, you read the section carefully and consider how its subsections fit within the context of the section and the entirety of Article 9 and the UCC. If, for whatever reason, you feel as though you are not able to participate effectively in class discussion, please let me know (with a note or quick comment) before class. You may excuse yourself from class discussion as often as necessary, but keep in mind 1) I will focus on those who have opted out of the previous class discussion in the next class meeting, and 2) your grade for this class may be affected by your performance in class discussion (see below in “Evaluation”).
II. Course Goals
The primary goal of this course is to develop in each of you a facility to work with Article 9 of the UCC in analyzing and solving problems relating to consensual security interests in personal property--and toHAVE FUN doing it! By the end of this course, you should be able to do the following:
appreciate and explain to a lender-client the advantages of secured credit with respect both to the debtor and especially to other creditors, and how practically and legally one achieves such advantages;
classify the various types of movable property used as collateral governed by Article 9 of the UCC, as well as property types governed by other state and federal law (e.g., mortgage, intellectual property, etc.);
differentiate between and assess the existence of the processes of intentional and unintentional "attachment" and "perfection" of a security interest, as well as the various methods of achieving and losing perfection over time;
interpret any given provision of Article 9 of the UCC, both in isolation and in the broader context of Article 9 and the UCC as a whole;
and ultimately, synthesize the rules of Article 9 to analyze and evaluate fact hypotheticals to determine a secured creditor-client's legal position with respect to each item of collateral, the debtor, and all third parties with an interest in that collateral, especially in the context of the debtor's bankruptcy.
III. Required Materials
Harris & Mooney, Security Interests in Personal Property(Foundation Press, 6th ed. 2016), ISBN 978-1-62810-144-7.
A recent version of the official text of the Uniform Commercial Code. I recommend Comprehensive Commercial Law Statutory Supplement (Ronald J. Mann, Elizabeth Warren, Jay Lawrence Westbrook, eds., Aspen Law & Business), but any similar recent UCC supplement will do.
You will be evaluated primarily based on your performance on one final examination consisting of a series of essay (and perhaps short answer and multiple-choice) problems of the type we have worked in class. You may bring with you and refer to during the exam anything that is neither alive nor disturbing to other students. Class participation is especially important to me, however, so I reserve the right to adjust your final grade up or down by as much as a full letter grade, though most likely no more than a + or - based on the quality (not necessarily quantity) of your contribution. You do not necessarily have to announce the "correct answer" immediately to receive an upward adjustment--concerted and reasoned efforts to grasp the materials, and especially voluntary and well-reasoned responses to questions posed in class, may lead to an upward adjustment. Extreme absenteeism, frequent requests to be excused from class discussion, and failure to be prepared for the next class after being excused from class discussion, will provide the basis for a downward adjustment.
One assignment per class meeting, 13 assignments over 13 weeks:
1. Intro; Advantages of Secured Creditors Read pp. 10-13, 15-21, skim pp. 67-78, 84-93; work Unsecured Creditor Problem; read pp. 457-60 and work Problem 7.1.1.
2. Attachment: Security Agreement, Collateral Skim In re Sabol (pp. 139-45), read pp. 145-53; familiarize yourself generally with the Prototype transaction described on pp. 95-117, sufficiently to work Problems 3.2.1-3.2.7 on pp. 137-39, but skip 3.2.2(b) and 3.2.3.
3. Recharacterization as Attachment: Finance Leases and Consignments Read pp. 319-23, skim pp. 324-35, and work Problem 5.1.1. (p. 323); read pp. 346-50 and work Problem 5.1.5(a) (p. 336); work Lease Recharacterization Problem [prepare a structured essay answer to this question, as if you were writing an answer on the bar exam].
4. Perfection by Filing: UCC-1 Financing Statements and Debtors' Names Skim pp. 158-68, review UCC-1 Financing Statement, read pp. 169, 171-78, 180-87, 196-97; work Problems 3.3.2-3.3.4 (p. 156), 3.3.7-3.3.8(a) (p. 169), Individual Debtor Name Problem, 3.3.11, 3.3.13(a)-(b) (pp. 178-79) and 3.3.18 (p. 189); skim pp. 359-61.
5. Non-Filing Perfection Methods Read pp. 443, 445-51 and work Problems 6.4.1, 6.4.2(a), and 6.4.3 (pp. 443-44), skim pp. 434, 437-43; skim pp. 210-13 and work Problem 3.3.26 (p. 202); read pp. 126 (at "(F)"), 130-31, 198-202, and 161 (just the 3rd paragraph, beginning "UCC 9-317(e)" about "purchase-money security interest"); work Problem 3.3.25 (p. 197) and Non-Filing Perfection Problem [again,prepare a structured essay answer, as if you were writing an answer on the bar exam].
6. Automatic Attachment/Perfection in Proceeds of Collateral Read pp. 225-44; work Problems 3.5.2 (p. 226), 3.5.3-3.5.4 (p. 229), and 3.5.5 (p. 231).
7. Multistate Transactions and Choice of Law; UCC-1 Lapse and Continuation Read pp. 216-22 and work Problems 3.4.1(a), (b), (e), 3.4.3, and 3.4.4(a)-(b).
8. Secured Creditors in Bankruptcy Read pp. 460-69, 473-75, 489-91; work Problems 7.1.3-7.1.4 (p. 461), 7.2.1-7.2.2 (p. 465), 7.2.4-7.2.6 (pp. 469-70), 7.2.12 (p. 473) and 7.2.13-7.2.16 (p. 475-76).
9. Priority Among Secured Creditors; PMSIs, Proceeds Read pp. 247-51, 270-76 and work Problems 4.1.1-4.1.2(a)-(d) (p. 248), 4.1.6-4.1.11(a) (pp. 267-69) but skip 4.1.9 and 4.1.11(b); then work Problem 4.1.3 (p. 253) (NOTE ERRATUM: the $20,000 loan on July 1 was made by SP-2, not SP-1, and take special care with this one--analyze for each type of collateral (i) attachment, (ii) perfection, and (iii) priority).
10. Priority Against Buyers of the Collateral Read pp. 288-303 and work Problems 4.2.1(a), (b), and (e) (pp. 288-89), 4.2.3 (pp. 303-04), and 4.2.7(a) (p. 313) and BIOC Review Problem [again,prepare a structured essay answer, as if you were writing an answer on the bar exam].
11. Fixtures; Scope of Article 9 Read pp. 517-24 and work Problem 8.3.5 (p. 520) and Fixture Priority Problem [one last time,prepare a structured essay answer, as if you were writing an answer on the bar exam].
12. Enforcement of Security Interests: Default, Repossession, & Foreclosure Read pp. 577-84, 620, 638-52, 669-70, 674-75, 686, and 689-94; work Problems 9.2.1 (p. 581), 9.3.1(b) and 9.3.2 (p. 621-22), and Repossession & Foreclosure Problems.