Secured Transactions

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Architect contracts with Designer to draft the plans for Designer's new office. The terms of the contract require Designer to pay $3,000 on the first of each month for four months, beginning June 1. On May 25, Designer sells some office furniture on credit to Architect. The standard form agreement, which both parties sign, calls for payment of the $5,000 purchase price in 30 days and provides that "buyer agrees not to assert any claim or defense against any assignee." Shortly thereafter, Designer assigns all her receivables to Security Bank. It is now July 15 and neither Architect nor Designer has paid anything to the other. Assuming Security Bank's agreement with Designer gives it the right to collect from Architect, how much is Security Bank entitled to collect from Architect? A. The answer depends on whether the receivable from Architect constitutes an account or chattel paper. B. The answer depends on whether the assignment to Security Bank was an outright sale of receivables or a borrowing with the receivables as collateral. C. $5,000 D. $2,000

$5,000

Article 9 applies to the use of which of the following as collateral for a debt? (X) An annuity that Disabled acquired in settlement of a claim against Tortfeasor and which provides for a payment of $3,000/month to Disabled for the remainder of Disabled's life. (Y) A corporation's right to a refund of the premium paid for a liability insurance policy in the event that it cancels the policy. A. Neither X nor Y. B. X only C. Y only D. X and Y

A. Neither X nor Y.

Dynamo is a manufacturer of generators used by electric utilities. On June 1, First Bank files with appropriate authorization and in the appropriate office, a financing statement against Dynamo that describes the collateral as "equipment." On June 12, Second Bank loans money to Dynamo and gets a security interest in all of Dynamo's equipment. On the same day, Second Bank filed in the appropriate office a proper financing statement against Dynamo describing the collateral as "equipment." On June 23, Lien Creditor gets the sheriff to levy on some of Dynamo's equipment pursuant to a writ of execution. Under applicable state law, Lien Creditor obtained a lien by virtue of that levy. Which one of the following additional facts would be the most likely to result in an irresolvable circularity of priority (,i.e.,, a situation in which Creditor A beats Creditor B, Creditor B beats Creditor C, and Creditor C beats Creditor A)? A. First Bank made a loan to Dynamo on June 1 but did not get an authenticated security agreement from Dynamo until June 30. B. First Bank got an authenticated security agreement from Dynamo on June 1 but did not make a loan until June 30. C. First Bank made a loan to Dynamo on June 1 but never got an authenticated security agreement from Dynamo. D. First Bank got an authenticated security agreement from Dynamo on June 1 but never made a loan to Dynamo. E. none of the above

A. A. First Bank made a loan to Dynamo on June 1 but did not get an authenticated security agreement from Dynamo until June 30.

Archimedes borrowed $400,000 from Bank to purchase a charming three-story Victorian home in an older section of town. In return, Archimedes executed and delivered to Bank a $400,000 promissory note and a mortgage on the home. Bank properly recorded the mortgage. A few months later, Bank transferred the promissory note to City Finance Company. Which one of the following statements is true with respect to the first transaction (between Archimedes and Bank)? A. Article 9 does not apply because the collateral is real estate. B. Article 9 applies because the transaction is a sale of a promissory note. C. Article 9 applies because the transaction creates a security interest in a promissory note. D. Article 9 applies because the transaction involves chattel paper.

A. Article 9 does not apply because the collateral is real estate.

DeForrest purchases the right to harvest timber from Blackacre, which is owned by Landowner. Which one of the following statements is true? A. Article 9 will govern a security interest in DeForrest's timber both before it is cut and after it is cut. B. Article 9 will govern a security interest in DeForrest's timber before it is cut but will not govern a security interest in the timber after it is cut. C. Article 9 will not govern a security interest in DeForrest's timber before it is cut but will govern a security interest in the timber after it is cut. D. Article 9 will not govern a security interest in DeForrest's timber either before it is cut or after it is cut.

A. Article 9 will govern a security interest in DeForrest's timber both before it is cut and after it is cut.

On February 1, Bank lends $15,000 to DuckTails, Inc., a manufacturer of bird calls, decoys, and other hunting accessories. On that date, Bank acquired a security interest in the forklift the debtor owns and uses in its shipping department. That same day it also filed an otherwise proper financing statement in the appropriate office describing the collateral as "a forklift." On July 1, DuckTails, Inc. traded the forklift to FishFun Corp., a maker of fishing accessories, for three personal computers FishFun Corp. had been using in its purchasing department. On December 1, FishFun Corp. changed its name to Fishing Fanatics, Inc. It is now May of the following year.Which one of the following statements is most probably correct? A. Bank has a perfected security interest in the three computers. B. Bank has an unperfected security interest in the three computers. C. Bank has no security interest in the three computers.

A. Bank has a perfected security interest in the three computers.

When Alpha Corp. ("Alpha") borrowed $2 million from Bank, Alpha authenticated a security agreement granting Bank a security interest in all of Alpha's existing and after-acquired equipment. The following year, Alpha sold all its assets to Beta Corp. ("Beta"). Which one of the following statements is most likely to be true? A. Bank's security interest encumbers neither equipment owned by Beta before Beta purchased the assets of Alpha nor equipment acquired by Beta after Beta purchased the assets of Alpha. B. Bank's security interest encumbers equipment owned by Beta before Beta purchased the assets of Alpha but not equipment acquired by Beta after Beta purchased the assets of Alpha. C. Bank's security interest encumbers equipment acquired by Beta after Beta purchased the assets of Alpha but not equipment owned Beta before Beta purchased the assets of Alpha D. Bank's security interest encumbers both equipment owned by Beta before Beta purchased the assets of Alpha and equipment acquired by Beta after Beta purchased the assets of Alpha.

A. Bank's security interest encumbers neither equipment owned by Beta before Beta purchased the assets of Alpha nor equipment acquired by Beta after Beta purchased the assets of Alpha.

Two years ago, Daffodil purchased the local franchise ,Flowers For You, from the franchisor, Flowers, Inc. Under the terms of the franchise agreement, Daffodil has the exclusive right to use the ,Flowers For You, name in the franchise territory and is required to buy the flowers and related merchandise Daffodil needs for the business directly from Flowers, Inc. In return, Flowers, Inc. is obligated to sell such goods to Daffodil at its regular prices. Flowers, Inc. also has the contractual right to ensure that Daffodil conducts business according to numerous specified terms (to ensure that Daffodil does not damage the ,Flowers for You, trademark). Applicable state law prohibits any franchisee, such as Daffodil, from transferring, either outright or for security, the franchisee's rights in the franchise agreement.Last year, Daffodil entered into a contract with Megacorp to provide it with a fresh floral arrangement for each of its eleven conference rooms every week. Under the terms of the agreement, Megacorp is to pay at the end of each calendar month and Daffodil is prohibited from assigning - either outright or for security - Daffodil's right to payment from Megacorp.Last month, Daffodil borrowed $40,000 from Bank and in return authenticated a written agreement purporting to grant Bank a security interest in Daffodil's existing and after-acquired accounts, inventory, and general intangibles.Which one of the following statements is true? A. Bank's security interest has attached to Daffodil's right to payment from Megacorp and the grant of that security interest does not constitute a breach by Daffodil of Daffodil's agreement with Megacorp. B. Bank's security interest has attached to Daffodil's right to payment from Megacorp but the grant of that security interest constitutes a breach by Daffodil of Daffodil's agreement with Megacorp. C. Bank's security interest has not attached to Daffodil's right to payment from Megacorp.

A. Bank's security interest has attached to Daffodil's right to payment from Megacorp and the grant of that security interest does not constitute a breach by Daffodil of Daffodil's agreement with Megacorp.

Two years ago, Daffodil purchased the local franchise ,Flowers For You, from the franchisor, Flowers, Inc. Under the terms of the franchise agreement, Daffodil has the exclusive right to use the ,Flowers For You, name in the franchise territory and is required to buy the flowers and related merchandise Daffodil needs for the business directly from Flowers, Inc. In return, Flowers, Inc. is obligated to sell such goods to Daffodil at its regular prices. Flowers, Inc. also has the contractual right to ensure that Daffodil conducts business according to numerous specified terms (to ensure that Daffodil does not damage the ,Flowers for You, trademark). Applicable state law prohibits any franchisee, such as Daffodil, from transferring, either outright or for security, the franchisee's rights in the franchise agreement.Last year, Daffodil entered into a contract with Megacorp to provide it with a fresh floral arrangement for each of its eleven conference rooms every week. Under the terms of the agreement, Megacorp is to pay at the end of each calendar month and Daffodil is prohibited from assigning - either outright or for security - Daffodil's right to payment from Megacorp.Last month, Daffodil borrowed $40,000 from Bank and in return authenticated a written agreement purporting to grant Bank a security interest in Daffodil's existing and after-acquired accounts, inventory, and general intangibles.Which one of the following statements is true? A. Bank's security interest has attached to Daffodil's rights in the franchise agreement and the grant of that security interest does not constitute a breach by Daffodil of the franchise agreement. B. Bank's security interest has attached to Daffodil's rights in the franchise agreement but the grant of that security interest constitutes a breach by Daffodil of the franchise agreement. C. Bank's security interest has not attached to Daffodil's rights in the franchise agreement.

A. Bank's security interest has attached to Daffodil's rights in the franchise agreement and the grant of that security interest does not constitute a breach by Daffodil of the franchise agreement.

PriceCo is a discount retailer of food, appliances, and other consumer goods. Its customers pay an annual membership fee for the privilege of purchasing goods from PriceCo. PriceCo does not accept payment from its customers by major credit card. Instead, it accepts payment only in cash, by check, or by charge to the customer's account with PriceCo.For the last several years, Bank has had a perfected security interest in all of PriceCo's existing and after-acquired personal property. Recently, Berry Computer Company sold several thousand electronic music players to PriceCo on credit. The sales agreement provided that Berry Computer retained a security interest in the goods sold, and their proceeds, to secure payment of the purchase price. Before the goods were delivered, Berry Computer perfected its security interest by filing a proper financing statement and Bank received a written communication from Berry Computer advising Bank of all the details of the pending transaction between Berry Computer and PriceCo.In which of the following property is Berry Computer most likely to have a security interest with priority over any competing security interest of Bank? A. Cash and checks that PriceCo received (and still has) from its customers in exchange for electronic music devices that PriceCo purchased from Berry Computer. B. PriceCo's right to receive payment from its customers who charged their purchase of electronic music devices that PriceCo purchased from Berry Computer. C. Cash and checks that PriceCo received (and still has) from its customers in payment of their earlier purchase, on credit, of electronic music devices that PriceCo purchased from Berry Computer. D. none of the above

A. Cash and checks that PriceCo received (and still has) from its customers in exchange for electronic music devices that PriceCo purchased from Berry Computer.

Diligent was recently graduated from law school and admitted to the practice of law. In order to finance the establishment of a solo law office and pay expenses until funds start coming in, Diligent approached both Classmate and Relative for a loan. On May 1, before making any commitment to lend and with Diligent's authenticated authorization, Classmate filed in the appropriate office a financing statement against Diligent. That financing statement described the collateral as "accounts and furniture." On May 5, Relative loaned Diligent $40,000. In return, Diligent authenticated a security agreement granting Relative a security interest in existing and after-acquired accounts and furniture. On the same day, Relative filed in the appropriate office a financing statement against Diligent that described the collateral in the same manner as the security agreement. On May 10, Classmate loaned Diligent $10,000 and in return Diligent authenticated a security agreement granting Classmate a security interest in existing and after-acquired accounts and furniture.Several years ago, Diligent acquired an antique desk used by one of Diligent's grandparents, who is also a lawyer. What are the relative priorities of the security interests of Classmate and Relative in that desk? A. Classmate's security interest has priority. B. Relative's security interest has priority. C. The security interests have equal priority. D. Neither creditor has a security interest in the desk.

A. Classmate's security interest has priority.

After working for six years as a certified public accountant for the major firm of Ernst & Anderson ("E&A"), David was summarily fired. Which of the following causes of action arising from that event would most likely constitute a commercial tort claim? A. David's defamation claim against E&A for statements that E&A made, after the incident, to other accounting firms to which David had applied for employment. B. David's claim against E&A for breach of their employment agreement. C. David's malpractice claim against his former attorney for letting the statute of limitations run on his claims against E&A.

A. David's defamation claim against E&A for statements that E&A made, after the incident, to other accounting firms to which David had applied for employment.

Diversified Enterprises, Inc. ("Diversified") is a corporation organized under the laws of the State of California. Last year, Diversified granted Bank a security interest in a large machine that Diversified uses in one of its manufacturing endeavors. Bank promptly filed in the appropriate California office a properly executed financing statement describing the collateral as "equipment." If Bank does nothing, in which one of the following independent scenarios will Bank lose perfection in the machine most quickly? A. For tax reasons, Diversified reincorporates under the laws of the State of Washington. B. Diversified transfers the machine to Creditor, a resident of California, in payment of an overdue debt. C. Diversified changes its name to Consolidated Enterprises, Inc. D. Diversified leases the machine to User for two years.

A. For tax reasons, Diversified reincorporates under the laws of the State of Washington.

On August 1, 2011, National Bank acquired a security interest in the existing and after-acquired inventory and accounts of Furniture Store. National Bank perfected its security interest that same day by filing in the appropriate office a financing statement describing all the relevant collateral.If National Bank filed no continuation statement but filed a new financing statement on June 15, 2016, and it is now 2017, which one of the following statements with respect to National Bank's security interest is most likely to be correct? A. It has remained continuously perfected in all the collateral. B. As to all the collateral, it was perfected, became unperfected, and then later became perfected again. C. It was perfected as to all the collateral, became unperfected as to some collateral, and has become perfected again as to all collateral. D. It was perfected as to all collateral and has become unperfected as to some collateral. E. It has become unperfected as to all collateral.

A. It has remained continuously perfected in all the collateral.

Craft Store sells goods produced by local artisans. Craft Store never buys the goods from the artisan or other owner. Instead, Craft Store enters into a written agreement with the artisan or owner pursuant to which the parties identify the price at which the goods will be sold and agree on how the sale proceeds will be divided (usually 60% to Craft Store, 40% to the artisan or owner). Each party has the right to terminate the agreement at any time before sale. Which of the following transactions conducted pursuant to these practices, if any, is governed by Article 9? (X) Aunt Bee, who supplements her retirement income by making quilts for sale, brings a newly made quilt to Craft Store for sale for $1,500. (Y) Newlywed brings a glass sculpture received as a wedding present to Craft Store for sale for $1,500. A. Neither X nor Y. B. X only C. Y only D. X and Y

A. Neither X nor Y.

Motorist requires medical services from Hospital after getting into a one-car accident. Before agreeing to treat Motorist, Hospital requires Motorist to sign a form by which Motorist does the following: (1) transfers to Hospital Motorist's claim under Motorist's health insurance policy (to the extent arising out of Hospital's fee for treating Motorist); (2) transfers to Hospital Motorist's claim under Motorist's automobile insurance policy (to the extent arising out of Hospital's fee for treating Motorist); and (3) agrees to pay Hospital for any portion of its fee not covered by insurance. Which of Hospital's rights to payment is a health-care-insurance receivable? A. only Hospital's right to payment from Motorist's health care insurer. B. Only Hospital's right to payment from Motorist's automobile insurer. C. only Hospital's right to payment from Motorist. D. Hospital's rights to payment both from Motorist's health care insurer and Motorist's automobile insurer. E. Hospital's rights to payment both from Motorist's health care insurer and from Motorist. F. Hospital's right to payment both from Motorist's automobile insurer and from Motorist.

A. Only Hospital's right to payment from Motorist's health care insurer.

Two years ago, Bank One acquired a security interest in all the equipment of Distressed. That security interest was perfected by a financing statement filed two years ago. Six months ago, without authorization from Bank One, Distressed sold a machine that it used as equipment to Salvage. Salvage paid for the machine with a loan from Bank Two and treated the machine as inventory. Three years ago, Bank Two acquired a security interest in all of the existing and after-acquired inventory of Salvage. At that time, Bank perfected its security interest by filing a financing statement against Salvage's inventory.Two weeks ago, Salvage sold the machine for cash to Buyer. Salvage put the money from the sale in a new deposit account maintained at Bank Two. Last week, Salvage withdrew the money and used it to buy a new photocopier from Seller. Salvage uses the photocopier as equipment. Which of the following statements is true? A. Seller took the cash free of both banks' security interests. B. Bank One's security interest in the photocopier has priority over Bank Two's security interest in the photocopier because Bank One's security interest in the deposit account had priority. C. Bank Two's security interest in the photocopier has priority over Bank One's security interest in the photocopier because Bank Two's security interest in the deposit account had priority. D. none of the above.

A. Seller took the cash free of both banks' security interests.

To perfect a security interest, Bank filed in the appropriate office a financing statement that properly identified the debtor's first personal name and surname but used the first initial for the debtor's middle name. Which one of the following statements would be most correct? A. The financing statement would be effective to perfect if the filing office follows the Model U.C.C. Administrative Rules of the International Association of Commercial Administrators (IACA). B. The financing statement would not be effective to perfect if not disclosed in a response to a search under the debtor's correct name using the filing office's standard search logic. C. The financing statement would be effective to perfect if disclosed in a response to a search under the debtor's legal name using the filing office's standard search logic. D. The financing statement would be effective to perfect if disclosed in response to an on-line search of filing office's records using the debtor's correct name.

A. The financing statement would be effective to perfect if the filing office follows the Model U.C.C. Administrative Rules of the International Association of Commercial Administrators (IACA).

Diphthong, Inc. is a Delaware corporation with its chief executive office and principal place of business in Newark, New Jersey. Bank is a financial institution operating primarily in the State of New York. Bank loaned Diphthong $2 million to purchase manufacturing equipment. The loan is secured by a security interest in the equipment, which was shipped from the seller in Trenton, New Jersey to Diphthong's manufacturing facility in Newark. The parties negotiated the loan and executed all of the loan documents in the State of New York. The funds were disbursed at the loan closing in New York. The security agreement expressly provides: "This agreement and the rights of the parties thereunder is governed by the law of the State of New York." Assuming that perfection by possession is impracticable, which one of the following statements is correct? A. To perfect its security interest, Bank must file an appropriate and authorized financing statement in Delaware, because that is where Diphthong is located. B. To perfect its security interest, Bank must file an appropriate and authorized financing statement in New Jersey, because that is where Diphthong is located. C. To perfect its security interest, Bank must file an appropriate and authorized financing statement in New Jersey, because that is where the equipment is located. D. To perfect its security interest, Bank must file an appropriate and authorized financing statement in New York, because that is the situs of the secured transaction. E. To perfect its security interest, Bank must file an appropriate and authorized financing statement in New York, because that is governing law selected in the security agreement. F. Bank's security interest is an automatically perfected purchase-money security interest.

A. To perfect its security interest, Bank must file an appropriate and authorized financing statement in Delaware, because that is where Diphthong is located.

In which one of the following transactions is the security interest least likely to have attached to the collateral identified? A. Trucker authenticated an agreement purporting to give Bank a security interest in Trucker's driver's license to secure a loan for personal purposes. B. Manufacturer authenticated an agreement purporting to give Bank a security interest in Manufacturer's nonexclusive license to use a patent of Inventor's to secure a loan made three years earlier. C. In return for a working capital loan, Retailer authenticated an agreement purporting to give Bank a security interest in Retailer's right to receive payment from Customer, to whom Retailer had previously sold defective goods. D. Baseball Fan, who has season tickets to all the home games of the local major league baseball team, authenticated an agreement purporting to grant Bank a security interest in Baseball Fan's contractual right to buy season tickets for the same seat to next season's games in return for a loan.

A. Trucker authenticated an agreement purporting to give Bank a security interest in Trucker's driver's license to secure a loan for personal purposes.

Which one of the following situations is the strongest basis for using judicial process? A. When unsure how to dispose of the collateral in a commercially reasonable manner. B. When the security interest is unperfected. C. When the collateral is located in several US states.

A. When unsure how to dispose of the collateral in a commercially reasonable manner.

Diaz owns 10,000 shares of stock in Microsoft, Inc. Microsoft has issued a certificate for the shares which lists Diaz as the owner. To facilitate later sale, Diaz has indorsed the back of the certificate in blank and delivered the certificate to Shearson Lynch, a major brokerage. Shearson Lynch retains the certificate in its vault at a branch near Diaz's home. Which one of the following best describes Diaz's property? A. a certificated security B. an uncertificated security C. a security entitlement D. a securities account E. investment property F. a general intangible

A. a certificated security

Which one of the following transactions is most likely to create chattel paper? A. a written, two-year lease of a mainframe computer. B. a loan secured by an interest in all of the borrower's existing and after-acquired inventory. C. a loan secured by an interest in all of the borrower's existing and after-acquired equipment. D. a loan secured by an interest in one of the borrower's patents.

A. a written, two-year lease of a mainframe computer

A security interest in which one of the following may not be perfected by possession? A Accounts. B. instruments C. chattel papeer D. documents

A. accounts

Diligent was recently graduated from law school and admitted to the practice of law. In order to finance the establishment of a solo law office and pay expenses until funds start coming in, Diligent approached both Classmate and Relative for a loan. On May 1, before making any commitment to lend and with Diligent's authenticated authorization, Classmate filed in the appropriate office a financing statement against Diligent. That financing statement described the collateral as "accounts and furniture." On May 5, Relative loaned Diligent $40,000. In return, Diligent authenticated a security agreement granting Relative a security interest in existing and after-acquired accounts and furniture. On the same day, Relative filed in the appropriate office a financing statement against Diligent that described the collateral in the same manner as the security agreement. On May 10, Classmate loaned Diligent $10,000 and in return Diligent authenticated a security agreement granting Classmate a security interest in existing and after-acquired accounts and furniture.In June, Diligent does work for Client, who promises to pay $5,000. What are the relative priorities of the security interests of Classmate and Relative in Diligent's right to payment from Client? A. Classmate's security interest has priority. B. Relative's security interest has priority. C. The security interests have equal priority. D. Neither creditor has a security interest in the right to payment.

A. classmate's security interest has priority.

On March 1, First Bank extends a loan to Pedro Dinkelstein and receives in return a security interest in all of Dinkelstein's existing and after-acquired equipment. On the same day, First Bank filed in the appropriate office a financing statement that properly identified both Dinkelstein and the collateral, but which listed Dinkelstein's address as "1057 State Street, Springfield," instead of "495 Beacon Place, Shelbyville."On March 2, Second Bank loaned money to Dinkelstein, taking in return a security interest in all of Dinkelstein's existing and after-acquired equipment to secure the loan and any future advances. Second Bank perfected its security interest that same day. Second Bank had searched for filed financing statements against Dinkelstein before making the loan, but First Bank's financing statement was not yet indexed and therefore not disclosed in response to the search request.On April 1, Third Bank made a loan to Dinkelstein, secured by all of Dinkelstein's existing and after-acquired equipment. Before making the loan, Third Bank filed a proper financing statement and conducted a search. The search disclosed the previously filed financing statements of both First Bank and Second Bank. Third Bank chose to disregard First Bank's filing, concluding that because of the address listed, it related to a different debtor. However, it was concerned about Second Bank's financing statement, so it got Second Bank to agree to subordinate any future advances it might make to Dinkelstein.What are the most likely relative priorities of the three creditors' security interests in Dinkelstein's equipment? A. First Bank, Second Bank, Third Bank. B. First Bank, Third Bank, Second Bank. C. Second Bank, First Bank, Third Bank. D. Second Bank, Third Bank, First Bank. E. Third Bank, First Bank, Second Bank. F. The priorities are circular.

A. first bank, second bank, third bank

Two years ago, State Bank acquired a security interest in the existing and after-acquired inventory and accounts of Dependable Delivery Service, Inc. State Bank promptly perfected by filing in the appropriate office a financing statement describing all the relevant collateral. Seven months ago Dependable Delivery Service, Inc. changed its name to Fleet Delivery Corp. by complying with all the relevant state laws. State Bank did not learn of the name change until last week and yesterday it filed an amendment to its financing statement to identify the debtor's new name. Which one of the following statements with respect to State Bank's security interest is most accurate? A. It is perfected in all the collateral. B. It is perfected in collateral acquired by the debtor either before the name change or within four months thereafter. C. It is perfected in collateral acquired by the debtor after the amendment was filed. D. It is perfected in collateral acquired by the debtor before the name change, collateral acquired within four months after the name change, and collateral acquired after the amendment. E. It is unperfected.

A. it is perfected in all the collateral.

On June 1, Duplicate approaches Bank for a $10,000 loan and fills out a loan application. Bank reviews the application and on June 5 agrees to lend Duplicate the money on the condition Duplicate can provide adequate collateral as security. Duplicate has no property available to satisfy Bank, but Double, Duplicate's cousin, does. On June 7, Double orally agrees to put up jewelry worth about $15,000 as collateral for the loan. On June 10, Bank issues a check to Duplicate, who simultaneously signs a written security agreement that describes the jewelry as the collateral for the loan. The security interest: A. Never Attached B. attached on June 5, because the Bank made a binding commitment to lend on that date. C. attached on June 7, because the condition on the commitment to lend was satisfied on that date. D. attached on June 10, because the loan funds were disbursed on that date. E. attached on June 10, because the loan funds were disbursed and the security agreement was signed on that date.

A. never attached

A. none

Delicious is a caterer who does business only in Oregon, a state that has designated the Secretary of State's office as the place for filing under § 9-501(a)(2). On June 1, Delicious granted National Bank a security interest in all of Delicious's business property and Bank filed a proper financing statement in the Oregon Secretary of State's office. The collateral includes a delivery van, a deposit account at State Bank, and cash. In which of that property does Bank have a perfected security interest? A None of it. B. the delivery van C. the deposit account D. the cash E. two of the items F. all of it

A. none of it

Two years ago, Barbara borrowed $100,000 from First Bank, Otto gave First Bank a security interest in some valuable artwork to secure the loan, and Olive gave First Bank a security interest in some Microsoft stock to secure the loan. Gene guaranteed payment of the debt. First Bank promptly perfected both of its security interests by filing proper financing statements in the appropriate office. With the consent and cooperation of the parties, it also took possession of the artwork and the stock certificates to facilitate the exercise of its enforcement rights in the event of default.Last year, Olive granted Second Bank a security interest in the same Microsoft stock to secure a personal loan of $50,000. Second Bank promptly perfected its security interest by filing a proper financing statement in the appropriate office. First Bank's security interest has priority over Second Bank's security interest.Last week, Barbara defaulted on the loan.If First Bank disposes of the artwork in a private sale, which of the liens will be discharged? A Only First Bank's lien on the artwork. B. only first bank's lien on the Microsoft stock C. only Second Bank's lien D. First Bank's lien on both the artwork and the Microsoft stock. E. first bank's lien on the artwork and second bank's lien. F. first bank's lien on the Microsoft stock and second bank's lien

A. only First Bank's lien on the artwork.

Detective is a private detective who needs money to expand operations. Detective borrows $30,000 from Secret, and signs a written security agreement granting Secret a security interest in all of Detective's "existing and after-acquired electronic surveillance devices, accounts, and consumer goods." Secret files a financing statement in the appropriate office that describes the collateral as "existing and after-acquired inventory, equipment, and consumer goods."One month later Detective buys a new computer with funds received from an inheritance. Which one of the following statements is true? A. Secret has no security interest in the computer. B. secret has an unperfected security interest in the computer. C. secret has a perfected security interest in the computer. D. Secret has a perfected security interest in the computer if Detective uses the computer for personal or household purposes, otherwise Secret has an unperfected security interest in the computer. E. Secret has a perfected security interest in the computer if Detective uses the computer for personal or household purposes, otherwise Secret has no security interest in the computer.

A. secret has no security interest in the computer.

On March 1, Debtor purchases some expensive machinery on credit from Seller. No security interest is retained or otherwise created. On April 1, when the debt remains unpaid, Debtor delivers a written and signed security agreement to Seller, purporting to grant Seller a security interest in certain specified goods to secure payment of the outstanding obligation. Which one of the following statements is true? A. the security interest has attached B. the security interest has not attached because the antecedent debt is not consideration under traditional contract law, and thus Seller has not given value. C. The security interest has attached only if Seller extended the payment schedule or otherwise relinquished some rights to enforce the debt, so that Seller will be deemed to have given value. D. The security interest has attached only if it is in the machinery purchased from Seller.

A. the security interest has attached.

Diane Dresser owns and operates a small retail store that makes and sells custom wedding dresses. On June 1, Diane married and started using her husband's surname: Donaldson. On July 1, Diane granted a security interest in the inventory of the store to Bank in return for a loan. Bank wishes to file a financing statement in the appropriate office to perfect its security interest.In which one of the following ways must the financing statement identify the debtor in order to perfect Bank's security interest? A. "Diane Deborah Dresser," the name appearing on her birth certificate, passport, federal income tax returns, and all financial documents. B. "Diana Deborah Dresser," the name - containing a misspelling of her given name - appearing on her current driver's license, issued by the state in which she resides. C. "D.D. Dresser," the name friends and family have long used to address Diane. D. "Diane Dresser Donaldson," the name Diane began using for on all documents after her marriage in June. E.. "D.D. Donaldson," the name friends and family began using to address Diane after the marriage. E. "Nuptials," the name of the store.

B. "Diana Deborah Dresser," the name - containing a misspelling of her given name - appearing on her current driver's license, issued by the state in which she resides.

Distinguished Furnishings, Inc. ("DFI") is a manufacturer of office furniture. In 2013, First Bank acquired a first-priority security interest in all of DFI's existing and after-acquired inventory and accounts. In 2014, Second Bank acquired a second-priority security interest in all of DFI's existing and after-acquired inventory and accounts. Second Bank promptly and properly notified all of DFI's regular customers, including Retailer, of its security interest in DFI's accounts. First Bank did not.On June 1, 2017, DFI sold seven desks to Retailer on open account. The purchase price was $21,000. On July 1, 2017, DFI sold 13 bookcases to Retailer, also on open account. The purchase price was $26,000. On July 5, 2017 after DFI defaulted on its obligations to First Bank, First Bank sent an authenticated letter to Retailer informing Retailer of First Bank's security interest in DFI's accounts and instructing DFI to remit payment to First Bank.Several of the bookcases that DFI sold to Retailer were defective, a fact discovered after Retailer sold the bookcases to one of Retailer's customers. Retailer claims that this caused it to suffer $30,000 in damages (the lost value of the bookcases and the lost profit on the resale contract).If Retailer can prove its damages, how much must Retailer pay to First Bank? A $0. B. $17,000 C. $21,000 D. $47,000 E. an amount other than the amounts listed above.

B. $17,000

Computer Leasing contracts in writing to lease a new $2,000 personal computer to User for four years. Pursuant to the contract, User agrees to pay Computer Leasing $50 per month. Whether the parties' transaction is a true lease or a disguised financing arrangement will: A. Affect both whether Article 9 applies and whether Computer Leasing's rights are classifiable as chattel paper. B. Affect whether Article 9 applies but not whether Computer Leasing's rights are classifiable as chattel paper. C. Affect whether Computer Leasing's rights are classifiable as chattel paper but not whether Article 9 applies. D. Not affect either whether Article 9 applies or whether Computer Leasing's rights are classifiable as chattel paper.

B. Affect whether Article 9 applies but not whether Computer Leasing's rights are classifiable as chattel paper.

After Driver's car is damaged in an accident, Driver brings it to Mechanic for repair. The repair agreement which Driver signed provides that Mechanic will have a lien on the car until Driver pays the repair bill and, if Driver does not pay the bill within 30 days, permits Mechanic to sell the car and keep all the sales proceeds. A state statute gives car mechanics a lien on property in their possession to secure payment of the goods and services provided in connection with the repair. Which one of the following statements is true? A. Article 9 applies to both the contractual lien and the statutory lien. B. Article 9 applies to the contractual lien but does not apply to the statutory lien. C. Article 9 does not apply to the statutory lien and does not apply to the contractual lien because it merely duplicates the statutory lien. D. Article 9 does not apply to the statutory lien and does not apply to the contractual lien because it is primarily for services rendered.

B. Article 9 applies to the contractual lien but does not apply to the statutory lien.

On August 1, 2011, National Bank acquired a security interest in the existing and after-acquired inventory and accounts of Furniture Store. National Bank perfected its security interest that same day by filing in the appropriate office a financing statement describing all the relevant collateral.If National Bank filed no continuation statement but filed a new financing statement on September 15, 2016, and it is now 2017, which one of the following statements with respect to National Bank's security interest would be true? A. It has remained continuously perfected in all the collateral. B. As to all the collateral, it was perfected, became unperfected, and then later became perfected again. C. It was perfected as to all the collateral, became unperfected as to some collateral, and has become perfected again as to all collateral. D. It was perfected as to all collateral and has become unperfected as to some collateral. E. it has become unperfected as to all collateral.

B. As to all the collateral, it was perfected, became unperfected, and then later became perfected again.

Two years ago, Bank One acquired a security interest in all the equipment of Distressed. That security interest was perfected by a financing statement filed two years ago. Six months ago, without authorization from Bank One, Distressed sold a machine that it used as equipment to Salvage. Salvage paid for the machine with a loan from Bank Two and treated the machine as inventory. Three years ago, Bank Two acquired a security interest in all of the existing and after-acquired inventory of Salvage. At that time, Bank perfected its security interest by filing a financing statement against Salvage's inventory.Assuming Salvage still owns the machine, which one of the following statements with respect to the parties' security interests in the machine is true? A. Bank One's security interest has priority because Bank One was the first to perfect. B. Bank One's security interest has priority even though Bank Two was the first to file or perfect. C. Bank Two's security interest has priority because Bank Two was the first to file. D. Bank Two's security interest has priority because Bank Two has a perfected purchase-money security interest. E. Only one of the banks has a security interest in the machine.

B. Bank One's security interest has priority even though Bank Two was the first to file or perfect.

On October 1, Donatello approached Bank for a $20,000 loan. The loan application, which Donatello signed, indicated a willingness to let both a car and a painting that Donatello owns serve as collateral. However, no separate security agreement was ever prepared or executed. Instead, when the loan funds were disbursed on October 10, the only things Donatello signed were a promissory note and a form application to have Bank listed as lienholder on the certificate of title for Donatello's car. The promissory note included a statement that "this note is secured by the collateral." The following week, Bank filed a financing statement listing Donatello as debtor and identifying the painting as collateral. Which one of the following statements is most likely correct? A. Bank has a security interest in both the car and the painting B. Bank has a security interest in the car but not the painting. C. Bank has a security interest in the painting but not the car. D. Bank has a security interest in neither the car nor the painting.

B. Bank has a security interest in the car but not the painting.

DebtorCo borrows $20,000 from Bank to buy a machine to use in its manufacturing business. To ensure that the loaned funds are used for their intended purpose, Bank makes the loan check payable jointly to DebtorCo and the seller of the machine. At the closing, DebtorCo signs a security agreement granting Bank a security interest in the machine. The security agreement makes no mention of a financing statement and does not expressly authorize Bank to file one. Moreover, DebtorCo signs no financing statement. Which one of the following statements is true? A. Bank is authorized to file a financing statement that describes the collateral as "equipment." B. Bank will be perfected if it files a financing statement that describes the collateral as "equipment." C. Bank is perfected even without filing a financing statement because it has a purchase-money security interest. D. Bank lacks authorization to file any financing statement.

B. Bank will be perfected if it files a financing statement that describes the collateral as "equipment."

Detailer is a graphic designer who works freelance for business and individuals. To help finance the purchase of new design and printing equipment, Detailer borrowed $35,000 from Bank. In return, Detailer gave Bank a security interest in all of Detailer's existing and after-acquired inventory, equipment, and accounts. Bank promptly perfected that security interest by filing a financing statement in Colorado, the state where Detailer was located. Two years later, Detailer moved to California. It is now five months after the move and Bank has not re-filed in California. Which one of the following statements is most correct? A. Bank's security interest became unperfected in all the collateral four months after Detailer moved. B. Bank's security interest was perfected in collateral acquired by Detailer before or within four months after the move with unencumbered funds, but is now unperfected in such collateral. C. Bank's security interest was never perfected in any collateral acquired by Detailer after Detailer moved. D. Bank's security interest in inventory acquired by Detailer after Detailer moved was perfected, if at all, for only 20 days. E. Bank's security interest is perfected in accounts generated after Detailer moved if those accounts are identifiable proceeds of inventory acquired before Detailer moved.

B. Bank's security interest was perfected in collateral acquired by Detailer before or within four months after the move with unencumbered funds, but is now unperfected in such collateral.

1. Debtor borrows $1,000 from Adams giving in exchange a negotiable promissory note and a security interest in Debtor's living room furniture. Before the note is due, Adams needs funds and borrows $1,000 from Bush, granting in exchange a security interest in all of Adams' rights against Debtor. Shortly thereafter, Bush incurs a cash-flow problem, and borrows $1,000 from Clinton, granting in exchange a security interest in all of Bush's rights against Adams. Which of the secured parties has a security interest in chattel paper? A. Adams only B. Bush only C. Clinton only D. Adams and Bush E. Adams and Clinton F. Bush and Clinton

B. Bush only

On April 14, Darrow borrowed $5,000 from Cardozo, a friend, in order to pay some overdue taxes. As part of the transaction, Darrow signed a written IOU that stated: "I owe Cardozo $5,000. All my home furniture is collateral for this loan." At all relevant times Cardozo maintained possession of the IOU. Which one of the following statements is true? A. Cardozo has no security interest at all. B. Cardozo has an unperfected security interest. C. Cardozo has a perfected security interest because Cardozo has possession of the IOU. D. Cardozo has a perfected security interest because Cardozo has possession of the IOU, provided the IOU is of a type normally transferred by delivery.

B. Cardozo has an unperfected security interest.

On May 1, Landscaper borrows $100,000 from City Bank and authenticates an agreement purporting to grant City Bank a security interest in all Landscaper's "equipment, now owned or hereafter acquired, to secure all obligations that Landscaper then or thereafter owes to City Bank." As part of the transaction, Bank also authorizes a $50,000 line of credit for Landscaper. On August 1, Landscaper leases for Landscaper's office a copier capable of copying large blueprints. The lease is a true lease for one year and Landscaper paid the entire rent for the year in advance. On September 1, Landscaper drew $10,000 on the line of credit with City Bank. Which one of the following statements is true? A. City Bank has a security interest in Landscaper's leasehold interest in the copier to secure the balance due on the original loan. B. City Bank has a security interest in Landscaper's leasehold interest in the copier to secure the balance due on both the original loan and the draw on the line of credit. C. City Bank has a security interest in the copier to secure the balance due on the original loan. D. City Bank has a security interest in the copier to secure the balance due on both the original loan and the draw on the line of credit. E. None of the above

B. City Bank has a security interest in Landscaper's leasehold interest in the copier to secure the balance due on both the original loan and the draw on the line of credit.

Manufacturer leases a new mainframe computer to Digitizer for four years. Two years later, Manufacturer sells (outright and without recourse) its rights under the lease to Finance Company. No other assets of Manufacturer are transferred in connection with the transaction with Finance Company. A month later, Digitizer assigns its rights under the lease to Assignee. Which of the following three transactions is most likely to be an Article 9 transaction? A. Manufacturer's lease of the computer to Digitizer. B. Manufacturer's lease of the computer to Digitizer. C. Digitizer's assignment of its lease rights to Assignee.

B. Manufacturer's lease of the computer to Digitizer.

Prior to the transactions described below, Bank acquired a security interest in each of the following: (i) Digger's existing and after-acquired crops; (ii) Doubloon Casino's equipment and general intangibles; (iii) Designer's computers and software; (iv) Dealership's inventory of automobiles; and (v) the equipment Duffer uses to operate Duffer's miniature golf course (,e.g.,, golf clubs, balls). In which one of the following property is Bank's security interest most likely to have attached? A. A right to payment to which Digger became entitled under a federal soil conservation program for taking acreage out of cultivation, prior to planting for the current season. B. Coins that Doubloon Casino's customers put in the slot machines. C. Designs that Designer generated, and later copyrighted, using the computers and software. D. Payments that Dealership received from customers in exchange for extended warranties on cars that Dealership sold to the customers. E. Payments that Duffer received from customers for use of the golf course and equipment.

B. Coins that Doubloon Casino's customers put in the slot machines.

1. Although goods can have only one Article 9 classification (consumer goods, equipment, farm products, inventory) at a time, most goods can be classified in several different ways, depending on how the debtor is using them. What Article 9 classification of collateral can a car sometimes have that gasoline can never be? A. Consumer good B. Equipment C. Farm product D. Inventory

B. Equipment

Some of Dispossessed's inventory of small electronic devices is in the possession of Bulk Storage, Inc., a professional bailee unrelated to Dispossessed. Dispossessed has granted a security interest in this inventory to State Bank. Which one of the following actions will perfect State Bank's security interest? A. Bulk Storage's receipt of an authenticated notification from State Bank informing Bulk Storage of State Bank's security interest in the goods. B. Filing a proper financing statement as to the goods, regardless of whether Bulk Storage has issued a document covering the goods. C. If Bulk Storage has issued a document covering the goods, filing against or taking possession of the document. D. none of the above

B. Filing a proper financing statement as to the goods, regardless of whether Bulk Storage has issued a document covering the goods.

On March 1, First Bank extends a loan to Pedro Dinkelstein and receives in return a security interest in all of Dinkelstein's existing and after-acquired equipment. On the same day, First Bank filed in the appropriate office a financing statement that properly identified both Dinkelstein and the collateral, but which listed Dinkelstein's address as "1057 State Street, Springfield," instead of "495 Beacon Place, Shelbyville."On March 2, Second Bank loaned money to Dinkelstein, taking in return a security interest in all of Dinkelstein's existing and after-acquired equipment to secure the loan and any future advances. Second Bank perfected its security interest that same day. Second Bank had searched for filed financing statements against Dinkelstein before making the loan, but First Bank's filing was not yet indexed and therefore not disclosed in response to the search request.On April 1, Third Bank made a loan to Dinkelstein, secured by all of Dinkelstein's existing and after-acquired equipment. Before making the loan, Third Bank filed a proper financing statement and conducted a search. The search disclosed the previous filings of both First Bank and Second Bank. Third Bank chose to disregard First Bank's filing, concluding that because of the address listed, it related to a different debtor. However, it was concerned about Second Bank's filing, so it got Second Bank to agree to subordinate any future advances it might make to Dinkelstein.If Second Bank makes a new loan to Dinkelstein in August, what will be the priorities of the three creditors' security interests with respect to the future advance? A .First Bank, Second Bank, Third Bank. B. First Bank, Third Bank, Second Bank. C. Second Bank, First Bank, Third Bank. D. Second Bank, Third Bank, First Bank. E. Third Bank, First Bank, Second Bank. F. the priorities are circular.

B. First Bank, Third Bank, Second Bank.

Driver borrows $2,000 from Friend and orally agrees that Driver's new car will serve as collateral. Pursuant to their agreement, Friend takes possession of the car but neither party does anything else with respect to the transaction. Which one of the following statements is true? A. Friend has no security interest in the car. B. Friend has an unperfected security interest in the car. C. Friend has a perfected security interest in the car. D. Friend has a perfected security interest in the car if Driver used the $2,000 loan to buy the car.

B. Friend has an unperfected security interest in the car.

Toy Store is a nationwide retailer of toys and games. For the last several years, Bank has had a security interest in all of Toy Store's existing and after-acquired inventory and accounts to secure an outstanding loan. That security interest is perfected by a financing statement filed three years ago. In late July of this year, FunCo, a wholesaler of toys and games, agreed to sell some handheld electronic gaming devices to Toy Store on credit, taking back a purchase-money security interest in the goods sold. FunCo promptly filed in the appropriate office a financing statement that properly identified Toy Store as the debtor and described the collateral as "inventory." FunCo also sent to Bank a written notification that FunCo "intends to finance the sale of handheld electronic gaming devices to Toy Store and retain a purchase-money security interest in the goods sold." Bank received the notification on August 2. On August 5, Toy Store received the handheld electronic gaming devices purchased from FunCo.In September, to gear up for the holiday shopping season, Toy Store purchased additional handheld electronic gaming devices from FunCo, again with purchase-money financing. FunCo did not file a financing statement or send another notification to Bank with respect to this transaction.In October, Toy Store purchased some wooden building blocks and a variety of plastic action figures from FunCo. As with the parties' previous transactions, the sale was on credit with FunCo taking a security interest in the items sold to secure payment of the purchase price. FunCo did not file a financing statement or send a notification to Bank with respect to this transaction.Toy Store has sold all the gaming devices from the August shipment but still has some of the goods from both September and October Shipments. What is relative priority of the security interests of Bank and FunCo with respect to such goods? A. FunCo's security interest has priority in the remaining inventory from both shipments. B. FunCo's security interest has priority in the remaining inventory from the September shipment; Bank's security interest has priority in the remaining inventory from the October shipment. C. FunCo's security interest has priority in the remaining inventory from the October shipment; Bank's security interest has priority in the remaining inventory from the September shipment. D. Bank's security interest has priority in the remaining inventory from both shipments.

B. FunCo's security interest has priority in the remaining inventory from the September shipment; Bank's security interest has priority in the remaining inventory from the October shipment.

Dispatch uses a truck to haul cargo for a fee. Last year, Dispatch borrowed $20,000 from Lender and signed a security agreement purporting to grant Lender in return a security interest in all of Dispatch's existing and after-acquired equipment, inventory, accounts, and commercial tort claims. Last month, Rival purposefully destroyed Dispatch's truck. Dispatch has brought a tort action against Rival, seeking compensatory damages for both the value of the truck and for lost business, as well as punitive damages. Which one of the following statements is most correct? A. Lender's security interest does not attach to Dispatch's claim against Rival because the security interest cannot attach to after-acquired commercial tort claims. B. Lender's security interest attached to Dispatch's claim against Rival for the damage to the truck, but not the claim for lost business or the claim for punitive damages. C. Lender's security interest attached to all of Dispatch's claim against Rival if Dispatch is an organization. D. Lender's security interest attached to all of Dispatch's claim against Rival.

B. Lender's security interest attached to Dispatch's claim against Rival for the damage to the truck, but not the claim for lost business or the claim for punitive damages.

DiMaggio is a collector of baseball memorabilia. In 2015, after retiring from his job as a college statistics professor, DiMaggio decided to open an internet sports memorabilia shop. On June 1, 2015, DiMaggio obtained a $60,000 loan from Bank to acquire inventory, create a web site, and advertise. At that time and to secure the loan, DiMaggio authenticated a security agreement that described the collateral as "all existing and after-acquired sports memorabilia." As a condition of making the loan, Bank required DiMaggio to place all his existing and after-acquired sports memorabilia in a safe deposit box at Bank. Like all safe deposit boxes, it required two keys to access: the customer key and the bank key. DiMaggio was given one of two identical customer keys. Bank's loan officer kept the other customer key. Bank's safe deposit personnel retained the bank key.In August 2017, DiMaggio defaulted on the loan from Bank. At that time and ever since then, the safe deposit box contained the following: (i) a bat, signed by Ted Williams, that DiMaggio acquired in 1998 and never offered for sale; (ii) an autographed photo of Carlton Fisk depicting his game-winning homer in game six of the 1975 World Series, that DiMaggio acquired in 2003 and offered for sale; (iii) a baseball glove, worn and signed Carl Yastrzemski, that DiMaggio acquired in 2011 and never offered for sale; and (iv) 247 autographed baseball cards that DiMaggio acquired in 2016 and offered for sale.The Bank is considering conducting a disposition of collateral. Which one of the following statements is most correct? A. If Lender has filed a financing statement against DiMaggio and none of the exceptions in § 9-611(d) exists, Bank must send Lender notification of the disposition. B. If Bank decides to conduct an on-line auction of all the collateral, a notification of the disposition will adequately describe the time and place of the sale if it states the time when the auction is scheduled to begin and states the uniform resource locator (URL) where the disposition can be accessed. C. Bank may not sell the bat to one of its employees. D. Bank may not buy the baseball cards. E. Bank may conduct the disposition by selling all the items in the safe deposit box to a single buyer.

B. If Bank decides to conduct an on-line auction of all the collateral, a notification of the disposition will adequately describe the time and place of the sale if it states the time when the auction is scheduled to begin and states the uniform resource locator (URL) where the disposition can be accessed.

On July 1, in return for a loan from State Bank, Donovan authenticated a security agreement purporting to grant State Bank a security interest in Donovan's "existing and after-acquired furniture, consumer goods, and deposit accounts." Which one of the following statements is most likely to be correct? A. If Donovan used the loan proceeds to pay her son's college tuition, State Bank has no security interest in the deposit account that Donovan has opened at Local Bank on August 1. B. If Donovan used the loan proceeds to pay her son's college tuition, State Bank has no security interest in the painting that Donovan purchased seven years ago and which hangs in Donovan's home. C. If Donovan used the loan proceeds to pay her son's college tuition, State Bank has no security interest in the sofa that Donovan purchased two years ago and uses in Donovan's home. D. If Donovan used the loan proceeds to finance a new business, State Bank has no security interest in the stamp collection that Donovan has owned for 15 years. E. If Donovan used the loan proceeds to finance a new business, State Bank has no security interest in an antique desk that Donovan inherited on July 7.

B. If Donovan used the loan proceeds to pay her son's college tuition, State Bank has no security interest in the painting that Donovan purchased seven years ago and which hangs in Donovan's home.

Direct Marketing, Inc. ("DMI") rents office space from Lessor. The lease purports to grant Lessor a lien on DMI's equipment located on the leased premises to secure DMI's obligations under the lease. Which one of the following statements is true? A. If an applicable statute grants landlords a lien on all of tenant's personal property located on the leased premises to secure the tenant's obligations under the lease, then Article 9 will not govern at all. B. If an applicable statute grants landlords a lien on all of a tenant's personal property located on the leased premises to secure the tenant's obligations under the lease, then Article 9 will not govern the statutory lien but will govern the lien granted in the lease. C. Article 9 does not govern Lessor's lien because it arises in connection with a real estate transaction. D. Article 9 does not govern Lessor's lien because it is a landlord's lien.

B. If an applicable statute grants landlords a lien on all of a tenant's personal property located on the leased premises to secure the tenant's obligations under the lease, then Article 9 will not govern the statutory lien but will govern the lien granted in the lease.

Diversified Enterprises is a wholesaler with operations throughout the western United States. At Diversified's request, Software Developer wrote some inventory-control software to enable Diversified to track its inventory and make the most cost-effective decisions regarding from what warehouse to fill orders. Software Developer sold the software to Diversified for $1 million, with payment to be made in ten installments of $100,000 each. To secure payment of the purchase price, Software Developer retained a security interest in the software and promptly filed in the UCC office of the state in which Diversified is located a financing statement properly identifying Diversified and describing the collateral as "software." At that time, the copyright on the software was not registered with the U.S. Copyright Office. Yesterday, Diversified registered the copyright on the software with the U.S. Copyright Office. Which one of the following statements with respect to Software Developer's security interest in the software is true? A. It was never perfected. B. It was perfected but became unperfected yesterday. C. It was perfected but if nothing is done will become unperfected in 20 days. D. It was perfected but if nothing is done will become unperfected in four months. E. It was perfected but if nothing is done will become unperfected in one year.

B. It was perfected but became unperfected yesterday.

Downtown Auto sells used cars. Two years ago, City Bank acquired a security interest in all of Downtown's existing and after-acquired inventory, equipment, accounts, chattel paper, instruments, and general intangibles. At that time, City Bank filed a financing statement against Downtown in the UCC office of the state in which Downtown is located. The financing statement describes the collateral as "all assets." However, because it would be cumbersome for City Bank to get its security interest noted on the certificate of title for each car Downtown Auto purchases, and then have that notation removed when Downtown later sells it, City Bank has never had its security interest noted on the certificate of title for any of Downtown's cars. Three weeks ago, Downtown purchased a used sedan and put the sedan up for sale. Yesterday, Downtown decided that it needed to have a car available for its personnel to shuttle customers who bring their own cars in for repair. Accordingly, Downtown dedicated the new sedan for this purpose. It is now used exclusively to drive customers from Downtown's lot to their home or office and to pick them up again. Which one of the following statements with respect to City Bank's security interest in the sedan is true? A. It was never perfected. B. It was perfected but became unperfected yesterday. C. It is perfected but will become unperfected in 20 days unless City Bank takes action to maintain its perfection. D. It is perfected and will remain perfected as long as City Bank's filed financing statement remains effective.

B. It was perfected but became unperfected yesterday.

Dietary Endeavors owns and operates several weight-loss clinics. At these clinics, it provides classes on diet and exercise, sells vitamins and weight loss books, and maintains exercise facilities and equipment for its clients to use. On May 1, Bank gets a security interest in all the existing and after-acquired inventory, equipment, and accounts of Dietary Endeavors in return for a loan. On the same day, Bank files in the appropriate statewide office a financing statement that properly identifies the debtor and the collateral.In which of the following situations is Bank likely to lose priority in the collateral at issue? A. On April 1, Dietary Endeavors sold a substantial portion of its accounts to Finance Company, which did not file a financing statement. B. On June 1, Dietary Endeavors brings one of its treadmills, which it uses as equipment, to Mechanic for repair. Mechanic fixes the treadmill and is holding onto it until Dietary Endeavors pays for the repairs. An applicable state statute gives Mechanic a lien on the treadmill to secure the cost of the repair as long as the treadmill remains in Mechanic's possession, but that statute says nothing about priority. C. On July 1, Dietary Endeavors sells a weight training machine used as equipment to Wholesaler, who pays in full and takes possession. D. none of the above

B. On June 1, Dietary Endeavors brings one of its treadmills, which it uses as equipment, to Mechanic for repair. Mechanic fixes the treadmill and is holding onto it until Dietary Endeavors pays for the repairs. An applicable state statute gives Mechanic a lien on the treadmill to secure the cost of the repair as long as the treadmill remains in Mechanic's possession, but that statute says nothing about priority.

Dietary Endeavors owns and operates several weight-loss clinics. At these clinics, it provides classes on diet and exercise, sells vitamins and weight loss books, and maintains exercise facilities and equipment for its clients to use. On May 1, Bank gets a security interest in all the existing and after-acquired inventory, equipment, and accounts of Dietary Endeavors in return for a loan. On the same day, Bank files in the appropriate statewide office a financing statement that properly identifies the debtor and the collateral.In which of the following situations is Bank's security interest in the collateral at issue likely to have priority? A. On April 15, Dietary Endeavors sold a tanning bed used as equipment to Salon on credit. Salon, which has yet to pay for the tanning bed, never filed a financing statement. Dietary Endeavors delivered the tanning bed on May 15. B. On June 1, Vandal maliciously damages some of Dietary Endeavors' equipment. Dietary Endeavors hires Lawyer, who obtains a tort judgment against Vandal. Applicable state law gives Lawyer a lien on the judgment to secure the costs and legal fees incurred in obtaining it. That law says nothing about priority. C. On July 1, Dietary Endeavors sells to Client a box of vitamins and some books on how to lose weight. The vitamins and books were part of Dietary Endeavors' inventory. Client has not yet paid for the goods. D. none of the above

B. On June 1, Vandal maliciously damages some of Dietary Endeavors' equipment. Dietary Endeavors hires Lawyer, who obtains a tort judgment against Vandal. Applicable state law gives Lawyer a lien on the judgment to secure the costs and legal fees incurred in obtaining it. That law says nothing about priority.

Art Dealer is in the business of buying and selling expensive paintings, sculptures, and limited edition prints. The mark up on such goods is high, typically about 150%, but it often takes many months before any item sells. Recently, to supplement income and increase customer traffic, Art Dealer has agreed to allow three people to exhibit their own art for sale in Art Dealer's store. Under the terms of each arrangement, the owner sets the price and Art Dealer keeps 20% of the sale proceeds. Which of the three transactions described is most likely to be governed by Article 9? A. Beneficiary delivered a recently inherited oil painting to Art Dealer for sale for $15,000. B. Painter delivered a recently completed watercolor to Art Dealer for sale for $10,000. C. Lithographer delivered three newly completed prints to Art Dealer, each of which is to be sold for $250.

B. Painter delivered a recently completed watercolor to Art Dealer for sale for $10,000.

Dertz Car Rental Company is in the business of leasing cars to consumers and businesses. Unlike many other car rental companies, which rent cars for a year or two and then sell them, Dertz rents each car until the car is simply unable to function despite routine maintenance. It then cannibalizes the car for parts. When Dertz approaches Bank for a loan, Dertz offers its fleet of cars as collateral. To perfect a security interest in these cars, Bank must: A. File a financing statement, because the cars are inventory. B. Record its interest on the certificate of title for each car, even though the cars are inventory. C. Record its interest on the certificate of title for each car, because the cars are equipment. D. File a financing statement and record its interest on the certificate of title for each car.

B. Record its interest on the certificate of title for each car, even though the cars are inventory.

Car Dealer sold a new car to Driver on credit, retaining a security interest in the car to secure the unpaid portion of the purchase price. Car Dealer promptly saw to it that its lien was noted on the certificate of title for the car. Six months later, Driver moved to a new state, which issued a new registration and new certificate of title for the car. Due to an error, the new certificate failed to note Car Dealer's interest in the car. Three months later, Driver sold the car to Second Hand Rides, a used car dealer that had no knowledge of Car Dealer's security interest and that took possession of the car. Which one of the following statements regarding the parties' interests in the car is true? A. Second Hand Rides took free of Car Dealer's security interest. B. Second Hand Rides will take free of Car Dealer's security interest if Car Dealer fails to get its interest noted on the new certificate of title within four months of when the certificate was issued. C. Second Hand Rides will take free of Car Dealer's security interest if Car Dealer fails to get its interest noted on the new certificate of title within one year of when the certificate was issued. D. Car Dealer's security interest has and will continue to have priority even if Car Dealer fails to get its interest noted on the new certificate of title within one year of when the certificate was issued.

B. Second Hand Rides will take free of Car Dealer's security interest if Car Dealer fails to get its interest noted on the new certificate of title within four months of when the certificate was issued.

On June 1, Devoted purchased from Seller a $10,000 diamond necklace and a $5,000 sapphire ring as an anniversary gift for his wife, Dazzling. Devoted paid $2,000 in cash and promised Seller to pay the balance in six months. The sales agreement provided that Seller retained a security interest in the necklace and ring to secure payment of the purchase price. Seller did not file a financing statement. Two weeks later, Devoted gave the necklace and ring to Dazzling.In August, Dazzling brought the necklace to Jeweler for a minor repair. After Jeweler fixed the necklace, Jeweler mistakenly put the necklace on display in Jeweler's store, and Customer purchased it using a Visa card issued by Local Bank. Customer's cardholder agreement with Local Bank provides that Local Bank has a security interest in each item Customer purchases with the card to secure the purchase price of that item. At all relevant times, State Bank has had a perfected security interest in all of Jeweler's existing and after-acquired inventory.Which of the following would be likely to affect Seller's security interest in the necklace? A. Customer and Dazzling live in different states. B. Seller saw the necklace up for sale in Jeweler's store several days before Jeweler sold it, recognized the necklace as the one sold to Devoted, but said nothing. C. Neither (a) nor (b)

B. Seller saw the necklace up for sale in Jeweler's store several days before Jeweler sold it, recognized the necklace as the one sold to Devoted, but said nothing.

On February 1, Dumbo borrowed $200,000 from Showtime Bank to expand the circus that Dumbo owns and operates. In return, Dumbo gave Showtime Bank a security interest in all of Dumbo's "existing and after-acquired accounts and ticket receipts." Showtime filed in the appropriate office a properly executed financing statement that described the collateral in the same way the security agreement did. Pursuant to the security agreement, Dumbo deposited all money collected on accounts or received from the sale of tickets into a special checking account at Showtime Bank. Funds from no other sources were deposited into this checking account. On June 1, Dumbo used some money from the checking account to buy an elephant. It is now July 1. Which one of the following statements is true? A. Showtime has no security interest in the elephant. B. Showtime has an unperfected security interest in the elephant. C. Showtime has a perfected security interest in the elephant. D. Showtime has a perfected security interest in the elephant provided this jurisdiction follows the lowest intermediate balance rule.

B. Showtime has an unperfected security interest in the elephant.

Digger operates a gardening service. On May 1, Digger purchased a new riding mower for business use on credit from Stears Department Store. Pursuant to the written credit agreement, Stears retained title in the mower until full payment is made. Stears filed no financing statement. Which one of the following statements is true? A. Stears has no security interest in the mower. B. Stears has an unperfected security interest in the mower. C. Stears has an automatically perfected PMSI in the mower. D. Stears has a security interest in the mower that is a not a PMSI.

B. Stears has an unperfected security interest in the mower.

On April 1, Bank loaned $200,000 to Farmer, secured by all of Farmer's existing and after-acquired equipment, inventory, accounts, and farm products. On that date, Bank sent to the appropriate filing office with the applicable filing fee a financing statement that properly identified Farmer and properly described the collateral, but which had an incorrect address for Farmer. On April 3, the filing office noticed the error and rejected the financing statement. On April 5, Supplier sold a tractor on credit to Farmer and retained a security interest in the tractor to secure payment of the purchase price. Supplier filed in the appropriate office a proper financing statement that same day. Supplier did not search for filed financing statements against Farmer. On April 7, Bank filed in the appropriate office a new financing statement against Farmer that properly identified Farmer and the collateral.If Supplier's security agreement with Farmer covers all of Farmer's existing and after-acquired equipment, inventory, accounts, and farm products - including the tractor purchased from Supplier - which one of the following statements about the priority of the parties' security interests is true? A. Bank's security interest has priority as to all the collateral. B. Supplier's security interest has priority in the tractor; Bank's security interest has priority in all the other collateral. C. Supplier's security interest has priority in all the collateral. D. There is not enough information provided to determine the relative priority of the security interests.

B. Supplier's security interest has priority in the tractor; Bank's security interest has priority in all the other collateral.

In which one of the following situations is the security interest in the identified collateral least likely to be perfected? A. The collateral is a sculpture that the debtor purchased with cash thirty days ago. The cash is directly traceable to a painting that the debtor sold. The debtor acquired the painting for home display three years earlier on credit from the artist, who retained a security interest in the painting to secure payment of a portion of the purchase price. At that time, the artist filed an otherwise sufficient financing statement describing the collateral as "all assets." B. The collateral is an antique vase that the debtor purchased for household use forty days ago. The debtor paid with funds that are directly traceable to a diamond ring the debtor sold. The debtor inherited the ring eight years ago and two years ago used it as collateral for a $5,000 personal loan from a relative, who promptly filed an otherwise sufficient financing statement describing the collateral as "consumer goods." C. The collateral is an account that the debtor acquired from the sale in bulk of some old inventory five months after the debtor changed its name from "Ski Chalet, LLC" to "Sport Supply Depot, LLC." Three years previously, the debtor granted a security interest in all its existing and after-acquired inventory and accounts to lender who promptly perfected by filing a financing statement describing the collateral as "inventory and accounts."

B. The collateral is an antique vase that the debtor purchased for household use forty days ago. The debtor paid with funds that are directly traceable to a diamond ring the debtor sold. The debtor inherited the ring eight years ago and two years ago used it as collateral for a $5,000 personal loan from a relative, who promptly filed an otherwise sufficient financing statement describing the collateral as "consumer goods."

Which one of the following is most likely to render the secured interest unperfected? A. The security agreement identifies the debtor as "Charles Darwen" instead of "Charles Darwin." B. The filed financing statement identifies the debtor as "Charles Darwen" instead of "Charles Darwin." C. The filed financing statement identifies the secured party as "Adlai Stevensen" instead of "Adlai Stevenson." D. The filed financing statement lists the debtor's address as "101 Maple Street" instead of "1001 Maple Street."

B. The filed financing statement identifies the debtor as "Charles Darwen" instead of "Charles Darwin."

In which one of the following situations is the secured party most likely to have violated Article 9? A. The secured party sends a proposal to accept the collateral in full satisfaction of the debt to the debtor but not to any of the guarantors. B. The secured party sends a proposal to accept the collateral in partial satisfaction of the debt to the debtor but not to any of the guarantors. C. The secured party proposes to accept the collateral in full satisfaction of the debt even though the debtor has repaid 75% of the amount originally borrowed. D. The secured party sends notification of a proposed disposition by private sale to the debtor but not to any of the other secured parties with a proper financing statement on file. E. The secured party repossesses the collateral from the debtor's home while the debtor is out by getting the 13-year-old babysitter to let the repossession agent into the home.

B. The secured party sends a proposal to accept the collateral in partial satisfaction of the debt to the debtor but not to any of the guarantors.

On May 1, Bank made a $200,000 three-year term loan to Retailer, who signed a promissory note for the debt and a security agreement granting Bank a security interest in Retailer's "equipment and inventory." There is no express reference to after-acquired property. Which one of the following statements is most probably true? A. The security interest does not cover equipment or inventory acquired by Retailer after May 1, unless such equipment or inventory constitutes identifiable proceeds. B. The security interest does not cover equipment acquired by Retailer after May 1 unless such equipment constitutes identifiable proceeds, but it does cover inventory acquired by Retailer after May 1. C. The security interest does not cover inventory acquired by Retailer after May 1 unless such inventory constitutes identifiable proceeds, but it does cover equipment acquired by Retailer after May 1. D. The security interest covers both equipment and inventory acquired by Retailer after May 1, regardless whether such equipment or inventory constitutes identifiable proceeds.

B. The security interest does not cover equipment acquired by Retailer after May 1 unless such equipment constitutes identifiable proceeds, but it does cover inventory acquired by Retailer after May 1.

Supplier leased manufacturing equipment with a remaining useful life of 20 years to Deft Manufacturing Company. The lease term is for ten years, after which Deft is obligated to purchase the equipment for its then appraised fair market value. The lease (including the purchase obligation) is terminable by Deft at any time between the third and fifth years. Which of the following statements is most correct? A. The transaction creates a security interest governed by Article 9 because Deft is obligated to become the owner of the goods at the end of the lease term. B. The transaction may or may not create a security interest governed by Article 9. C. The transaction does not create a security interest governed by Article 9 because the purchase price at the end of the lease term is based on the equipment's fair market value, and thus is not nominal. D. The transaction does not create a security interest governed by Article 9 because the lease is terminable by Deft.

B. The transaction may or may not create a security interest governed by Article 9.

Which of the following are most likely to have the same classification? (W) large supply of fresh motor oil owned and stored by car rental company for later use in its fleet of cars (X) fresh eggs owned by Dairy Farmer and produced by Dairy Farmer's chickens (Y) fresh eggs owned by Restaurant and used to make food. (Z) Pots owned by Restaurant and used to make food. A. W and X B. W and Y C. W and Z D. X and Y. E. E and Z F. Y and Z

B. W and Y

Which one of the following situations is the weakest basis for using judicial process? A. When unsure whether the debtor is in default. B. When the debtor's obligation lacks an acceleration clause. C. When repossession would likely breach the peace.

B. When the debtor's obligation lacks an acceleration clause.

1. Although goods can have only one Article 9 classification (consumer goods, equipment, farm products, inventory) at a time, most goods can be classified in several different ways, depending on how the debtor is using them. Which one the following is most susceptible to classification as each of the four mutually-exclusive classifications of goods? A. a cut flower B. a horse C. milk D. a tractor E. a tree

B. a horse

which one of the following is not a general intangible? A. a copyright B. a right to royalties from the license of a copyright C. an ownership interest in a limited liability company D. a buyer's claim for breach of warranty against a seller of goods E. a license to operate a fishing vessel

B. a right to royalties from the license of a copyright.

Delveccio opened a money market account at Shearson Lehman, a major brokerage and deposited $10,000 into it. The funds in this account, like those in other accounts of this kind, are invested in highly rated, short-term debt obligations, such as U.S. Treasury bills and certificates of deposit. The fund seeks to maintain a stable net asset value of $1.00, so that account holders such as Delveccio can withdraw their investment at any time. The fund even permits account holders to withdraw their investment by writing a check. Income from the investments is allocated daily to depositors. Money market accounts such as this yield a modest return with extremely low risk. Which one of the following best describes Delveccio's property? A. an uncertificated security B. a security entitlement C. investment property D. a general intangible E. a deposit account

B. a security entitlement

1. Discount Clothiers Corp. ("DC") is a nationwide retailer of discount clothing, with its main corporate offices in Delaware. At the beginning of this fiscal year, DC leased a mainframe computer from Business Machines, Inc. ("BMI") to assist it in managing its business operations. The lease, which requires DC to make monthly payments of $2,500 to BMI for five years, is a true lease. Six months later, DC needed money because of cash-flow problems. DC borrowed $100,000 from Bank, granting it a security interest in DC's rights in the mainframe pursuant to the lease. The proper classification of the collateral is: A. an account B. equipment C. chattel paper D. a general intangible

B. equipmebt

Duchess Glassworks, Inc. ("DG") purchased a new kiln from its manufacturer, Super Hot Supply Corp. ("SHS"). DG agreed to pay in monthly installments over a four-year period and granted SHS a security interest in the kiln. Two years later, with business going poorly, DG defaulted in payment. SHS declared a default, accelerated the debt (pursuant to the parties' agreement), and repossessed the kiln. Two weeks later, on May 3, SHS sent DG an e-mail message proposing to keep the kiln in satisfaction of the debt. DG thinks the resale value of the kiln exceeds the balance owing on the debt and on May 20 mailed SHS a written objection to this proposal. SHS received the objection on May 25. Which of the following statements is most likely to be true? A. The objection is valid because it was sent in a timely manner. B. the objection is invalid. C. No objection is necessary because SHS cannot properly send its proposal by e-mail. D. No objection is necessary if DG has paid 60% of the purchase price.

B. the objection is invalid.

Dressmaker, a garment manufacturer, sells all of its accounts to Finance Co. Which one of the following statements is most correct? A. Article 9 applies to this transaction if Dressmaker is obligated to repurchase any account that Finance Company is unable to collect. B. Article 9 applies to this transaction if Dressmaker has no obligation to repurchase any account that Finance Company is unable to collect. C. Article 9 applies to this transaction regardless of whether Dressmaker is obligated to repurchase any account that Finance Company is unable to collect. D. Article 9 does not apply to this transaction.

C. Article 9 applies to this transaction regardless of whether Dressmaker is obligated to repurchase any account that Finance Company is unable to collect.

Archimedes borrowed $400,000 from Bank to purchase a charming three-story Victorian home in an older section of town. In return, Archimedes executed and delivered to Bank a $400,000 promissory note and a mortgage on the home. Bank properly recorded the mortgage. A few months later, Bank transferred the promissory note to City Finance Company. Which one of the following statements is true with respect to the second transaction (between Bank and City Finance Company)? A. Article 9 does not apply because the first transaction involves real estate. B. Article 9 applies if Bank borrowed against the promissory note, but not if Bank sold the promissory note. C. Article 9 applies unless City Finance Company was acting as Bank's agent and the transfer was made to facilitate collection on the promissory note. D. Article 9 applies

C. Article 9 applies unless City Finance Company was acting as Bank's agent and the transfer was made to facilitate collection on the promissory note.

Last year, Bank One acquired and perfected a security interest in Doctor's x-ray machine to secure all existing and future obligations of Doctor to Bank One. On May 1 of this year, Bank Two obtained a security interest in the same machine and perfected that security interest by filing a financing statement. Then, on May 5, Creditor got the sheriff to levy on the x-ray machine pursuant to a writ of execution. Under applicable state law, Creditor obtained a lien by virtue of that levy. In which one of the following situations is Bank One's security interest in the x-ray machine least likely to have priority over both other creditors with respect to the future advance it describes? A. Bank One loans Doctor $10,000 on June 6, without knowledge of either Bank Two's security interest or Creditor's lien. B. Bank One loans Doctor $10,000 on June 6, with full knowledge of both Bank Two's security interest and Creditor's lien. C. Bank One loans Doctor $10,000 on July 7, knowing of Creditor's lien but not knowing of Bank Two's security interest. D. Bank One loans Doctor $10,000 on July 7, knowing of Bank Two's security interest but not knowing of Creditor's lien.

C. Bank One loans Doctor $10,000 on July 7, knowing of Creditor's lien but not knowing of Bank Two's security interest.

Bank lends $15,000 to DuckTails, Inc., a manufacturer of bird calls, decoys, and other hunting accessories. On that date, Bank acquired a security interest in the forklift the debtor owns and uses in its shipping department. That same day it also filed an otherwise proper financing statement in the appropriate office describing the collateral as "a forklift." On July 1, DuckTails, Inc. traded the forklift to FishFun Corp., a maker of fishing accessories, for three personal computers FishFun Corp. had been using in its purchasing department. On December 1, FishFun Corp. changed its name to Fishing Fanatics, Inc. It is now May of the following year.Assuming FishFun Corp. did not take the forklift free of Bank's security interest (,i.e.,, that the exchange between DuckTails, Inc. and FishFun Corp. did not cut off Bank's interest in the forklift) and that the governing law has not changed, which one of the following statements is most correct? A. Bank has a perfected security interest in the forklift because the collateral was acquired by DuckTails, Inc. before the name change. B. Bank has a perfected security interest in the forklift because the collateral was acquired by FishFun Corp. before the name change. C. Bank has a perfected security interest in the forklift because the name change is immaterial. D. Bank has an unperfected security interest in the forklift.

C. Bank has a perfected security interest in the forklift because the name change is immaterial.

Distinguished Fixtures, Inc. ("DFI") is a manufacturer of objects made with brass, which is an alloy of copper and zinc. In late August, CopperCo sold 3,000 lbs. of copper to DFI, for which DFI agreed to pay $10,000 in six months. CopperCo retained a security interest in the copper sold and perfected its security interest by filing a proper financing statement on September 1. On September 15, DFI combined the 3,000 lbs. of copper purchased from CopperCo with 2,000 lbs. of zinc (worth $2,000) to make brass. Which one of the following presents the greatest risk to CopperCo's priority in the collateral? A. ZincCo had a purchase-money security interest in the zinc securing a debt of $2,000. The security interest was perfected by a financing statement filed against DFI's zinc on September 10. B. Lender had a security interest in the zinc securing a loan of $15,000. The security interest was perfected by a financing statement filed against DFI's zinc on August 15. C. Bank has a security interest in DFI's existing and after-acquired inventory, to secure a debt of $10,000. The security interest was perfected by a financing statement filed against DFI's inventory on August 15. D. Each of two different creditors had a security interest in some of the zinc, securing a total debt of $20,000. Each security interest was perfected by a financing statement filed against DFI's zinc on September 15.

C. Bank has a security interest in DFI's existing and after-acquired inventory, to secure a debt of $10,000. The security interest was perfected by a financing statement filed against DFI's inventory on August 15.

Jack Deare & Company ("Deare") sells tractors and related machinery to farmers. First Bank has a security interest in all of Deare's inventory. That security interest is perfected by a financing statement filed two years ago. Second Bank also has a security interest in all of Deare's inventory. Second Bank's security interest was perfected by a financing statement filed last year. In which of the following situations is First Bank's security interest in the described proceeds most likely not to have priority? A. Deare sells a tractor on credit to Adams, who is located in a different jurisdiction. Adams signs an agreement granting Deare a security interest to secure payment of the purchase price. Deare retains possession of the agreement. B. Deare sells a tractor on credit to Bernstein, who signs an agreement granting Deare a security interest to secure payment of the purchase price. Pursuant to the terms of their security agreement, Second Bank takes possession of that agreement. C. Deare sells a tractor on credit to Chavez, who signs an agreement granting Deare a security interest to secure payment of the purchase price. Deare then sells the right to payment from Chavez to Finance Company, which pursuant to its normal business practices, takes possession of Deare's written agreement with Chavez. D. none of the above

C. Deare sells a tractor on credit to Chavez, who signs an agreement granting Deare a security interest to secure payment of the purchase price. Deare then sells the right to payment from Chavez to Finance Company, which pursuant to its normal business practices, takes possession of Deare's written agreement with Chavez.

Deborah, who owns and operates a small used bookstore, approached Bank for a loan to create a web page and an electronic catalog of the store's inventory, so as to facilitate internet sales. On the loan application, which Deborah signed, Deborah listed the store's address as Kansas City, Missouri, and her home address as Kansas City, Kansas. Nothing in the loan application or anything else that Deborah signed at that time authorized Bank to file a financing statement. Nevertheless, Bank did file a financing statement and conducted a search before deciding whether to make the loan. The financing statement properly identifies Deborah and describes the collateral as "inventory." Bank filed the financing statement in the office designated by Missouri's § 9-501. Subsequently, Bank approved and made a $15,000 loan to Deborah, who authenticated a security agreement granting Bank a security interest in all of the store's existing and after-acquired inventory.Which of the following additional facts, if true, would be most relevant to whether Bank has a perfected security interest? A. Deborah owns and operates a second store in Kansas City, Missouri, and the security agreement covers the inventory at both locations. B. Deborah owns and operates a second store in Kansas City, Kansas, and she manages both stores primarily from the Missouri location. C. Deborah's friend, Douglas, owns and operates the store with her. Douglas, who also lives in Kansas City, Kansas, oversees the sales staff and manages the inventory; Deborah handles all the finances. D. None of the above is relevant to the Bank's perfection.

C. Deborah's friend, Douglas, owns and operates the store with her. Douglas, who also lives in Kansas City, Kansas, oversees the sales staff and manages the inventory; Deborah handles all the finances.

1. Although goods can have only one Article 9 classification (consumer goods, equipment, farm products, inventory) at a time, most goods can be classified in several different ways, depending on how the debtor is using them. What Article 9 classification of collateral can gasoline sometimes have that a car can never be? A. Consumer Good B. Equipment C. Farm Product D. inventory

C. Farm Product

Driller acquires from Owner the right to drill for and extract oil from Owner's land. In exchange, Driller pays Owner $100,000 and agrees to pay additional sums based on the amount of oil extracted. Article 9 will govern a security interest in which of the following? A. Neither Driller's right to extract oil nor the oil after it is extracted. B. Driller's right to extract oil. C. the oil after it is extracted. D. both Driller's right to extract oil and the oil after it is extracted.

C. the oil after it is extracted

Doubloon, Inc. is a Delaware corporation that conducts all its business out of Miami, Florida. Doubloon is engaged in the business of treasure hunting: searching the Caribbean for wrecked ships and salvaging whatever it finds. Doubloon's operations require expensive equipment, including a boat covered by a certificate of title statute. Most of its funding comes from equity investors who want a share of any recovery. Some, however, comes from lenders, two of which recently provided secured financing to Doubloon. On May 1, First Finance Company loaned Doubloon $200,000 and in return took a security interest in all of Doubloon's existing and after-acquired equipment and inventory. That same day, First Finance filed a proper financing statement in Florida. On June 1, Second Finance loaned Doubloon $300,000. At that time, Second Finance obtained a security interest in Doubloon's existing and after-acquired equipment and inventory and filed a proper financing statement in Florida.On July 1, Second Finance filed in Delaware a financing statement properly describing the debtor and the collateral. It is now August. What are the relative priorities of the security interests of First Finance and Second Finance? A. First Finance's security interest has priority in all of Doubloon's equipment and inventory. B. First Finance's security interest has priority in the boat and in all of the equipment and inventory Doubloon acquired before July 1. C. First Finance's security interest has priority in the boat; Second Finance's security interest has priority in all of Doubloon's other equipment and inventory. D. The security interests of First Finance and Second Finance share priority in the boat; Second Finance's security interest has priority in all of Doubloon's other equipment and inventory. E. Second Finance's security interest has priority in all of Doubloon's equipment and inventory.

C. First Finance's security interest has priority in the boat; Second Finance's security interest has priority in all of Doubloon's other equipment and inventory.

Which one of the following statements is true? A. It is never possible to peaceably repossess collateral from the debtor's principal residence. B. A secured party who sells the collateral to its own employee at a private disposition must compute a deficiency or surplus based on what a complying disposition to an unrelated party would have realized. C. If the secured party conducts a commercially unreasonable sale of collateral constituting consumer goods, the debtor is entitled to recover statutory damages even if the debtor is also able to have the resulting deficiency eliminated. D. All methods of enforcing a security interest - disposition, acceptance, and collection - must be commercially reasonable.

C. If the secured party conducts a commercially unreasonable sale of collateral constituting consumer goods, the debtor is entitled to recover statutory damages even if the debtor is also able to have the resulting deficiency eliminated.

Customer uses a national credit card, issued by Issuing Bank, to order goods from Merchant on Merchant's web site. Merchant has a contract with Merchant Bank that allows Merchant to participate in the credit card system. As a result of the transaction, customer has a right to receive the ordered goods from Merchant, Merchant has a right to receive payment from Merchant Bank, Merchant Bank has a right to receive payment from Issuing Bank, and Issuing Bank has a right to receive payment from Customer. Which of the parties' rights to payment qualifies as an account? A. Merchant's only B. merchant Bank's only C. issuing Bank's only D. Merchant's and Merchant's Bank E. Merchant's and Issuing Bank's F. Merchant Bank's and Issuing Bank's

C. Issuing Bank's only

Disengaged was divorced last year, and as part of the property settlement received some jewelry and a negotiable promissory note from Disengaged's former spouse. A few months ago, Disengaged decided to take a vacation to Hawaii, but needed some funds to finance the trip. Disengaged borrowed $4,000 from Finance Company and signed a security agreement granting Finance Company a security interest in the jewelry and the promissory note. Finance Company filed no financing statement, but took possession of both the jewelry and the note. Upon return from vacation, Disengaged asked Finance Company to return the jewelry, so that Disengaged could wear it to a social function, and to return the note, so that Disengaged could present it for payment. Fifteen days ago, Finance Company gave both the jewelry and the note to Disengaged for the purposes requested. Disengaged still has possession of both. Which one of the following statements best described the status of Finance Company's security interest? A. It was never perfected in either the jewelry or the note. B. It was perfected in the jewelry and the note, but is no longer perfected in either. C. It was perfected in the jewelry and the note, but is now perfected only in the note. D. It was perfected in the jewelry and the note, but is now perfected only in the jewelry. E. It is perfected in the jewelry and the note.

C. It was perfected in the jewelry and the note, but is now perfected only in the note.

Creditor has a security interest in Debtor's inventory. On Day 1, Debtor's deposit account contains $9,000, all of which is identifiable proceeds of inventory in which Creditor had a security interest. On Day 2, Debtor deposits $8,000 of non-proceeds into the deposit account. On Day 3, Debtor deposits $4,000 of identifiable proceeds of inventory into the deposit account. On Day 4, Debtor deposits $2,000 of non-proceeds into the deposit account. On Day 5, Debtor uses $3,000 of the $23,000 balance credited to the deposit account to buy a laser printer to be used as equipment. On Day 6, Debtor uses $7,000 of the remaining $20,000 balance to buy a network server to be used as equipment, leaving a balance of $13,000 credited to the deposit account. Which of the following tracing rules would leave Creditor with the greatest value of identifiable proceeds as collateral? A. the lowest intermediate balance rule B. FIFO (first-in-first-out) C. LIFO (last-in-first-out)

C. LIFO

Dentist purchased $10,000 of furniture on credit from Sterling Products, with Sterling retaining a security interest in the furniture sold. Dentist defaulted on the secured obligation and Sterling peaceably repossessed the furniture. If Sterling gives the proper notice, may it simply retain the furniture in satisfaction of the debt? A. Yes, provided the furniture is worth less than the secured obligation. B. Yes, provided the furniture is used in Dentist's office and Dentist has not paid 60% of the secured obligation. C. No, if the furniture is used in Dentist's home and Dentist has paid 60% of the secured obligation. D. No, if retention of the furniture would be commercially unreasonable.

C. No, if the furniture is used in Dentist's home and Dentist has paid 60% of the secured obligation.

Which one is the least likely to be consumer goods? A. Homeowner's water heater B. college student's laptop C. a farmer's pet cat D. a physician's cell phone

C. Physician's Cell Phone

Six months ago, Debutante purchased a necklace for personal use from Seller, who retained a security interest to cover the unpaid portion of the purchase price. Seller did not file a financing statement. Four weeks ago, Debutante traded the necklace for a bracelet and $200 in cash. Which one of the following statements is true? A. Seller has a perfected security interest in the bracelet and, if the $200 in cash remains identifiable, a perfected security interest in the cash. B. Seller has a perfected security interest in the bracelet and an unperfected security interest in the cash. C. Seller has an unperfected security interest in the bracelet and, if the $200 in cash remains identifiable, a perfected security interest in the cash. D. Seller has an unperfected security interest in the bracelet and cash because Seller's security interest in the necklace was unperfected. E. Seller has an unperfected security interest in the bracelet and cash even though Seller's security interest in the necklace was perfected. F. Seller has no security interest in the bracelet or cash.

C. Seller has an unperfected security interest in the bracelet and, if the $200 in cash remains identifiable, a perfected security interest in the cash.

Elaine had a rather valuable oil painting in need of expert restoration and re-framing. She brought it to Masterpieces, Inc., which specializes in such work and is a retail seller of fine art. Due to some internal miscommunication, Masterpieces sold the painting to Blaine, an investment banker. Blaine financed the purchase with a loan from State Bank. The loan agreement, which Blaine signed, purported to grant a security interest in the painting to State Bank. For the last several years, National Bank has had a security interest in all of the existing and after-acquired inventory and equipment of Masterpieces. Inc. Which of the following parties had, at some point in the fact pattern, a security interest in the painting? A. neither national bank nor state bank B. National Bank C. State Bank D. Both National Bank and State Bank

C. State Bank

On April 1, Bank loaned $200,000 to Farmer, secured by all of Farmer's existing and after-acquired equipment, inventory, accounts, and farm products. On that date, Bank sent to the appropriate filing office with the applicable filing fee a financing statement that properly identified Farmer and properly described the collateral, but which had an incorrect address for Farmer. On April 3, the filing office noticed the error and rejected the financing statement. On April 5, Supplier sold a tractor on credit to Farmer and retained a security interest in the tractor to secure payment of the purchase price. Supplier filed in the appropriate office a proper financing statement that same day. Supplier did not search for filed financing statements against Farmer. On April 7, Bank filed in the appropriate office a new financing statement against Farmer that properly identified Farmer and the collateral.Which one of the following statements is true with respect to the relative priorities of the security interests in the tractor that Supplier sold to Farmer? A. Bank's security interest has priority because Bank was the first to file or perfect. B. Bank's security interest has priority because Bank did not receive notification of Supplier's intent to take a purchase-money security interest in the tractor before Farmer received the tractor. C. Supplier's security interest has priority because it is a timely perfected purchase-money security interest. D. Supplier's security interest has priority because the filing office rejected Bank's first financing statement. E. Supplier's security interest has priority both because it is a timely perfected purchase-money security interest and because the filing office rejected Bank's first financing statement.

C. Supplier's security interest has priority because it is a timely perfected purchase-money security interest.

In which one of the following transactions is the security interest most likely to have attached to the collateral identified? A. Restaurateur authenticated an agreement interest purporting to give Bank a security interest in Restaurateur's liquor license (,i.e.,, license to sell alcoholic beverages) to secure a business loan. B. In return for a personal loan, Child authenticated an agreement purporting to grant Bank a security interest in Child's right to inherit under the will of Parent, who is still alive. C. Taxpayer authenticated an agreement purporting to grant Bank a security interest in Taxpayer's right to a refund of federal income taxes paid in the previous calendar year and for which no tax return has yet been filed. D. To obtain a loan to pay a long-outstanding bar tab, Homer authenticated an agreement purporting to grant Bank a security interest in a gas grill that Homer had borrowed from his neighbor, Ned.

C. Taxpayer authenticated an agreement purporting to grant Bank a security interest in Taxpayer's right to a refund of federal income taxes paid in the previous calendar year and for which no tax return has yet been filed.

Two years ago, Bank One acquired a security interest in all the equipment of Distressed. That security interest was perfected by a financing statement filed two years ago. Six months ago, without authorization from Bank One, Distressed sold a machine that it used as equipment to Salvage. Salvage paid for the machine with a loan from Bank Two and treated the machine as inventory. Three years ago, Bank Two acquired a security interest in all of the existing and after-acquired inventory of Salvage. At that time, Bank perfected its security interest by filing a financing statement against Salvage's inventory.Two weeks ago, Salvage sold the machine for cash to Buyer. Salvage put the money from the sale in a new deposit account maintained at Bank Two. Last week, Salvage withdrew the money and used it to buy a new photocopier from Seller. Salvage uses the photocopier as equipment. If neither Bank One nor Bank Two takes any action, which one of the following statements with respect to the priority of their security interests in the photocopier will be true? A. Bank One's security interest will have priority. B. Bank Two's security interest will have priority. C. The banks' security interests will have equal priority.

C. The banks' security interests will have equal priority.

Assuming that the filing office does everything it is supposed to do, which of the following is most likely to render a secured party unperfected? A. The financing statement contains an inaccurate address for the debtor. B. The financing statement contains an inaccurate address for the secured party. C. The financing statement omits the secured party's address. D. The financing statement contains an error in the debtor's name.

C. The financing statement omits the secured party's address.

Machine Maker leased $2 million in manufacturing equipment to Lessee for 20 years, a period equal to the useful life of the goods. Lessee has the right to terminate the lease at any time. Lessee also has the option to buy the goods at the end of the lease period for their appraised fair market value. Which of the following facts is most likely to cause the lease to qualify as an Article 9 transaction? A. Lessee must insure the goods and maintain them in good condition. B. The goods are specially manufactured for Lessee and not readily suitable for sale or lease to anyone else. C. The goods have to be integrated into Lessee's manufacturing facility and the cost of removing them would exceed the total amount remaining due under lease. D. Lessee paid $400,000 upon entering into the lease and is obligated to pay $13,400/month for the 20-year term of the lease (an amount that amortizes the remaining $1.6 million at slightly over 8%). E. None of the above; because the lease is terminable by Lessee, it does not qualify as an Article 9 security interest.

C. The goods have to be integrated into Lessee's manufacturing facility and the cost of removing them would exceed the total amount remaining due under lease.

Dirty buys a new $500 washing machine from Spears, paying $100 down and signing a negotiable promissory note for the $400 balance. Two weeks later, Spears sells the note and ancillary contract rights against Dirty to Factor for $375. Which one of the following is true? A. Neither transaction is an Article 9 transaction. B. The first transaction is an Article 9 transaction. C. The second transaction is an Article 9 transaction. D. Both transactions are Article 9 transactions.

C. The second transaction is an Article 9 transaction.

Which one of the following statements is true? A. Both the security agreement and the financing statement must describe the collateral and identify the obligation secured. B. The security agreement must describe the collateral and identify the obligation secured; the financing statement need not do either. C. The security agreement must describe the collateral and identify the obligation secured; the financing statement need only describe the collateral. D. Both the security agreement and the financing statement must describe the collateral; neither must identify the obligation secured.

C. The security agreement must describe the collateral and identify the obligation secured; the financing statement need only describe the collateral.

Two years ago, Degas used a valuable oil painting as security for three different loans, one from each of Bank One, Bank Two, and Bank Three. Bank One, which has the first priority security interest, is currently owed $30,000. Bank Two, which has the second priority security interest, is currently owed $20,000. Bank Three, which has the third priority security interest, is currently owed $10,000. Degas also owes a $5,000 unsecured debt to Restorer for work in repairing some damage to the painting.Degas has defaulted on all the loan obligations and Second Bank repossessed the painting. After sending proper notice to the required parties, Second Bank sold the painting for $50,000 in a commercially reasonable private disposition. The costs that Second Bank incurred in conducting the disposition totaled $2,000 and were reasonable. Second Bank has received a timely written demand for proceeds from First Bank and Restorer but not from Third Bank.What effect does the disposition have on the security interests of Bank One, Bank Two, and Bank Three? A. All the security interests are discharged. B. The security interests of Bank One and Bank Two are discharged; the security interest of Bank Three is unaffected. C. The security interests of Bank Two and Bank Three are discharged; the security interest of Bank One is unaffected. D. Each security interest is discharged only to the extent that the proceeds of the disposition are used to satisfy the obligation secured by that security interest. E. None; all the security interests are unaffected. F. none of the above

C. The security interests of Bank Two and Bank Three are discharged; the security interest of Bank One is unaffected.

1. Depositor recently deposited large sums of money for specified periods of time with three different banks. Each bank issued Depositor a certificate of deposit ("CD") in a different form. Which of these CDs qualifies as a deposit account? (X) A $100,000 six-month paper certificate issued by City Bank in negotiable form that accrues interest at a fixed rate. (Y) A $200,000 one-year paper certificate issued by State Bank in nonnegotiable form that accrues interest at a variable rate. (Z) A $300,000 ten-year CD issued by National Bank solely as an electronic data entry that accrues interest at a fixed rate. A. X only B. Y only C. Z only D. X and Y E. X and Z. F. Y and Z

C. Z only

A security interest in which one of following items of collateral may be perfected by filing a financing statement (assuming none of the items is proceeds of other collateral)? A. An automobile held as equipment. B. an aircraft held as inventory C. a certificated security held in bearer form. D. a deposit account

C. a certificated security held in bearer form.

Director borrows $2,000,000 from Shortcut to make a motion picture, and grants Shortcut a security interest in Director's copyright in the motion picture. Later, Shortcut needs cash and borrows money from Bank, giving a security interest in both Shortcut's right to receive money from Director and Shortcut's interest in Director's copyright. Bank's collateral is: A. an account B. chattel paper C. a general intangible D. an instrument

C. a general intangible

Dvorak owns 10,000 shares of stock in Microsoft, Inc. The shares are held in street name at Shearson Lynch, a major brokerage. That is, the transfer agent's records list the owner as Shearson Lynch, whose records list Dvorak as the owner. Which one of the following best describes Dvorak's property? A. a certificated security B. an uncertified security C. a security entitlement D. a securities account E. investment property F. a general intangible

C. a security entitlement

Which one is most likely to constitute equipment? A. spark plugs owned by an auto parts store B. spark plugs owned by delivery service, which maintains a fleet of delivery vans C. extra, uninstalled windshield owned by delivery service D. new tires installed on one of the vans owned by delivery service

C. extra, uninstalled winshield

Dealer is in the business of selling automobiles. Bank has a security interest in Dealer's inventory. Which of the following types of collateral is least likely to be direct proceeds from Dealer's sale of cars? A. accounts B. chattel paper C. general intangibles D. instruments

C. general intangibles

On August 1, 2011, National Bank acquired a security interest in the existing and after-acquired inventory and accounts of Furniture Store. National Bank perfected its security interest that same day by filing in the appropriate office a financing statement describing all the relevant collateral.If National Bank filed only one continuation statement - on January 15, 2016 - and it is now 2017, which one of the following statements with respect to National Bank's security interest would be true? A. It is perfected in all the collateral. B. t is perfected in collateral acquired by the debtor on or before July 31, 2016, but unperfected in collateral acquired by the debtor after that date. C. it is unperfected in all the collateral. D. National Bank no longer has a security interest.

C. it is unperfected in all the collateral.

Department Store sold a refrigerator to Customer, who in return gave Department store two $100 bills and a post-dated check for the balance of the purchase price. Which of the following best describes Department Store's property? A. money B. instruments C. money and an instrument D. money and an account E. instruments and an account

C. money and an instrument

C. surveillance devices and consumer goods.

Deft builds fine custom cabinetry. Last year, when many of Deft's customers were behind in paying their bills, Deft approached Serendipity Bank ("SB") for a loan. On October 1, a loan officer of SB advised Deft by telephone that Deft had been approved for a $25,000 loan. On October 3, the parties signed the loan documents and the funds were advanced. Included in the loan documents was a written security agreement in which Deft granted SB a security interest in all of Deft's "equipment and accounts." The security agreement did not mention after-acquired property. Deft used the loan proceeds to pay some outstanding bills. On November 1, Deft collected $13,000 on a long-overdue account and used part of the money to buy a new lathe. Which one of the following statements is true? A. The security interest attached to the lathe on October 1. B. the security interest attached to the lathe on October 3 C. the security interest attached to the lathe on November 1 D. the security interest never attached to the lathe

C. the security interest attached to the lathe on November 1.

Which one of the following is not a general intangible? A. frequent flyer miles B. tickets to an upcoming performance of the opera. C. ticket stubs to game six of the 1986 World Series D. a parking permit

C. ticket stubs to game 6 of the World Series

Which one of the following is most likely to involve a security interest governed by Article 9? A. A two-year lease of new office furniture worth $2,000 for $100/month. B. A sale of new office furniture worth $2,000 for which the buyer is to pay $100/month for 24 months. C. A sale of new office furniture worth $2,000 for $2,000 in cash; the seller has an option to buy the furniture back from the buyer one year later for $2,200. D. A sale of new office furniture worth $2,000 for $2,000 in cash; the buyer has the option to sell the furniture back to the seller one year later for $2,200.

D. A sale of new office furniture worth $2,000 for $2,000 in cash; the buyer has the option to sell the furniture back to the seller one year later for $2,200.

Delectables Corp. is an Oregon corporation that manufactures candy and then sells it to supermarket wholesalers. On June 1, to expand its operations, Delectables borrowed $20,000 from Bank and granted Bank a security interest in all its existing and after-acquired inventory and its proceeds. That same day, Bank filed an authorized financing statement in the appropriate office that describes the collateral as "existing and after-acquired inventory." Most of the customers of Delectables purchase on open account, promising to pay for the candy purchased within 60 days of receipt. It is now July 1. Which of the following statements is true? A. Bank's security interest in Delectables' accounts generated from the sale of candy is not perfected because the financing statement does not purport to cover accounts. B. Bank's security interest in Delectables' accounts generated from the sale of candy is not perfected because the financing statement does not purport to cover proceeds. C. Bank has a perfected security interest in Delectables' accounts generated from the sale of candy within the last 20 days. D. Bank has a perfected security interest in Delectables' accounts generated from the sale of candy within the last 30 days. E. Bank has a perfected security interest in all of Delectables' accounts generated from the sale of candy.

D. Bank has a perfected security interest in Delectables' accounts generated from the sale of candy within the last 30 days.

Two years ago, Bank acquired a security interest in Old Corp.'s existing and after-acquired equipment to secure a multi-year loan. At that time, Bank perfected its security interest by filing an effective financing statement against Old Corp. in Pennsylvania, the jurisdiction in which Old Corp. was incorporated. Old Corp. recently merged with New Corp., an entity recently incorporated in Minnesota. Pursuant to the merger, New Corp, as the surviving entity, acquired all the assets of Old Corp. and became obligated for all of Old Corp.'s obligations. Which one of the following statements is most correct immediately after the merger? A. Bank has a perfected security interest in the equipment previously owned by Old Corp and transferred to New Corp. but Bank must file in Minnesota within four months for that security interest to remain continuously perfected. B. Bank has no security interest in equipment acquired by New Corp. after the merger with Old Corp. C. Bank One has an unperfected security interest in the equipment acquired by New Corp. after the merger with Old Corp. D. Bank has a perfected security interest in the equipment acquired by New Corp. after the merger with Old Corp. but Bank must file in Minnesota within four months for that security interest to remain continuously perfected. E. Bank has a perfected security interest in the equipment acquired by New Corp. after the merger with Old Corp. but Bank must file in Minnesota within one year for that security interest to remain continuously perfected.

D. Bank has a perfected security interest in the equipment acquired by New Corp. after the merger with Old Corp. but Bank must file in Minnesota within four months for that security interest to remain continuously perfected.

When Alpha Corp. ("Alpha") borrowed $2 million from Bank, Alpha authenticated a security agreement granting Bank a security interest in all of Alpha's existing and after-acquired equipment. The year after Bank made the loan, Alpha and Beta merged pursuant to state corporate law to form Omega Corp. ("Omega"). Which one of the following statements is most likely to be true? A. Bank's security interest encumbers neither equipment owned by Beta before the merger nor equipment acquired by Omega after the merger. B. Bank's security interest encumbers equipment owned by Beta before the merger but not equipment acquired by Omega after the merger. C. Bank's security interest encumbers equipment acquired by Omega after the merger but not equipment owned by Beta before the merger. D. Bank's security interest encumbers both equipment owned by Beta before the merger and equipment acquired by Omega after the merger.

D. Bank's security interest encumbers both equipment owned by Beta before the merger and equipment acquired by Omega after the merger.

Dirty buys a new $500 washing machine from Spears, paying $100 down and signing a negotiable promissory note for the $400 balance. Two weeks later, Spears sells the note and ancillary contract rights against Dirty to Factor for $375. If Spears retained title to the washing machine, which of the following would be true? A. Neither transaction would be an Article 9 transaction. B. The first transaction would be an Article 9 transaction. C. The second transaction would be an Article 9 transaction. D. Both transactions would be Article 9 transactions.

D. Both transactions would be Article 9 transactions.

When Sarah, the sole owner of a Speedy Press, Inc., decided to retire, she entered into an agreement to sell the corporation to Bob for $400,000. On July 1, Bob paid $40,000 at the closing and agreed to pay the balance of the purchase over six years. Bob granted Sarah a security interest in shares of stock in Speedy Press, Inc. that he purchased. As part of the transaction, Grandmother guaranteed Bob's debt to Sarah and granted Sarah a security interest in her Rolls-Royce to secure the obligation on the guaranty. On September 1, in return for a $250,000 loan, Sarah granted Asset Finance Company a security interest in her rights against Bob and Grandmother. On November 1, Bob defaulted on his obligations. On December 1, Sarah defaulted on her obligations to Asset Finance Company. On December 10, Asset Finance Company notified Grandmother of Bob's default, as required under the terms of the guaranty, but she refused to pay.Which one of the following dates is most likely the earliest date on which Asset Finance Company would be authorized to peaceably repossess the Rolls-Royce? A. September 1. B. November 1 C. December 1 D. December 10 E. Asset Finance Company has no right to repossess the Rolls-Royce.

D. December 10

Two years ago, Degas used a valuable oil painting as security for three different loans, one from each of Bank One, Bank Two, and Bank Three. Bank One, which has the first priority security interest, is currently owed $30,000. Bank Two, which has the second priority security interest, is currently owed $20,000. Bank Three, which has the third priority security interest, is currently owed $10,000. Degas also owes a $5,000 unsecured debt to Restorer for work in repairing some damage to the painting.Degas has defaulted on all the loan obligations and Second Bank repossessed the painting. After sending proper notice to the required parties, Second Bank sold the painting for $50,000 in a commercially reasonable private disposition. The costs that Second Bank incurred in conducting the disposition totaled $2,000 and were reasonable. Second Bank has received a timely written demand for proceeds from First Bank and Restorer but not from Third Bank.What effect does the disposition have on the liability of Degas? A. Degas' liability to all the creditors is discharged. B. Degas' liability to the three secured parties is discharged; Degas' liability to Restorer is unaffected. C. Degas' liability to Bank Two and Bank Three is discharged; Degas' liability to Bank One is unaffected. D. Degas' liability to each creditor is discharged only to the extent that the proceeds of the disposition are used to satisfy the obligation owed to that creditor. E. None of the above

D. Degas' liability to each creditor is discharged only to the extent that the proceeds of the disposition are used to satisfy the obligation owed to that creditor.

Last year, Dudley granted Snidely a security interest in a riding lawn mower that Dudley already owned to secure a loan. At that time, Snidely filed a proper financing statement in the appropriate office that described the collateral as "lawn mower." Which one of the following independent scenarios presents the greatest threat to the continued perfection of Snidely's security interest in the mower? A. Dudley's name is legally changed to Do-Right. B. Dudley sells the mower to Nell, whose name is later changed to Whiplash. C. Dudley sells the mower to Nell, who uses the mower in a landscaping business. D. Dudley sells the mower to Nell, who is located in a different state.

D. Dudley sells the mower to Nell, who is located in a different state.

Dependable Transport Co. is a Delaware corporation with its principal place of business and chief executive office in Seattle, Washington. Dependable transports cargo for customers by both rail and ship. It owns and operates a fleet of railroad cars, several dozen large vessels that travel on the high seas, as well as several hundred shipping containers (large metal boxes that are lifted by crane and stacked on the railroad cars and ships). Dependable grants a security interest in all its equipment to Bank.How may Bank perfect its security interest in Dependable's shipping containers? A. Only by taking possession of the containers. B. Only by filing a financing statement in Delaware. C. Only by filing a financing statement in Washington.Only by filing a financing statement in Washington. D. Either by taking possession of the ships or by filing a financing statement in Delaware. E. Either by taking possession of the ships or by filing a financing statement in Washington. F. None of the above

D. Either by taking possession of the container or by filing a financing statement in Delaware.

Doubloon, Inc. is a Delaware corporation that conducts all its business out of Miami, Florida. Doubloon is engaged in the business of treasure hunting: searching the Caribbean for wrecked ships and salvaging whatever it finds. Doubloon's operations require expensive equipment, including a boat covered by a certificate of title statute. Most of its funding comes from equity investors who want a share of any recovery. Some, however, comes from lenders, two of which recently provided secured financing to Doubloon. On May 1, First Finance Company loaned Doubloon $200,000 and in return took a security interest in all of Doubloon's existing and after-acquired equipment and inventory. That same day, First Finance filed a proper financing statement in Florida. On June 1, Second Finance loaned Doubloon $300,000. At that time, Second Finance obtained a security interest in Doubloon's existing and after-acquired equipment and inventory and filed a proper financing statement in Florida.It is now August. What are the relative priorities of the security interests of First Finance and Second Finance? A. First Finance has priority in all of Doubloon's equipment and inventory. B. First Finance has priority in all the equipment and inventory that Doubloon acquired on or before May 1. C. First Finance has priority in all the equipment and inventory that Doubloon acquired on or before May 1, except the boat. D. First Finance has priority in all the equipment and inventory that Doubloon acquired on or before June 1. E. First Finance has priority in all the equipment and inventory that Doubloon acquired on or before June 1, except the boat.

D. First Finance has priority in all the equipment and inventory that Doubloon acquired on or before June 1.

On June 1, DiskDrive Maker approaches State Bank for a loan. On June 5, after reviewing DiskDrive Maker's credit report, State Bank agrees to loan DiskDrive Maker $200,000 to expand its operations, provided a search of the UCC records reveals no prior filings. On June 7, DiskDrive Maker signs a written security agreement, purporting to grant State Bank a security interest in all of DiskDrive Maker's existing and after-acquired equipment. On June 8, State Bank's UCC search shows no prior filings against DiskDrive Maker, and on June 9 State Bank makes the loan. On June 21, DiskDrive Maker purchases a new stamping machine with money from investors (,i.e.,, not with the loan proceeds). Which one of the following statements is true with regard to State Bank's security interest in the new stamping machine? A. it never attached B. it attached before June 8 C. it attached onJune 8 or 9 D. it attached on June 21

D. It attached on June 21

Which one of the following statements is most correct? A. Junior secured parties are entitled to notice of a foreclosure sale by a senior secured party. B. Junior secured parties are entitled to share in surplus proceeds of a foreclosure sale by a senior secured party. C. Junior secured parties may, by delivering a timely objection to a senior secured party, prevent that senior secured party from conducting a foreclosure sale. D. Junior secured parties may, by delivering a timely objection to a senior secured party, prevent that senior secured party from conducting a strict foreclosure.

D. Junior secured parties may, by delivering a timely objection to a senior secured party, prevent that senior secured party from conducting a strict foreclosure.

On June 1, Devoted purchased from Seller a $10,000 diamond necklace and a $5,000 sapphire ring as an anniversary gift for his wife, Dazzling. Devoted paid $2,000 in cash and promised Seller to pay the balance in six months. The sales agreement provided that Seller retained a security interest in the necklace and ring to secure payment of the purchase price. Seller did not file a financing statement. Two weeks later, Devoted gave the necklace and ring to Dazzling.In August, Dazzling brought the necklace to Jeweler for a minor repair. After Jeweler fixed the necklace, Jeweler mistakenly put the necklace on display in Jeweler's store, and Customer purchased it using a Visa card issued by Local Bank. Customer's cardholder agreement with Local Bank provides that Local Bank has a security interest in each item Customer purchases with the card to secure the purchase price of that item. At all relevant times, State Bank has had a perfected security interest in all of Jeweler's existing and after-acquired inventory.Which one of the following statements about the necklace is true? A. Seller, State Bank, and Local Bank each has a security interest in the necklace. B. Seller's security interest in the necklace was cut off by Jeweler's sale of the necklace to Customer. C. State Bank had a security interest in the necklace that was cut off by Jeweler's sale of the necklace to Customer. D. Local Bank has a perfected purchase-money security interest in the necklace.

D. Local Bank has a perfected purchase-money security interest in the necklace.

Two years ago, Barbara borrowed $100,000 from First Bank, Otto gave First Bank a security interest in some valuable artwork to secure the loan, and Olive gave First Bank a security interest in some Microsoft stock to secure the loan. Gene guaranteed payment of the debt. First Bank promptly perfected both of its security interests by filing proper financing statements in the appropriate office. With the consent and cooperation of the parties, it also took possession of the artwork and the stock certificates to facilitate the exercise of its enforcement rights in the event of default.Last year, Olive granted Second Bank a security interest in the same Microsoft stock to secure a personal loan of $50,000. Second Bank promptly perfected its security interest by filing a proper financing statement in the appropriate office. First Bank's security interest has priority over Second Bank's security interest.Last week, Barbara defaulted on the loan.Assume that First Bank gives proper notification of its intent to dispose of the artwork in a private sale and then conducts a commercially reasonable sale. The costs of the sale are $3,000 and are reasonable. On the date of the sale, the debt to First Bank is $95,000 and the debt to Second Bank is $45,000. Second Bank demands a share of the sale proceeds. Which one of the following statements is true? A. First Bank must pay to Barbara the portion of the sale proceeds that exceeds $98,000. B. First Bank must pay to Barbara the portion of the sale proceeds that exceeds $143,000. C. First Bank must pay to Second Bank the portion of the sale proceeds that exceeds $98,000 (up to a maximum of $45,000). D. Neither Barbara nor Second Bank is entitled to any portion of the sale proceeds.

D. Neither Barbara nor Second Bank is entitled to any portion of the sale proceeds.

Diligent was recently graduated from law school and admitted to the practice of law. In order to finance the establishment of a solo law office and pay expenses until funds start coming in, Diligent approached both Classmate and Relative for a loan. On May 1, before making any commitment to lend and with Diligent's authenticated authorization, Classmate filed in the appropriate office a financing statement against Diligent. That financing statement described the collateral as "accounts and furniture." On May 5, Relative loaned Diligent $40,000. In return, Diligent authenticated a security agreement granting Relative a security interest in existing and after-acquired accounts and furniture. On the same day, Relative filed in the appropriate office a financing statement against Diligent that described the collateral in the same manner as the security agreement. On May 10, Classmate loaned Diligent $10,000 and in return Diligent authenticated a security agreement granting Classmate a security interest in existing and after-acquired accounts and furniture.In July, Diligent buys a new sofa for use at home. What are the relative priorities of the security interests of Classmate and Relative in that sofa? A. Classmate's security interest has priority. B. Relative's security interest has priority. C. The security interests have equal priority. D. Neither creditor has a security interest in the sofa.

D. Neither creditor has a security interest in the sofa.

If the secured party, after default, conducts a disposition by selling the collateral in the usual manner and at the prevailing price on a recognized market, which one of the following statements is not true? A. No notification of the disposition need be sent to the debtor. B. The sale is conclusively deemed to be conducted in a commercially reasonable manner. C. The secured party may purchase the collateral at the disposition. D. No actual damages can be recovered for the secured party's failure to comply with Article 9 in conducting the disposition.

D. No actual damages can be recovered for the secured party's failure to comply with Article 9 in conducting the disposition.

If the debtor's name changes after a security interest in the debtor's existing and after-acquired equipment has been perfected by the filing of a financing statement, which one of the following statements is correct? A. An amendment to the financing statement must be filed to maintain perfection if the name change rendered the filed financing statement seriously misleading. B. The debtor's authorization is needed to file an amendment to the financing statement to indicate the debtor's new name. C. An amendment to the financing statement must be filed to maintain perfection in equipment acquired by the debtor on credit more than four months after the name change. D. No amendment to the financing statement need be filed to perfect a security interest in equipment acquired by the debtor more than four months after the name change, in a trade for existing equipment, even if the name change rendered the filed financing statement seriously misleading.

D. No amendment to the financing statement need be filed to perfect a security interest in equipment acquired by the debtor more than four months after the name change, in a trade for existing equipment, even if the name change rendered the filed financing statement seriously misleading.

Duke, Incorporated makes and sells surfboards and related merchandise. Duke maintains a securities account at Brokerage. Shares of stock in several publicly traded corporations - mostly suppliers to and customers of Duke - are currently credited to Duke's account at Brokerage. To obtain the cash needed to finance a new advertising campaign, Duke approaches Bank for a loan. As part of the transaction, Duke agrees to offer as collateral its interest in all the shares of stock credited now or in the future to Duke's account with Brokerage. Which one of the following statements is true? A. A description of the collateral as "all assets" in the security agreement would be sufficient provided Duke's agreement with Brokerage does not purport to invalidate an attempt by Duke to grant a security interest in the securities account. B. A description of the collateral as "all investment property" in the security agreement would be sufficient regardless whether Duke's agreement with Brokerage purports to invalidate an attempt by Duke to grant a security interest in the securities account. C. A description of the collateral as "all securities accounts" will be sufficient to reach securities entitlements credited to Duke's account at Brokerage at the time the security agreement is authenticated, but insufficient to reach any securities entitlements credited later. D. No security interest will attach if Duke's agreement with Brokerage purports to invalidate an attempt by Duke to grant a security interest in the securities account.

D. No security interest will attach if Duke's agreement with Brokerage purports to invalidate an attempt by Duke to grant a security interest in the securities account.

Dunkirk is a Seattle retailer of sailboats who two years ago granted Sailor a security interest in her existing and after-acquired inventory in return for a loan. Sailor properly perfected that interest by filing a properly executed financing statement with the Washington Department of Licensing (the office that Washington law designates as the place to file financing statements) that describes the collateral as "existing and after-acquired inventory."Dunkirk sells a $20,000 sailboat to Buyer, who pays $2,000 down and promises to pay the remainder over the next two years. If Sailor does nothing, in which one of the following scenarios is Sailor's security interest in Dunkirk's rights against Buyer most likely to become unperfected? A. Buyer's obligation is an account. B. Buyer's obligation is a negotiable instrument. C. Buyer lives in a state other than Washington. D. None of the above will cause Dunkirk to lose perfection.

D. None of the above will cause Dunkirk to lose perfection.

Which one of the following is most likely to render a secured party unperfected? A. The filing office rejects the filing because it lists an incorrect address for the secured party. B. The financing statement described the collateral as "equipment listed on Exhibit A" but Exhibit A is not attached and does not exist. C. The filing office inadvertently switched the names of the debtor and the secured party when entering the information on the financing statement into its electronic database, with the result that the filing was indexed under the secured party's name instead of the debtor's name. D. None would render the secured party unperfected.

D. None would render the secured party unperfected.

Accountant assists people and small businesses in preparing their federal and state income tax returns. Because the work is seasonal, last autumn Accountant needed money to pay bills and other living expenses. At that time, Accountant borrowed $40,000 from Savings & Loan and signed an agreement purporting to grant Savings & Loan a security interest in all of Accountant's existing and after-acquired accounts. At that time, Client owed Accountant $8,000 for services rendered.Last week, when Client failed to pay as promised, Client got Friend to guaranty the debt to Accountant in return for Accountant agreeing not to bring legal action for three months. Which one of the following statements is true? A. Savings & Loan has no interest in Friend's guaranty because that is a liability, not an interest in property to which a security interest can attach. B. Savings & Loan has no interest in the guaranty because Savings & Loan provided no new value for it. C. Savings & Loan has no interest in the guaranty because the guaranty was created after Savings & Loan's interest in the receivable attached. D. Savings & Loan's security interest in the account due from Client includes the guaranty.

D. Savings & Loan's security interest in the account due from Client includes the guaranty.

Accountant assists people and small businesses in preparing their federal and state income tax returns. Because the work is seasonal, last autumn Accountant needed money to pay bills and other living expenses. At that time, Accountant borrowed $40,000 from Savings & Loan and signed an agreement purporting to grant Savings & Loan a security interest in all of Accountant's existing and after-acquired accounts. At that time, Client owed Accountant $8,000 for services rendered.Two months ago, after Accountant pressed Client for payment, Client gave Accountant a mortgage on Client's vacation cabin to secure payment of the debt. Which one of the following statements is true? A. Article 9 does not apply to Savings & Loan's interest in the mortgage on Client's cabin because that interest is in real property. B. Savings & Loan has no interest in the mortgage on Client's cabin because Savings & Loan provided no new value for it. C. Savings & Loan has no interest in the mortgage on Client's cabin because the mortgage was created after Savings & Loan's interest in the receivable attached. D. Savings & Loan's security interest in the account due from Client includes the mortgage on Client's cabin.

D. Savings & Loan's security interest in the account due from Client includes the mortgage on Client's cabin.

On June 1, Devoted purchased from Seller a $10,000 diamond necklace and a $5,000 sapphire ring as an anniversary gift for his wife, Dazzling. Devoted paid $2,000 in cash and promised Seller to pay the balance in six months. The sales agreement provided that Seller retained a security interest in the necklace and ring to secure payment of the purchase price. Seller did not file a financing statement. Two weeks later, Devoted gave the necklace and ring to Dazzling.In July, Dazzling decided that she did not like the ring, so she sold it to Pawn Shop for $2,000. A week later, Pawn Shop sold it to Buyer for $3,000.Which one of the following statements about Seller's security interest in the ring is true? A. Seller's security interest was cut off by Devoted's gift of the ring to Dazzling. B. Seller's security interest survived the gift of the ring to Dazzling but was cut off by the sale of ring to Pawn Shop. C. Seller's security interest survived the sale of the ring to Pawn Shop but was cut off by the sale to Buyer. D. Seller's security interest in the ring survives.

D. Seller's security interest in the ring survives.

Distributor manufactures and sells toys. Shipper provides transportation services for Distributor; specifically, Shipper transports all of Distributor's toys to its customers throughout the country. The form invoices that Shipper provides to Distributor when picking up toys for transport contain a provision purporting to grant Shipper a security interest in all goods of the customer (,i.e.,, Distributor) in Shipper's possession to secure payment of the shipping charges. Distributor has never signed these invoices and the parties have never discussed this provision. Which one of the following statements is true? A. Shipper has a security interest in Distributor's goods in Shipper's possession because no signed writing is needed. B. Shipper has a security interest in Distributor's goods in Shipper's possession because of Distributor's failure to object to the provision. C. Shipper has a security interest in Distributor's goods in Shipper's possession because of the parties' course of dealing. D. Shipper does not have a security interest in any of Distributor's goods

D. Shipper does not have a security interest in any of Distributor's goods

Which one of the following transactions is most likely to involve a security interest governed by Article 9? A. The sale of a $500 computer for $300 in cash. B. The sale of a $100 computer for $300 in cash C. the sale of a computer for $300, with an option to buy it back one year later for $330. D. The sale of a computer for $300, with an obligation to buy it back one year later for $330.

D. The sale of a computer for $300, with an obligation to buy it back one year later for $330.

Deborah, who owns and operates a small used bookstore, approached Bank for a loan to create a web page and an electronic catalog of the store's inventory, so as to facilitate internet sales. On the loan application, which Deborah signed, Deborah listed the store's address as Kansas City, Missouri, and her home address as Kansas City, Kansas. Nothing in the loan application or anything else that Deborah signed at that time authorized Bank to file a financing statement. Nevertheless, Bank did file a financing statement and conducted a search before deciding whether to make the loan. The financing statement properly identifies Deborah and describes the collateral as "inventory." Bank filed the financing statement in the office designated by Missouri's § 9-501. Subsequently, Bank approved and made a $15,000 loan to Deborah, who authenticated a security agreement granting Bank a security interest in all of the store's existing and after-acquired inventory. Bank's security interest is: A. Perfected. B. Unperfected because it was unauthorized when filed. C. Unperfected because it was filed before the security interest attached. D. Unperfected because it was filed in the wrong jurisdiction.

D. Unperfected because it was filed in the wrong jurisdiction.

Diane borrows $2,000 from Local Bank to finance a vacation. The loan documents, which Diane signed, purport to grant Local Bank a security interest in Diane's personal checking account to secure the loan. Which one of the following statements is true? A. Local Bank has an Article 9 security interest in Diane's checking account only if the checking account is maintained at Local Bank. B. Local Bank has an Article 9 security interest in Diane's checking account whether or not the checking account is maintained at Local Bank. C. Local Bank has no security interest in Diane's checking account. D. Whether Local Bank has a security interest in Diane's checking account is an issue not governed by Article 9.

D. Whether Local Bank has a security interest in Diane's checking account is an issue not governed by Article 9.

Duchess, a wealthy individual, maintains a securities account at Brokerage. Shares of stock in several publicly traded corporations are credited to Duchess' account at Brokerage. To obtain the cash needed to finance a huge party, Duchess approaches Bank for a loan. As part of the transaction, Duchess agrees to offer as collateral her interest in all the shares of stock currently credited to her account with Brokerage. Which of the following descriptions of the collateral would be sufficient for this purpose if put in a properly authenticated security agreement? (W) All investment property. (X) All securities accounts.(Y) All securities entitlements. (Z) Duchess' securities account at Brokerage. A. W only B. X only C. Y only D. Z only E. two of the above F. Three of the above

D. Z only

Which of the following entities, if organized under the law of a U.S. state, is a registered organization? (X) A corporation. (Y) A limited liability company. (Z) A limited liability partnership. A. A corporation. B. a limited liability company C. a limited liability partnership D. a corporation and an LLC E. a corp. and an LLP F. an LLC and an LLP

D. a corporation and an LLC

Which one of the following is most likely to be a secured transaction governed by Article 9? A. A credit sale of goods. B. a lease of goods C. A sale of a copyright. D. a sale of a payment intangible. E. a sale of investment property

D. a sale of a payment intangible.

Towing Company is authorized by state law to tow any vehicle abandoned on a public road. The law further allows Towing Company to bill the registered owner of the vehicle for the towing service and gives Towing Company a lien on the vehicle, while in its possession, to secure payment of that charge. In return for a loan, Towing Company grants Factor a security interest in all of its existing and after-acquired rights against the owners of the vehicles it tows. Which one of the following statements is correct? A. the collateral is chattel paper B. the collateral is not chattel paper because of the after-acquired property clause. C. The collateral is not chattel paper because Towing Company's lien on the vehicles it tows does not constitute a security interest. D. the collateral is not chattel paper for a reason other than those indicated by answers (b) and (c).

D. collateral is not chattel paper.

D. three

Driver purchased a new $16,000 car from Seller for personal use. The agreement called for Driver to make 48 equal monthly payments of $400 (for a total of $19,200). After making only one payment, Driver defaulted and Seller repossessed the car. Two weeks later, Driver received an official-looking letter from Seller. This was the first communication sent by Seller after the default. The letter indicated that Seller had sold the car off Seller's lot for $12,500, leaving a $3,500 deficiency (the letter fully explained how this deficiency was calculated: $16,000 debt - $400 payment - $12,500 sale price + $400 costs of repossession & sale). The letter also demanded that Driver pay within one week and threatened legal proceedings if Driver did not. Driver comes to your office for advice. The supreme court in your state has adopted the "Absolute Bar Rule" for consumer transactions, to deal with creditor misconduct under Part 6 of Article 9. You conclude that the resale price was fair and that the cost of repossession and sale were reasonable. Thus: A. Seller did nothing wrong and Driver is liable for the deficiency. B. Seller acted improperly but the error caused no damage, so Driver is nevertheless liable for the deficiency. C. Driver's best protection is the Absolute Bar Rule. D. Driver's best protection is § 9-625(c).

D. driver's best protection is § 9-625(c).

Dancing Studios ("DS") operates two nightclubs that cater to a large, local retirement community. To enhance revenues, it starts providing ballroom dancing lessons, which it markets to customers in packages of 20 private or semi-private lessons. Customers typically promise to pay for these lessons by signing a negotiable promissory note. Every time DS receives such a note, it delivers it to Suave Bank, which has a security interest in all of DS's "existing and after-acquired instruments, accounts, chattel paper, and general intangibles" to secure long-term capital financing. Suave Bank filed no financing statement with respect to this transaction. On March 1, Suave Bank returned to DS the promissory note DS had received from Client, so that DS could present it to Client for payment. Upon presentation of the note, Client was unable to pay. On March 18, as part of an amicable settlement, DS cancelled the note and Client gave DS a new negotiable promissory note with a longer maturity date and a higher rate of interest. It is now April 1 and DS still has possession of the new note from Client. Which one of following statements is true with respect to Suave Bank's security interest in the new note? A. It is unperfected because the temporary perfection period in § 9-312(e) has expired. B. It is unperfected because the temporary perfection period in § 9-312(g) has expired. C. It is unperfected because the perfection rule of § 9-315(c) is inapplicable D. it is perfected.

D. it is perfected

On March 1, Lender acquired a security interest in the inventory of Downtown Auto Parts, a retailer of replacement parts for cars and trucks. Lender perfected its interest on March 2 by filing in the appropriate office a financing statement that properly identifies the debtor and describes the collateral as "inventory." On October 1, Downtown delivers a large portion of its inventory to Bailee. Which one of the following statements with respect to Lender's security interest in the goods held by Bailee is true? A. It is unperfected if Bailee has neither issued a document covering the goods nor authenticated a record acknowledging that Bailee is holding the goods for Lender's benefit. B. It is unperfected if Bailee issued a negotiable document covering the goods. C. It is unperfected if Bailee issued a nonnegotiable document covering the goods. D. it is perfected.

D. it is perfected.

Dentist purchases on credit from Furniture Store a sofa for use in Dentist's home. The sales agreement, which Dentist signed, gives Furniture a security interest in the sofa to secure payment of the purchase price. Furniture Store never filed a financing statement. Six months later, Dentist decides the sofa is needed more at Dentist's office and brings the sofa there, where it remains. Which one of the following statements with respect to Furniture Store's security interest is most likely to be correct? A. It was never perfected. B. It was perfected but became unperfected when Dentist moved the furniture to Dentist's office. C. It was perfected and remains perfected under § 9-507(b). D. it was and remains perfected.

D. it was and remains perfected.

Dietary Endeavors owns and operates several weight-loss clinics. At these clinics, it provides classes on diet and exercise, sells vitamins and weight loss books, and maintains exercise facilities and equipment for its clients to use. On May 1, Bank gets a security interest in all the existing and after-acquired inventory, equipment, and accounts of Dietary Endeavors in return for a loan. On the same day, Bank files in the appropriate statewide office a financing statement that properly identifies the debtor and the collateral.In which of the following situations is Bank's security interest in the collateral at issue likely not to have priority? A. On June 1, a copier that Dietary Endeavors uses as equipment becomes a fixture to real property owned by Dietary Endeavors and on which Mortgagee has a mortgage. The mortgage was recorded in the appropriate real estate records two years ago. B. On July 1, Creditor causes the sheriff to levy on inventory and equipment at one of Dietary Endeavors' places of business pursuant to a writ of execution in connection with a judgment obtained on February 1. C. On August 1, Dietary Endeavors transfers some inventory to Accountant in satisfaction of a pre-existing debt. D. none of the above

D. none of the above

Distinguished Furnishings, Inc. ("DFI") is a manufacturer of office furniture. In 2006, First Bank acquired a first-priority security interest in all of DFI's existing and after-acquired inventory and accounts. In 2007, Second Bank acquired a second-priority security interest in all of DFI's existing and after-acquired inventory and accounts. Second Bank promptly and properly notified all of DFI's regular customers, including Retailer, of its security interest in DFI's accounts. First Bank did not.On June 1, 2010, DFI sold seven desks to Retailer on open account. The purchase price was $21,000. On July 1, 2010, DFI sold 13 bookcases to Retailer, also on open account. The purchase price was $26,000. On July 5, 2010 after DFI defaulted on its obligations to First Bank, First Bank sent an authenticated letter to Retailer informing Retailer of First Bank's security interest in DFI's accounts and instructing DFI to remit payment to First Bank.Several of the bookcases that DFI sold to Retailer were defective, a fact discovered after Retailer sold the bookcases to one of Retailer's customers. Retailer claims that this caused it to suffer $30,000 in damages (the lost value of the bookcases and the lost profit on the resale contract).Before First Bank received anything from Retailer, DFI defaulted on its obligations to Second Bank and First Bank received an authenticated letter from Second Bank demanding any surplus collections, up to the amount of the $50,000 debt that DFI still owes to Second Bank. First Bank then reached a commercially reasonably agreement with Retailer pursuant to which Retailer gave First Bank a promissory note for $18,000 in full payment of Retailer's obligations on the purchase agreements for the desks and bookcases. At this time, First Bank had collected on all the other accounts and DFI still owed First Bank $10,000. Ignoring all collection costs and further interest, which one of the following statements is most likely to be correct? A. First Bank must pay Second Bank $8,000. B. First Bank must pay Second Bank the amount by which the value of the promissory note exceeds $10,000. C. First Bank's settlement agreement with Retailer is not binding on Second Bank. D. none of the above

D. none of the above

Two years ago, Degas used a valuable oil painting as security for three different loans, one from each of Bank One, Bank Two, and Bank Three. Bank One, which has the first priority security interest, is currently owed $30,000. Bank Two, which has the second priority security interest, is currently owed $20,000. Bank Three, which has the third priority security interest, is currently owed $10,000. Degas also owes a $5,000 unsecured debt to Restorer for work in repairing some damage to the painting.Degas has defaulted on all the loan obligations and Second Bank repossessed the painting. After sending proper notice to the required parties, Second Bank sold the painting for $50,000 in a commercially reasonable, private disposition. The costs that Second Bank incurred in conducting the disposition totaled $2,000 and were reasonable. Second Bank has received a timely written demand for proceeds from First Bank and Restorer but not from Third Bank.How should such funds be disbursed? A. $30,000 to First Bank, $20,000 to Second Bank. B. $22,000 to Second Bank, $10,000 to Third Bank, followed by $18,000 to Degas. C. $22,000 to Second Bank, $5,000 to Restorer, followed by $23,000 to Degas. D. $22,000 to Second Bank, $10,000 to Third Bank, $5,000 to Restorer, followed by $13,000 to Degas. E. $22,000 to Second Bank, $28,000 to Degas. F. None of the above.

E. $22,000 to Second Bank, $28,000 to Degas.

When Sarah, the sole owner of a Speedy Press, Inc., decided to retire, she entered into an agreement to sell the corporation to Bob for $400,000. On July 1, Bob paid $40,000 at the closing and agreed to pay the balance of the purchase over six years. Bob granted Sarah a security interest in shares of stock in Speedy Press, Inc. that he purchased. As part of the transaction, Grandmother guaranteed Bob's debt to Sarah and granted Sarah a security interest in her Rolls-Royce to secure the obligation on the guaranty. On September 1, in return for a $250,000 loan, Sarah granted Asset Finance Company a security interest in her rights against Bob and Grandmother. On November 1, Bob defaulted on his obligations. On December 1, Sarah defaulted on her obligations to Asset Finance Company. On December 10, Asset Finance Company notified Grandmother of Bob's default, as required under the terms of the guaranty, but she refused to pay.Which one of the following dates is most likely the earliest date on which Asset Finance Company would be authorized to peaceably repossess the assets of Speedy Press, Inc.? A. September 1 B. November 1 C. December 1 D. December 10 E. Asset Finance Company has no right to repossess the assets of Speedy Press, Inc.

E. Asset Finance Company has no right to repossess the assets of Speedy Press, Inc.

Numismatist collects brass, silver, copper, and gold coins dating from the Roman Empire. Although she occasionally trades coins with other collectors, she collects primarily for her own personal enjoyment and displays the coins throughout her home to all her visitors. When Numismatist purchased a new house, she made a down payment of $25,000 and borrowed $250,000 from Bank, secured by a mortgage on the house. Because Numismatist's annual income was not quite as high as Bank normally prefers for someone borrowing that amount of money, Bank insisted upon taking - and did in fact acquire - a security interest in "Numismatist's coin collection." At this time, the coin collection was worth $20,000. Four years later, Numismatist defaulted on the loan from Bank, and Bank peaceably repossessed the coin collection. At this time, the collection was worth $40,000 (the increase in value being due to both appreciation and to periodic additions to the collection). Which of the following statements is true? A. The lien on the collection is not governed by Article 9 because it was part of a real estate mortgage transaction. B. Bank had no right to repossess unless it filed a properly executed financing statement in the appropriate office. C. Bank did nothing inappropriate. D. Bank had no right to repossess more than $20,000 worth of coins. E. Bank had no right to repossess all of the coins in the collection.

E. Bank had no right to repossess all of the coins in the collection.

Dunkirk, an individual, is a Seattle retailer of sailboats who two years ago granted Sailor a security interest in her existing and after-acquired inventory in return for a loan. Sailor properly perfected that interest by filing a properly executed financing statement with the Washington Department of Licensing (the office that Washington law designates as the place to file financing statements) that describes the collateral as "existing and after-acquired inventory."In which one of the following situations is Sailor's security interest most likely to become unperfected with respect to some or all of the collateral if Sailor fails to refile? A. Dunkirk moves her office from Seattle to Boise, Idaho. B. Dunkirk moves her home from Seattle to Spokane, Washington. C. Dunkirk moves some of her inventory from Seattle to Portland, Oregon. D. Dunkirk exchanges several boats for an elephant. E. Dunkirk gets married and adopts her husband's surname.

E. Dunkirk gets married and adopts her husband's surname.

Prior to the transactions described below, Bank acquired a security interest in each of the following: (i) Farmer's existing dairy herd; (ii) Beekeeper's honey bees; (iii) Breeder's racehorse; (iv) Limousine Service's only spare engine; (v) all of Manufacturer's leather; and (vi) all of Landscaper's equipment. In which of the following property is Bank's security interest most likely to have attached? A. a calf born to one of Farmer's cows B. Honey produced by Beekeeper's bees C. a purse won by Breeder's racehorse D. The vehicle into which Limousine Service's spare engine is installed. E. the sneaker's made using Manufacturer's leather. F. a new bulldozer that Landscaper purchased on credit.

E. the sneaker's made using Manufacturer's leather

Film Studio has been making films for 20 years and owns the copyright on several dozen motion pictures. All of the copyrights are registered with the U.S. Copyright Office. Three years ago, Finance Company began loaning money to Film Studio and acquired a security interest in all of Film Studio's existing and after-acquired copyrights. Finance Company's security interest in each copyright is recorded with the U.S. Copyright Office. Last month, Film Maker granted a nonexclusive license in its copyrights to DVD Maker for the purpose of producing and selling high-definition digital video discs. Under the license agreement, DVD Maker is to pay Film Studio a royalty for each disc it makes using one of Film Studio's copyrights. Which one of the following statements about Finance Company's security interest in Film Studio's right to royalties from DVD Maker is most correct? A. It never attached. B. It attached but was never perfected because Finance Company's security interest in the copyrights was never perfected. C. It attached but was never perfected even though Finance Company's security interest in the copyrights was never perfected. D. It was perfected but became unperfected 21 days after Film Studio entered into the agreement with DVD Maker because Finance Company has not filed a financing statement. E. It was perfected but became unperfected 21 days after Film Studio entered into the agreement with DVD Maker because perfection of a security interest such a right to royalties cannot be accomplished by filing where Finance Company filed. F. It is perfected.

E. It was perfected but became unperfected 21 days after Film Studio entered into the agreement with DVD Maker because perfection of a security interest such a right to royalties cannot be accomplished by filing where Finance Company filed.

Cassals wanted to buy a new cello but lacked the $2,000 purchase price. So, Cassals borrowed $2,000 from Rostropovich, granting Rostropovich a security interest in and possession of the new cello. Rostropovich filed no financing statement. Which one of the following statements is true? A. Rostropovich has a purchase-money security interest only if Cassals bought the cello for use as a consumer good. B. Rostropovich's security interest is perfected only if Cassals bought the cello for use as a consumer good. C. Rostropovich's security interest is perfected only if the loaned funds were actually used to buy the new cello. D. Rostropovich's security interest is perfected only if Cassals bought the cello for use as a consumer good and the loaned funds were actually used to buy the new cello. E. Rostropovich's security interest is perfected.

E. Rostropovich's security interest is perfected.

Dexterous is building a house on land Dexterous owns. Supplier is providing some of the materials Dexterous needs on credit. Article 9 will govern a security interest in which of the following materials provided by Supplier? (X) Lumber yet to be used to frame the house. (Y) Lumber already used to frame the house. (Z) A hot tub already installed on the outside deck. A. X only. B. Y only C. Z only D. X and Z E. X and Z F. Y and Z

E. X and Z

Motorist requires medical services from Hospital after getting into a one-car accident. Before agreeing to treat Motorist, Hospital requires Motorist to sign a form by which Motorist does the following: (1) transfers to Hospital Motorist's claim under Motorist's health insurance policy (to the extent arising out of Hospital's fee for treating Motorist); (2) transfers to Hospital Motorist's claim under Motorist's automobile insurance policy (to the extent arising out of Hospital's fee for treating Motorist); and (3) agrees to pay Hospital for any portion of its fee not covered by insurance. Hospital borrows money from Bank and in return grants Bank a security interest in all of Hospital's receivables, including Hospital's rights against Motorist, Motorist's health care insurer, and Motorist's automobile insurer. Which of the following statements are true? (X) Article 9 applies to a security interest in Hospital's right to payment from Motorist's health care insurer. (Y) Article 9 applies to a security interest in Hospital's right to payment from Motorist's automobile insurer. (Z) Article 9 applies to a security interest in Hospital's right to payment from Motorist. A. X only. B. Y only C. Z only. D. X and Y E. X and Z. F. Y and Z

E. X and Z

Which one of the following is not a general intangible? A. a right to receive alimony. B. a bequest due from an estate under administration. C. a right to an income tax refund. D. a tenant's right in a security deposit provided by the landlord E. a right to receive vacation pay from an employer.

E. a right to receive vacation pay from an employer.

Two years ago, Barbara borrowed $100,000 from First Bank, Otto gave First Bank a security interest in some valuable artwork to secure the loan, and Olive gave First Bank a security interest in some Microsoft stock to secure the loan. Gene guaranteed payment of the debt. First Bank promptly perfected both of its security interests by filing proper financing statements in the appropriate office. With the consent and cooperation of the parties, it also took possession of the artwork and the stock certificates to facilitate the exercise of its enforcement rights in the event of default.Last year, Olive granted Second Bank a security interest in the same Microsoft stock to secure a personal loan of $50,000. Second Bank promptly perfected its security interest by filing a proper financing statement in the appropriate office. First Bank's security interest has priority over Second Bank's security interest.Last week, Barbara defaulted on the loan.If, before selling the artwork, First Bank desires to keep the Microsoft Stock in partial satisfaction of the debt, to how many among Barbara, Otto, Olive, Gene, and Second Bank must First Bank send notification of the proposal? A. None. B. one C. Two D. three E. Four F. five

E. four

On August 1, 2011, National Bank acquired a security interest in the existing and after-acquired inventory and accounts of Furniture Store. National Bank perfected its security interest that same day by filing in the appropriate office a financing statement describing all the relevant collateral.If National Bank filed only one continuation statement - on September 15, 2016 - and it is now 2017, which one of the following statements with respect to National Bank's security interest would be true? A. It is perfected in all the collateral. B. It is perfected in collateral acquired by the debtor on or before July 31, 2016, but unperfected in collateral acquired by the debtor after that date. C. It is perfected in collateral acquired by the debtor on or after September 15, 2016, but unperfected in collateral before that date. D. It is perfected in collateral acquired by the debtor on or before July 31, 2016 and in collateral acquired by the debtor on or after September 15, 2016, but unperfected in collateral acquired in between those two dates. E. it is unperfected in all the collateral.

E. it is unperfected in all the collateral.

Delinquent borrows $10,000 from Bank. Father guarantees the loan and Aunt grants Bank a security interest in her antique desk to secure the loan. No other creditor has a lien in the desk or a filed financing statement against Aunt. After Delinquent defaults on the loan, Bank repossesses the desk.If Bank desires to keep the desk in full satisfaction of the debt, to whom must Bank send a proposal to that effect (or otherwise obtain written consent from)? A Delinquent only. B. delinquent and father C. delinquent, father, and aunt D. father and aunt E. father only F. Aunt only

F. Aunt only

Article 9 applies to the lien described in which of the following? (X) Lawyer represents Victim in a tort action against Tortfeasor. The common law of the applicable state provides that Victim is the owner of all documents prepared by Lawyer in the course of the representation but gives Lawyer a lien on those documents to secure payment of Lawyer's fee. (Y) Feed Supplier provides feed on credit to Porky, who is in the business of raising pigs. A state statute gives Feed Supplier a lien on the pigs that eat the feed to secure payment of the purchase price, but only so long as the pigs remain in Porky's possession. (Z) Owner leases to Farmer 4,000 acres of land on which Farmer grows soybeans and corn. A statute of the state in which the parties are located gives Owner a lien on the crops Farmer grows on the land to secure payment of the rent. A. X only. B. Y only C. Z only D. X and Y E. X and Z F. Y and Z

F. Y and Z

Dipstick is a professional plumber. Which of the following statements is true? (X) If Dipstick is an employee of a plumbing contractor, Article 9 will apply to any attempt to grant a security interest in Dipstick's right to payment for work. (Y) If Dipstick works freelance (,i.e.,, is hired directly by customers who need plumbing services), Article 9 will apply to any attempt to grant a security interest in Dipstick's right to payment for work. (Z) If Dipstick works freelance (,i.e.,, is hired directly by customers who need plumbing services), Article 9 will apply to a sale of all of Dipstick's rights to payment for work. A. X only. B. Y only C. Z only D. X and Y E. X and Z F. Y and Z

F. Y and Z

Equipment Co. leases a large bulldozer to Landscaper for three years. This is a true lease (,i.e.,, not a disguised security arrangement). Which of the following statements is true? (X) Article 9 applies to this transaction.(Y) If Equipment Co. uses all its rights under the lease as collateral for a loan from a bank, Article 9 will apply to that transaction. (Z) If Equipment Co. sells all its rights under the lease, Article 9 will apply to that transaction. A. X only. B. Y only C. Z only D. X and Y E. X and Z F. Y and Z

F. Y and Z

Darling's parents put 10,000 shares of stock in Microsoft, Inc. in trust for Darling. Lawyer serves as trustee. The stock is held in street name at Shearson Lynch, a major brokerage. That is, the transfer agent's records list the owner as Shearson Lynch, which in turn credits ownership to Lawyer, as trustee. Which one of the following best describes Darling's property? A. a certificated security B. an uncertificated security C. a security entitlement D. a securities account E. investment property F. a general intangible

F. a general intangible

Dependable Transport Co. is a Delaware corporation with its principal place of business and chief executive office in Seattle, Washington. Dependable transports cargo for customers by both rail and ship. It owns and operates a fleet of railroad cars, several dozen large vessels that travel on the high seas, as well as several hundred shipping containers (large metal boxes that are lifted by crane and stacked on the railroad cars and ships). Dependable grants a security interest in all its equipment to Bank.How may Bank perfect its security interest in Dependable's railroad cars? A. Only by taking possession of the railroad cars. B. Only by filing a financing statement in Delaware. C. Only by filing a financing statement in Washington. D. Either by taking possession of the railroad cars or by filing a financing statement in Delaware. E. Either by taking possession of the railroad cars or by filing a financing statement in Washington. F. none of the above

F. none of the above

Dependable Transport Co. is a Delaware corporation with its principal place of business and chief executive office in Seattle, Washington. Dependable transports cargo for customers by both rail and ship. It owns and operates a fleet of railroad cars, several dozen large vessels that travel on the high seas, as well as several hundred shipping containers (large metal boxes that are lifted by crane and stacked on the railroad cars and ships). Dependable grants a security interest in all its equipment to Bank.How may Bank perfect its security interest in Dependable's ships? A. Only by taking possession of the ships. B. Only by filing a financing statement in Delaware. C. Only by filing a financing statement in Washington.Only by filing a financing statement in Washington. D. Either by taking possession of the ships or by filing a financing statement in Delaware. E. Either by taking possession of the ships or by filing a financing statement in Washington. F. None of the above

F. none of the above

Which one is most likely to constitute farm products? A. honey that a beekeeper extracts from hives, puts in jars, and sells on the internet. B. butter that a dairy farmer has made from milk produced by his cows C. wine that a vintner is making form the grapes grown on the vintner's land D. grain harvested by a wheat farmer and sold to a silo operator

a. honey--only one that keeps its classification as a farm product.

Delinquent borrows $10,000 from Bank. Father guarantees the loan and Aunt grants Bank a security interest in her antique desk to secure the loan. No other creditor has a lien in the desk or a filed financing statement against Aunt. After Delinquent defaults on the loan, Bank repossesses the desk.If Bank desires to sell the desk at a private sale, to whom must Bank send advance notification of the sale? A Delinquent only. B. delinquent and father C. delinquent, father, and Aunt D. father and aunt E. father only F. aunt only

Secured Transactions

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