Ch 24 - law MC

2. Donna defaulted on her loan owed to Second State Savings and Loan. The loan was secured with Donna's car. Donna used the car for personal and family reasons. Which statement is correct? a. Second State may take Donna's car without a court order if this can be done without a breach of the peace. b. Second State may take Donna's car without a court order even if it means a breach of the peace. c. Second State may not take Donna's car because it is a consumer good. d. Second State may not take Donna's car because perfection was automatic.

a. Second State may take Donna's car without a court order if this can be done without a breach of the peace.

Wedney, Inc. sold a meat processing machine to Voro Chickens, taking a security interest in the machine. Yoro Chickens defaulted on the loan. Wedney repossessed the machine. Wedney would like to retain the machine to use as a model. Which of the following statements is correct? a. Wedney must notify the debtor that it intends to retain the machine and give Yoro 20 days to object. b. By taking possession, Wedney automatically foreclosed on the collateral. Wedney has valid title and need do nothing else. C. Since the machine is equipment, Wedney cannot retain the machine. Wedney must dispose of the collateral in a commercially reasonable manner. d. Wedney can retain the machine but must pay Yoro the surplus, the difference between the fair market value of the machine and the amount of the debt.

a. Wedney must notify the debtor that it intends to retain the machine and give Yoro 20 days to object.

When two creditors have a security interest in the same collateral, which party takes priority? a. The first unperfected party to attach b. A party with an unperfected interest c. A party with a perfected interest d. The first perfected party to sue

c. A party with a perfected interest

6. Which of the following parties can defeat a perfected security interest? a. A "buyer in ordinary course of business." b. A buyer of consumer goods if the buyer is not aware of the security interest, gives value for the goods, will continue to use the goods as consumer goods, and the secured party has not filed a financing statement. C. A buyer who purchases chattel paper or an instrument in the ordinary course of business, and then takes possession. d. All of the above are correct.

d. All of the above are correct.

In terms of collateral, which of the following would be categorized as "equipment? a. a mowing tractor used to mow personal property d. crops produced by a farming operation C. goods held by someone for sale or lease d. a computer system used in a retail store

d. a computer system used in a retail store

The series of steps a secured party must take to protect its rights in the collateral against people other than the debtor is called a. authentication. b. recording. c. obligating. d. perfection.

d. perfection.

4. Great State Bank loans money to Seth, securing the loan with property owned by Seth. Great State Bank is advised by its attorney to file a financing statement. Great State Bank doesn't understand why it should spend the extra money for this filing, since Seth has told them that he has no other creditors. Why should Great State Bank file a financing statement? a. There are criminal penalties for failing to file. b. The financing statement allows Great State Bank to repossess the collateral on default without a court order. C. The financing statement will protect Great State's priority rights with other creditors by giving notice to other creditors that it claims a security interest in the collateral. d. Filing the financing statement is necessary to complete the attachment requirement in order to create a security interest.

C. The financing statement will protect Great State's priority rights with other creditors by giving notice to other creditors that it claims a security interest in the collateral.

Wedney, Inc. has a purchase money security interest in one of Yoro Chicken's meat processing machines. Wedney filed a financing statement on the day the machine was delivered, perfecting its interest. Great State Bank already had a security interest in the machine. Which party has superior priority rights in the meat processing machine? a. Wedney. A PMSI in collateral other than inventory takes priority over a conflicting security interest if the PMSI is perfected at the time the debtor receives the collateral or within 20 days after he receives it. b. Great State Bank, since it had an earlier security interest. C. The party who is first to repossess the collateral has priority rights. d. The creditors have equal priority.

a. Wedney. A PMSI in collateral other than inventory takes priority over a conflicting security interest if the PMSI is perfected at the time the debtor receives the collateral or within 20 days after he receives it.

If repossessed collateral is sold or otherwise disposed of by the creditor, then the time, place, manner, and method of disposal must be a. commercially reasonable. b. scheduled with the debtor so that the debtor is able to attend. C. court ordered. d. perfected.

a. commercially reasonable.

5. First Bank loaned $400,000 to Thomas, taking a security interest in his yacht. Thomas defaulted on the loan and First Bank repossessed the boat. First Bank sold the yacht at a public sale. The sale yielded $50,000 more than the debt. First Bank a. must pay Thomas the $50,000. b. is entitled keep the $50,000. C. must share the $50,000 equally with Thomas. d. must pay the surplus to the Secretary of State.

a. must pay Thomas the $50,000.

Which of the following is an example of a purchase money security interest in consumer goods? a. A doctor purchasing a computer on credit to create a Webpage to make services and information available to her patients b. A doctor purchasing on credit a blood glucose monitor to check his own blood sugar levels c. A doctor purchasing a TV/VCR unit on credit to place in her office waiting room d. A doctor purchasing an exercise bike for his employees to use over the lunch hour

b. A doctor purchasing on credit a blood glucose monitor to check his own blood sugar levels

At her neighbor's garage sale, Constance buys a vanity dressing table from her neighbor, Carlos, for $160. Constance purchased the vanity table for her own personal use, without any knowledge that Carlos had signed a security agreement giving All Purpose Furniture, Inc. a security interest in the vanity table. All Purpose Furniture did not file a financing statement. Constance does not know that Carlos is still paying off the purchase money security interest and owes All Purpose Furniture, Inc. $400. Under these circumstances a. Constance takes the vanity table subject to All Purpose's security interest because All Purpose's security interest automatically perfected. A perfected security interest takes priority. b. Constance takes the vanity table free of All Purpose's security interest because she is a buyer of consumer goods. C. Constance takes the vanity table free of All Purpose's security interest because she is

b. Constance takes the vanity table free of All Purpose's security interest because she is a buyer of consumer goods.

Which of the following is correct concerning termination statements? a. A termination statement must be filed by a secured party when a debtor has defaulted on a loan. b. For consumer debt, the secured party must complete a termination statement in every place that it filed a financing statement. C. The secured party must file a termination statement within 30 days of a consumer debtor's demand, provided the debtor has paid the full debt. d. A termination statement indicates that a secured party is transferring its rights to collateral to another party.

b. For consumer debt, the secured party must complete a termination statement in every place that it filed a financing statement.

Florence borrows $1,500 from Fremont, leaving her gold necklace with Fremont as collateral. Two weeks earlier, Florence had borrowed $1,000 from Corner Bank. Florence signed a security agreement and a financing statement giving Corner Bank a security interest in the same gold necklace. The financing statement is filed in the appropriate location. If Florence defaults on both loans, which creditor has the superior rights to the necklace? a. Fremont, because his loan was the first to attach. b. Fremont, because possession takes priority over filing. c. Corner Bank, because Fremont did not perfect his interest. d. Corner Bank, because Fremont did not have a written security agreement.

b. Fremont, because possession takes priority over filing.

On April 10, Amy agreed to buy a riding lawn mower from Mowers Plus, signing a promissory note and security agreement giving Mowers Plus a security interest in the mower. On April 15, Amy took delivery of the mower. On May 1, Mowers Plus filed a financing statement. Which of the following is correct? a. Despite the agreement, Mowers Plus could not create a security interest in the mower since it is a consumer good. b. Mowers Plus has attachment of a security interest in Amy's mower. C. Mowers Plus completed the attachment of a security interest in the mower when it filed the financing statement on May 1. d. The security interest has not attached, but attachment is unimportant to the enforceability of a security interest.

b. Mowers Plus has attachment of a security interest in Amy's mower.

1. All but which of the following may be used as collateral in a secured transaction under UCC Article 9? a. Stocks and bonds b. Personal injury tort claims of individuals C. Intellectual property rights d. A computer program if, by purchasing a computer, the buyer of the computer acquires the right to use that embedded program

b. Personal injury tort claims of individuals

Morefield Custom Design sends 30 recliners by rail to Danville Furniture. To show where the goods will be shipped and who gets them when they arrive, Morefield will obtain ______, which can be used as collateral in a secured transaction. a. warehouse receipt b. a bill of lading C. chattel paper d. a deposit account

b. a bill of lading

Wanderlust gave a security interest in his Conestoga wagon to Iowa Bank who perfected its security interest by filing a financing statement with the appropriate officials in Iowa. Five months later, Wanderlust hit the trail again, moving to Montana. If Iowa Bank wants to continue its perfected interest in the Conestoga wagon, it should a. file a continuation statement for another five years in Iowa before Wanderlust moves on. b. re-perfect by filing a financing statement in the appropriate place in Montana, according to Montana law, within four months of Wanderlust's entering Montana. C. repossess the Conestoga wagon. d. file a continuation statement for another four months in Iowa before Wanderlust moves on.

b. re-perfect by filing a financing statement in the appropriate place in Montana, according to Montana law, within four months of Wanderlust's entering Montana.

Byron bought a 50' yacht from Myrtle's Marina by entering into a note and security agreement promising the yacht as collateral for the purchase money security interest. When Byron faced some tough financial times, he failed to make three monthly payments. Myrtle's Marina repossessed the yacht by removing the yacht engine and advertised a public auction of the yacht. Byron appealed to his good friend Charles and managed to pay off the debt balance and the Marina's expenses of repossessing and advertising the sale. Byron's actions represent a. strict foreclosure. b. redemption. c. silent bidding at the auction. d. an artisan's lien.

b. redemption.

3. To perfect a security interest in a negotiable document, Second State Savings and Loan should a. file a financing amendment. b. take possession of the instrument. c. do nothing. Perfection is automatic. d. secure a court order.

b. take possession of the instrument.

Landscaper Lottie used her machinery, employee labor, and her expertise to landscape Opal's new guest home. Opal fails to pay for the landscaping because she has run out of money. Lottie files a lien against the real property. This lien is called a. an artisan's lien; her landscape design is a work of art. b. a landlord's lien; Opal is planning to rent the guest house to a tenant c. a mechanic's lien; it was created by improving real property. d. a purchase money security interest.

c. a mechanic's lien; it was created by improving real property.