Answer:
Refer to the case Magnavox Employees Credit Union v Benson
Case Issue
The facts to this case are:
• Bank financed debtor's purchase of the car.
• Bank has a security interest in the car.
• Debtor left her car to be repaired.
• Debtor failed to pay bank for car loan and failed to pay repairers for car repair.
The issue is who (bank or repairer) has priority over the claim on the car.
Relevant Terms, Laws, and Cases
Security agreement - is a contract that has a security interest, collateral. For example, a creditor may loan money to the debtor with a property that belongs to the debtor as collateral. The creditor may repossess the collateral if the debtor defaults.
UCC 9-203 - states how security interest is created.
1. A security agreement, e.g. a loan with collateral, is formed. There is sufficient description of the collateral.
2. Value is given
3. Debtor has rights in collateral
Purchase Money Security Interest (PMSI) - security interest based on conditional sale. If the sale was financed by a creditor (can be seller itself, or a third party such as bank), then the creditor would have the PMSI on the sold items as collateral. PMSI do not need to be filed to be perfected. (Note perfected secured creditors have higher priority over other creditors).
Opinion
Court held that the repairer has priority over the car.
The court argued that while the bank would have priority claim over the car. However, since the repairer done work on it during ordinary course of business, this gave the repairer a lien over the payments for his services. This lien takes priority even over perfected security interest. Hence, the repairer has priority claim on the vehicle.
Answer:
Under the Uniform Commercial code, a secured transaction is a loan transaction wherein the lender acquires a security interest in collateral owned by the borrower. The lender is entitled to foreclose or repossess the collateral in the event of the borrower's default.
Under the Secured Transaction Article of the UCC, a security agreement where the collateral is in the possession of the secured party does not need to be in writing to be enforceable.
When a security party takes possession of the collateral as part of the security agreement, the agreement is enforceable without writing.
However, a security agreement that collateral a debt under $500 and where the collateral is in the possession of the secured party or involves purchase money, security interest is in writing.
Hence, the correct response is c).
Answer:
Uniform Commercial Code or UCC's mission is to match the law of sales and other commercial transactions across the US.
Under the Secured transactions Article of the Uniform Commercial Code, the rules governing any transaction other than finance lease couples a debt with a creditor's interest in a debtor's personal property.
Article 9 under UCC applies to consensual and secured transaction in personality. Every consensual secured transaction has five components in it. These are discussed below:
• Debtor
• Secured creditor
• Collateral- It includes the personal property of a debtor that is subjected to a creditor's security interest
• Security agreement
• Security Interest: It basically refers to the creditor's right to a debtor's personal property
In addition, a valid financing statement consists of three elements. These are mentioned below:
• Name and address of the debtor and creditor
• The debtor's signature
• A general description of the collateral property
Hence, the amount of the obligation secured would be excluded from a filed original financing statement.
The correct response is (d).