Editor’s note: Section 4 of PL 14-34 enacted a new chapter 10 entitled The Secured Transactions Act. The word “The” has been removed as unnecessary and to comport with standard code formatting.
SUBCHAPTER V
Transition Provisions
SECTIONS
§ 1070. Effective date of this Act.
§ 1071. Transactions concluded prior to effective date of this Act.
Editor’s note: PL 14-34 § 78 created this subchapter as subchapter 5. This subchapter entitled Transition Provisions is redesignated as subchapter V for format consistency.
This Act shall come into effect upon the date certified by the Department to the President of the Federated States of Micronesia as the date on which the filing office is prepared to perform the duties required in subchapter III of this chapter.
Source: PL 14-34 § 79.
Cross-reference: The statutory provisions on the President and the Executive are found in title 2 of this code.
This section applies to transactions concluded prior to the effective date of this Act that would be subject to this Act if this Act had been in effect at the time the transactions were concluded. In this section, such a transaction is referred to as a “prior transaction.”
(1) The validity, effect and enforcement of a prior transaction shall be determined by reference to the law in effect when the agreement was concluded, except as provided otherwise in this section.
(2) The provisions of this chapter on filing, priority, and enforcement apply to a property interest created by a prior transaction to the extent the interest in the prior transaction conflicts with a security interest created under this chapter.
(3) A secured party under a prior transaction may file a notice of the property interest created by the prior transaction within 60 days of the effective date of this Act, in the same manner as provided for a notice of a security interest. The secured party shall deliver a copy of the notice to the debtor. If a notice establishes priority in a property right created in collateral under a prior transaction, the priority of the property right over a perfected security interest under this chapter shall be measured from the effective date of this Act.
Source: PL 14-34 § 80.
Case annotations: The common law of the United States today concerning secured transactions is the Uniform Commercial Code (UCC), a comprehensive statute covering commercial transactions. Absence in the FSM of any filing requirement to notify others of a security interest, and of a designated place for filing, which provisions are at the heart of the UCC statutory scheme, virtually precludes any judicial attempt to draw heavily on UCC principles in fashioning an approach to secured transactions. Bank of Guam v. Island Hardware, Inc., 2 FSM R. 281, 287 (Pon. 1986).
In considering the law concerning secured transactions, the FSM Supreme Court must look for guidance of the pre-UCC common law and may only declare the existence of such security interests as have been found by other courts to exist in the absence of statutes. Bank of Guam v. Island Hardware, Inc., 2 FSM R. 281, 288 (Pon. 1986).
When a party agrees to create a security interest to secure his debt but then refuses to do what is necessary to vest the other party with statutory or common law lien rights in the property, courts can find that the other party has an equitable lien in property even if statutory or common law lien requirements have not been made. Bank of Guam v. Island Hardware, Inc., 2 FSM R. 281, 290 (Pon. 1986).
Non-possessory equitable liens will not be found to exist against another who had neither actual notice nor reason to know of the existence of the security claim. Bank of Guam v. Island Hardware, Inc., 2 FSM R. 281, 290 (Pon. 1986).
A “general security agreement,” without more does not establish a lien under common law or pursuant to any statute in the Federated States of Micronesia. In re Island Hardware, 3 FSM R. 332, 342 (Pon. 1988).
Unless a statute or common law principle expressly says otherwise, disclosure is a prerequisite for making a lien effective against other creditors. In re Island Hardware, 3 FSM R. 332, 342 (Pon. 1988).
A promissory note and a security agreement are enforceable contractual agreements between the parties. Goyo Corp. v. Christian, 12 FSM R. 140, 146 (Pon. 2003).