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4.3 - Lecture
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Do curso por Yale University
A caixa de ferramentas do aluno de direito
523 classificações
Conheça os instrutores
Ian AyresWilliam K. Townsend Professor
Yale Law School
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So in today's lecture I'm going to be talking about how to get your client paid.
The successful plaintiff in a civil action will typically obtain
a money judgement against the defendant.
Many beginning law students are surprised to learn though, that a judgement
in most jurisdictions does not ordered the defendant to pay a particular sum.
Where other, a judgement declares that the plaintiff shall have recovery
of the defendant the stated sum and have execution there of.
If the defendant pays, the matter is settled.
If the defendant does not pay, the plaintiff must proceed by the process of
execution to obtain satisfaction from the defendant's real and personal property.
A judgment gives the successful plaintiff the right to levy
on any of the defendant's asset that the plaintiff can locate.
The judgement often doesn't require the defendant to even cooperate by disclosing
the existence and location of such assets.
Execution involves a number of steps and
procedures, the details of which vary from state to state.
The basic objectives are to allow the victorious plaintiff to first obtain
possession of defendants assets by legally seizing the assets by attachment,
by levy, or by garnishment.
And then to conduct a public sale of any nonmonetary assets seized.
The proceeds of which are used to satisfy the judgement.
If the proceeds from the sale exceed the amount of the judgment
any excess is paid back to the defendant.
Both the seizure and the sale are often undertaken or
supervised by representatives of the state.
For example, by off duty sheriffs.
In addition, by docketing of a judgement,
a lean can be placed upon the defendant's non-exempt real property.
And eventually, through the sheriff or other public official.
So imagine that at the end of the trial you succeeded in
securing a $1,000.00 breach of contract judgement on behalf of your client.
The judgement would give the plaintiff a legal right not only to the judgement
amount of $1,000.00 but sometimes also to interest in certain collection costs.
You might hire an off-duty sheriff to levy, or
literally seize, an automobile belonging to the defendant.
You would then auction the car, being careful to follow the state's mandated
auction procedures, such as giving adequate public notice of the auction.
If the auction produces a revenue of $4,000,
the thousand dollars and possibly some interests and auction costs would go
to your client and the remainder would go to the defendant.
Alternatively, judgement holders may have the right to place a lean upon
the defendants non-exempt real property.
The lien, which would be uncovered by perspective buyers in a title search,
would make it difficult for the defendant to sell the property
until the lien had been lifted, by paying off the judgment.
There can be many a slip between the docketing and satisfaction of a judgment.
The defendant may not have any property in the jurisdiction.
The sheriff may not be able to find it.
Other creditors may have leans with priority.
The proceeds from the public sale may be insufficient or
bankruptcy of the defendant may intervene to extinguish the judgement itself.
Consumer protection concerns have produced
further pressure to limit the traditional rights enjoyed by some creditors.
Nevertheless, unless the claim reduced to judgement is discharged in bankruptcy,
the plaintiff normally has a 20 year renewable period to obtain satisfaction.
One way for sellers to avoid the problem of having to collect
on unpaid debts is to demand payment in advance.
An alternative protection for sellers is to obtain a secured interest in payment.
Under article nine of the UCC, sellers of goods on credit or
other lenders can easily create, by agreement with a buyer or borrower,
a security interest in personal property of the borrower and
perfect it by filing a finance statement in the appropriate public office.
And by the way, when you say this perfect as a verb,
make sure you emphasize the second syllable.
You perfect a security interest.
A security interest is an interest in public property which secures payment or
performance of an obligation.
That's a quote from UCC 1-201B35.
The written agreement creating the security interest,
called the security agreement, is often accompanied by
a negotiable promissory note that evidences the debtor's obligation to pay.
A creditor takes a security interest in particular pieces of property,
not in the debtor's entire estate.
But article nine allows security interest in some replenishing financial assets,
such as a debtor's accounts receivable.
The main advantage of a security interest is speed.
Due process takes time.
A plaintiff with an unsecured civil claim, for example,
arising out of contract retort, needs to serve the defendant notice
of the suit and then wait for an answer and proceed through discovery and
wait for trial and after trial, then to obtain the judgement.
Only then, which often will be several months later,
can the plaintiff hire a sheriff off duty to levy on the defendant's property.
In contrast, a security interest holder can skip the filing and
privately levy on the property without a trial.
Upon default, by the debtor on the note or as defined in the security agreement
the secured party without sewing, without obtaining judgment or hiring a sheriff.
May privately take possession of the property subject to the security interest
so long as such repossession can be done without breaching of the peace.
That said, quote,
a repo man spends his life getting into tense situations, unquote.
That's a quotation from the movie Repo Man, a 1984 classic.
The ability to privately take possession without delay or
legal expense is the key benefit of a security interest.
Subject to a limited right of redemption by the borrower and
the possible claims of other lean or secured creditors.
The secured creditor will usually sell the repossessed property at a public or
private sale.
The proceeds of the sale will then be used to
reimburse the secured creditor for expenses incurred in doing
the repossession to satisfy the underlying obligation and
to satisfy the security interest in those subordinate to the reposessing creditor.
As with levying to satisfy a legal judgement any
surplus proceeds from the sale of the security are then paid to the debtor.
If an inadequate sum is produced, the secured party is entitled to
seek what's called a deficiency judgement for the balance due, and
in effect becomes an unsecured creditor with regard to that deficiency.
The entire process, which can occur without the need for
direct intervention by a court or
sheriff Is regulated by article nine of the uniform commercial code.
For example any public or
private sale must be accomplished in a commercially reasonable manner.
Basic debt or rights cannot be eroded by agreement with the creditor and
the creditor is given an extensive private remedies of the creditor
fails to comply with article nine.
The take home lessons here are number one, that judgments are not orders to pay,
and two, when you give a security interest in your property,
you're selling many of your due process rights.
And finally, number three, because surplus proceeds are returned
to the defendant a judgement or security interest holder cannot profit from seizing
more assets that are needed to satisfy the amount owed.
And now for discussion.
Given this last point, what was so wrong,
what was substantively unconscionable about Walker Brothers furniture,
taking the security interest in many more household
items than it needed to secure its debt?
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