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LAW 629 Study Guide - Fall 2019, Comprehensive Final Exam Notes - Lien, Security Interest, Mortgage Law


Department
Law
Course Code
LAW 629
Professor
Tabb
Study Guide
Final

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LAW 629

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Judicial collection
o Race of diligence: “First in time is first in right”
o Getting a lien
Creditor’s rights are fixed when gets a lien against property of the debtor
Either up front (e.g., Art. 9 security interest, mortgage)
Or in process of collecting (e.g., execution lien, judgment lien)
o Secured vs Unsecured
Secured creditors can collect just by foreclosing on the collateral (applying
the collateral to payment of debt)
Unsecured creditor by definition does not enjoy any collateral to secure its
debt
Cannot just seize debtor’s property to enforce debt- would be
conversion
Unsecured creditor has to get a judgment first, then they can try to
collect by enforcing the judgment with state assistance
o Execution
The process of enforcing a judgment with the aid of the state
Steps in execution
1) Final money judgment entered by the judge
2) Issuance of writ of execution by the clerk of the court
3) Delivery of writ of execution to sheriff
o Important in a minority of states, like Illinois, because this
is point in time at which execution lien arises (even though
still contingent or inchoate)
***4) Sheriff levies on debtor’s property, makes return
o Levy is the sheriff’s assertion of dominion and control over
the property
o Power to levy goes up in smoke once return date passes
o Consequences of late levy
1) Sheriff is liable to debtor in conversion
2) Creditor has nothing- the levy is ineffective, so
no execution lien or right to continue execution
As long as judgment is still active
Creditor has to get new execution lien and try again
o Majority rule: this is time that execution lien arises
o Minority states is when contingency is removed
5) Sale of assets levied on
6) Distribution of sale proceeds
Nulla bona return of writ
If sheriff returns writ nulla bona without levying, this kills off
sheriff’s power under that writ
Does not matter if return date has not passed- the writ is dead
Creditor simply gets a new writ issued
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Delivers to sheriff with specific instructions on what asset to levy
on
o How to decide priority battles
1) Property principle of “nemo dat” (can’t give what you don’t have)
When assessing rights of parties who have dealt with the debtor,
what rights did the debtor have in the property at the key moment
in time?
2) What date did each party’s rights versus debtor’s property first arise?
Look to whatever the operative law is (regarding sale of goods,
laws of execution, etc.)
3) Did that party ever lose their priority?
Did they do what they had to do (if anything) to keep their priority
alive?
4) Default rule in determining the winner
Race- first in time wins
Compare the operative dates for each party (from first 3 principles)
and party with earliest date wins
5) See if there is an exception to the default rule
For example:
o A “purchase money” lender may trump earlier parties
o Ditto (sometimes) a bona fide purchaser
o Article 9
Governs security interests in personal property
Creditor (secured party) has rights in specific collateral (debtor’s property)
to secure an obligation
SP gets rights against collateral upon attachment
Attachment means that the SP has a right as against the debtor with
regard to the covered collateral
Has nothing to say about SP’s rights versus third parties- except,
with no attachment, SP has nothing at all!
For attachment, need:
1) Agreement of debtor (usually in a signed security agreement)
2) Debtor has rights in collateral
3) SP gives value (usually a loan or extension of credit)
For rights against third parties, the article 9 concept of perfection comes
into play
In a priority fight versus a third party, an Article 9 secured party almost
always dates the time of its rights from the date of perfection- not
attachment
Date of perfection- usually when the secured party files a “financing
statement” (or a “UCC-I”)
UCC § 9-317(a)(2):
“A security interest . . . is subordinate to the rights of:
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