Today's lecture, I'm going to be talking about how to get your client paid. The successful plaintiff in the 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 order the defendant to pay a particular sum. Rather, a judgement declares that the plaintiff shall have recovery of the defendant, the stated sum, and have execution thereof. 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 judgement 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 defendant's assets by legally seizing the assets, by attachment, by levy, or by garnishment. And then to conduct a public sale of any non-monetary asset seized. The proceeds of which are used to satisfy the judgement. If the proceeds from the sale exceed the amount of the judgement, 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 shares. 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 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 but sometimes also to interest and 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 procedure, such as giving adequate public notice of the auction. If the auction produces a revenue of $4,000, the $1,000 and possibly some interest and auction cost would go to your client. And the remainder would go to the defendant. Alternatively, judgement holders may have the right to place a lien upon the defendant's non-exempt real property. Now lien which would be uncovered by perspective buyers and a title search would make it difficult for the defendant to sell the property until the lien have 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 liens with priority. The proceeds from the public sale may be insufficient. Or bankruptcy of the defendant may intervene to extinguish the judgment itself. Consumer protection concerns have produced further pressure the limit the traditional rights enjoyed by some creditors. Nevertheless, unless the claim reduced to judgment is discharged in bankruptcy. The plaintive normally has a 20-year renewable period to obtain satisfaction. One way for sellers to avoid the problem of having to collect on unpaid debt is to demand payment in advance. An alternative protection for sellers is to obtain a secured interest in payment. Under Article IX 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. So you perfect a security interest. A security interest is an interest in public property which secures payment or performance of an obligation. That's the quote from UCC 1-201b35. The 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 IX 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 or tort, 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 suing, 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 breach 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 lien 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 repossessing creditor. As with levying to satisfy a legal judgement, any surplus proceeds from the sale of the security or then paid to the debtor. If an inadequate sum is produced, the secured party is entitled to seek what's called the 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 a direct intervention by a court or sheriff, is regulated by Article IX of the Uniform Commercial Code. For example, any public or private sale must be accomplished in a commercially reasonable manner. Basic debt or rights can not be eroded by agreement with the creditor. And the debtor is giving extensive private remedies if the creditor fails to comply with Article IX. The take home lessons here are number one, that judgements 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 judgment 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 Brother's furniture, taking the security interests in many more household items than it needed to secure it's debt?
