Secured Transactions Perfection Practice Qs

Octopus National Bank (ONB) had a SI in the equipment of the Weekend Construction Company for which it filed a financing statement in the proper place on May 1, 2016. Antirust National Bank (ANB) took a SI in the same collateral and filed its financing statement on May 2, 2016, in the same place. 1. How long is a financing statement effective? 2. If ONB files a continuation statement on May 1, 2020, is its perfected position continued? 3. If ONB never files a continuation statement in time, so that its perfection lapses, but a week later it files another financing statement, is it still senior to ANB? 4. If ONB fails to file a continuation statement in time, so that its perfection lapses, but a week later it files another financing statement, is it still senior to ANB? 5. Is an attorney who fails to file a continuation statement guilty of malpractice?

1. 5 yrs after the date of filing. 2. No. The continuation statement is only timely filed if it is within 6 months of the expiration of the 5 year period. Pre-revision decisions called this the problem of "premature renewal." 3. No. The security interest is deemed to have never been perfected as against a purchaser of the collateral for value. ANB wins. 4. No, it's behind ANB - if it files a second before the FS it's ok; if it files a second after lapse, it's not. 5. Yes, if it could reasonably understood by the client that the lawyer would do so.

Bank loaned Debtor money to buy a new car and made sure its lien was noted on the certificate of title. Debtor moved to a new state a year later and on March 1 of that year managed to get a new certificate issued that showed no liens. 1. If Debtor sells the vehicle to a used car dealer on May 1, who has priority between the used car dealer and Bank? 2. If Debtor sells the vehicle to a used car dealer on August 1, who has priority between the used car dealer and Bank? 3. If Debtor sells the vehicle to a consumer (who gives value and has no knowledge of the lien) on May 1, who has priority between the consumer and Bank?

1. Bank, but only if it perfects in the new state by July 1. 2. The used car dealer, unless Bank perfected in the new state by July 1. 3. The consumer.

A party has a security interest in a merchant's feel of delivery trucks (i.e. equipment) 1. How does the secured party perfect its security interest? 2. Could the secured party perfect its security interest by taking possession of the titles to the trucks? 3. Could the secured party perfect its security interest by taking possession of the trucks?

1. By notation on the certificates of title. 2. No. 3. No.

Peripatetic Corporation was organized under the laws of the State of Delaware but has its large retail store outlet in NJ. Further, the corporation was really a husband-and-wife type of business, and they did all the corporate paperwork at their home in Baltimore, MD (where they also kept the corporate records). Their corporate stationary used their home address. 1. When the corporation borrows money against its account receivable, in what state should the financing statement be filed? 2. If the corporation was registered and had its only place of business in Republic of Jahala, a Pacific Island nation, where should the financing statement be filed?

1. Delaware 2. DC

The SA & the FS both described the collateral as "inventory." 1. Does this limit the SI to existing inventory only, or does the SI extend to replacement for the original collateral? 2. Is this sufficient for after-acquired inventory in the FS?

1. Extends to the replacement if the SA had said "inventory now owned or after acquired" but the FS simply mentioned "inventory," so no. 2. Yes, but only an idiot would not also include after-acquired in FS.

Kiddie Delight, a manufacturer of toys, wanted to borrow money and use its inventory of toys as collateral. It called up Fred's Field Warehouse Company, and Fred's came to the plant, put the inventory in a locked room, and posted a sign on the door saying "Contents of Room Under Control of Fred's Field Warehouse." Fred's then issued a negotiable warehouse receipt deliverable to the order of Kiddie Delight. Fred's hired Mort Menial, the Kiddie Delight janitor, as their local warehouse custodian (Mort was paid $1.00 a week by Fred's to mind the goods; he continued to receive his normal paycheck from Kiddie Delight). KD then pledged the warehouse receipt (a document) to Mammon Bank in return for a loan. KD went bankrupt shortly after. 1. By having possession of this document, did the bank have a perfected SI in the inventory? 2. Assume there is a warehouse receipt that is validly issued and effective. If the bank and KD signed a written security agreement covering the warehouse receipt & the inventory it represented & if the bank gave KD the money, does the bank have a perfected SI in the warehouse receipt even before the bank gets possession of it?

1. If transaction taken at face value, there would be a perfected SI in the document, but probably not because this is a sham (the $1 & locked room makes it a sham). The warehouse receipt does not look to be legit. Had it been a sham, the bank would have a had a perfected SI in the inventory. But, the bank does have a perfected interest in the piece of (worthless) paper. 2. Yes, if the possession problem is ignored or resolved in the bank's favor, from the date of attachment (when value is paid) for 20 days even without filing

ABC Auto Dealership went to Secured Creditor National Bank to obtain a loan. On June 1, Secured Creditor made an irrevocable commitment to extend credit to ABC on June 20. On June 3, ABC and Secured Creditor signed a security agreement that granted Secured Creditor a security interest in ABC's presently existing and after-acquired inventory. On that date, ABC had an inventory of 500 cars. On June 10, ABC received a shipment of 50 cars for sale; ABC obtained rights in these 500 cars on June 10. On June 20, Secured Creditor gave ABC a cashier's check for $10,000 pursuant to the loan agreement. 1. On which date was a security interest first created in favor of Secured Creditor? 2. On what date was a security interest created in favor of Secured Creditor in the 50 cars ABC received on June 10?

1. June 3. 2. June 10.

Two months later, Lawyer is in need of money. Lawyer asks Bank for a loan. Bank agrees to refinance the June 1 loan and, in so doing, loans an additional $5,000 to Lawyer. 1. Did Bank lose its PMSI status with regard to the copy machine? 2. Would your answer change if the copy machine were consumer goods?

1. No 2. Yes

Peter Poor signed a SA & FS in favor of the Total Finance Co., giving the company a SI in "all personal property debtor now owns or ever owns or even hopes to own between now & the end of the world or his death, whichever is first." 1. Does this perfect an interest in his guitar? 2. Why would the drafters have drawn this distinction btwn the description in the SA & that in the FS?

1. No 2. Here, the FS would be ok; it notifies later searchers that something is afoot. But the SA is not ok. Super generic descriptions of the collateral do not tell the debtor which pieces of his collateral are on the line. SA to pick up goods & FS for perfection and to defeat bankruptcy trustee. "All equipment" or "all inventory" is ok, but not "all property."

LNB filed a financing statement in the proper place to perfect a SI in the accounts receivable of the American Elect. Store. When the latter ran into financial difficulty, its assets were sold to a new electronics store, Voice of Japan, which moved into the same retail location. 1. Must LNB refile to keep its security interest perfected in the accounts actually transferred by American Elec. to Voice of Japan? 2. Do we get the same result if American Elec. merges with Voice of Japan & the new entity is called "Voice of Elec."? 3. What if the opposite happens & the debtor remains the same, but LNB assigns its interest in the debtor's accounts to ONB? Need the records be change? 4. Is ONB's interest superior to that of LNB's creditors? Consider that the transfer of the security interest from LNB to ONB is itself the transfer of an account or chattel paper.

1. No, for 4 months. 2. Yes, no refilling. However, changing the records would be wise. 3. No, the assignment itself is an Art. 9 transaction; LNB is selling an "account" to ONB. 4. Yes, if ONB perfects; ONB should perfect to protect itself from LNB's creditors. Were this chattel paper or instruments, possession would do it, otherwise a FS would have to be filed showing LNB as the debtor.

Karate, Inc., was a self-defense training school. It pledged 36 of the promissory notes given by its customers to Nightflyer Finance Company in return for a loan. The parties signed a security agreement, and the finance company took possession of the notes. A month later, Karate, Inc.'s president, Arnold Sun, asked Nightflyer to let him have back one of the notes so that he could present it to the customer for payment (an Art. 3 presentment). The finance company gave him the note on April 6. Sun put it in his desk at the school and forgot about it. On October 12 the karate school went bankrupt. 1. Does the bank have a perfected SI in any or all of the promissory notes? 2. Could the finance company have protected itself by filing a financing statement as to the promissory notes?

1. No, the 20 days has lapsed and the bankruptcy trustee wins. 2. Yes. A SI in chattel paper, negotiable documents, instruments, or investment property may be perfected by filing.

Polly owned a clothing store that was doing quire well so she decided to open branches all over the state. She borrowed money to do so from Longhorn State Bank, which took a security interest (according to its financing statement) in "all inventory, accounts receivable, equipment, instruments, general intangibles, and personal property." The bank also made her pledge her extension collection of jewelery to the bank, making her bring it from her home and putting it in the vault. A year later she asked to have the jewlery back to wear it to a social occasion, and the bank gave it to her. Before she could return it, another creditor seized it by judicial process. Is there interest in the jewelry perfected by the filed financing statement?

1. Possession only lasts as long as you have possession, so that perfection is out the window. However, the jewerly is probably covered by "personal property" in the financing statement (this isn't too broad for a financing statement). Still, the bank should have filed an amendment to the financing statement before giving the jewelry to her.

Mary Bush lived in a home she owned in Cheyenne, Wyoming, but she also wanted to buy a large sailboat in Cleveland, Ohio, and planned to keep the boat there after the purchase for use in her fishing charter business. Ohio law provides that whenever a buyer has paid more than 75% of a debt secured by a boat, the creditor's security interest automatically is stripped from the boat. Wyoming has no such rule. 1. If a creditor loans Mary money to buy the sailboat and takes a SI in it, where should the creditor file the financing statement? 2. When Mary has paid 75% of the debt, with the creditor's SI still be attached to the boat?

1. The creditor should file in Wyoming (debtor's location, bc creditor does not have possession). 2. No. Because the collateral is a good, under 9-301(3) the law of the location of the collateral (Ohio) governs the effect of perfection.

Able, who lives in Massachusetts, and Baker, who lives in New York, form a general partnership, called AB Services, that has its only office in Vermont. First Bank takes a security interest in assets of AB Services. 1. Where should First Bank file the financing statement? 2. What name(s) for the debtor should be listed on the financing statement?

1. Vermont bc only office 2. Name of partnership

Big Sky Baking, Inc., is a Wyoming corporation with its only place of business in Fort Mercy, Colorado. Jane Smith is the majority shareholder of Big Sky. First Bank of New York, a Delaware corporation that has its principal office in New York, and Big Sky enter into a security agreement that has a choice of law provision that states, "This agreement shall be governed by the law of New York." 1. In which state should First Bank file the financing statement? 2. What name(s) for the debtor should be listed on the financing statement?

1. Wyoming bc state of incorporation 2. Exact name of corp

ABC Motors is in need of cash, so it asks First National Bank for a loan. ABC offers to grant a security interest in its checking account at First National Bank as collateral for the loan. 1. Is this transaction covered by Article 9? 2. Does FNB need to do anything to perfect its security interest in ABC's checking account? 3. Would your answer to No. 2 change if ABC's checking account was with Second National Bank?

1. Yes 2. No 3. Yes

On June 1, Lawyer borrows money from Bank to buy a copy machine for her office. Bank has Lawyer sign a security agreement granting Bank a security interest in the copy machine. Bank disburses the loan money to Lawyer, who uses it to purchase the copy machine. 1. Does Bank have a PMSI? 2. Is it automatically perfected?

1. Yes 2. No because it is in equipment. Consumer goods is the only type of PMSI that is automatically perfected.

Coco buys a Corvette, signing a security agreement making the car collateral for payment of the price. The dealer retains possession of the certificate of title and set of keys. 1. Would that perfect the dealer's security interest? 2. If the dealer filed a financing statement indicating the car as collateral, would that perfect its security interest? 3. If the dealer retained possession of the car, would that perfect its security interest? 4. Or maybe the security interest perfects automatically, if the transaction is a PMSI in consumer goods?

1. Yes 2. No, because there is a title. 3. No, because there is a title. 4. No, because there is a title.

Bob Wolton had always used "Bob" as his first name although his name is really "Robert Edward Wolton." All of Bob's public records used "Bob Wolton" and that is the name on his drivers license. 1. When Bob applied for a loan from the credit union, using his valuable comic book collection as collateral, will the credit union be perfected in an Alternative A state if its financing statement identifies him as "Bob Wolton"? 2. In Alternative State B? 3. In either state his drivers license expires and he fails to get a new one?

1. Yes, if the license is from "this state." 2. No, because license not from this state. 3. No

Factory, Factory & Money is a legal partnership that has its only place of business in Chicago, Illinois, where ONB, which has a security interest in the accounts receivable of the firm, had field its financing statement. 1. If the law firm makes a permanent move to Washington DC on Jan. 1, 207, does the bank lose its perfection or does it have a grace period in which to refile in the new jurisdiction? 2. If the law firm merges with a law firm in DC with the new DC firm assuming all the debts of the former one, is the time period the same? 3. Is the creditor protected as to collateral debtor acquires between the move or merger & during the applicable time period?

1. Yes, it has a grace period of 4 months. 2. No, the time period is now 1 year after the transfer of collateral to the DC firm. 3. Yes, if the financing statement would have been effective to perfect a SI in the collateral had the collateral been acquired by the original debtor.

When Portia Moot paid off her debt to Last National Bank, which had loaned her $3,000 to buy a computer for her law office (& had taken a PMSI therein, for which it had duly filed a financing statement), she wanted the bank to clear up the records down at the filing office. 1. Does she have this right? 2. What can she do if they stiff-arm her?

1. Yes, there is not obligation secured by collateral anymore. 2. Portia herself may file as the debtor taking advantage of 9-509(d)(2).

Millie lends Arthur, her next-door neighbor, $25,000. He gives her possession of his diamond ring as collateral for the loan. Millie has...

An attached, perfected security interest in the ring. Oral agreement + possession is enough to perfect

MediCorp is a Delaware corporation that owns and operates hospitals and clinics in San Francisco, Los Angeles, and San Diego. A few months ago, BAM Technologies sold three pieces of medical equipment to MediCorp on credit, retaining an enforceable security interest in the equipment to secure the aggregate purchase price. BAM Technologies filed its financing statement with California's central filing office. Yesterday, without the knowledge or consent of BAM Technologies, MediCorp sold one of the three pieces of equipment to HealthNet for $1.5 million. HealthNet paid $500,000 in cash and executed and delivered a short-term $1 million negotiable promissory note for the balance. Assuming that BAM Technologies can satisfy its tracing burden, BAM Technologies has:

An unperfected security interest in both the cash and the note.

Woodson Brothers Automotive Repair, LLC is a limited liability company registered in Delaware, whose members/owners are the Woodson brothers, Mark, Thomas, and Gerald. Woodson Brothers Automotive Repair, LLC owns several service stations in Illinois, which primarily serve customers who reside in Missouri. The Woodson Brothers each live in Iowa, but have an office in Minnesota that functions as their company headquarters. Fifth Third Bank provides the inventory financing for the parts Woodson Brothers Automotive Repair, LLC uses to fix broken automobiles. Fifth Third Bank is a Kansas corporation but has most of its branches in Oklahoma and those primarily serve customers from Texas. In order to be perfected, where should Fifth Third Bank file its financing statement?

Delaware

Bende and Brake, LLC, an engineering company, has offices in both Texas and Oklahoma, although its headquarters is located in Oklahoma. It is organized in Delaware, but does not have any offices or business activities in Delaware. If Bank was going to take a security interest in the non-fixture assets of Bende and Brake, LLC, where would it need to file a financing statement to be assured of having a perfected security interest in the assets (assuming those assets are not covered by certificate of title statutes)?

Delaware.

Hamlet Corporation borrowed $100,000 from the Elsinore Finance Company and gave it a security interest in the corporation's equipment. The parties properly filled out a financing statement; W. Shakespeare was mentioned on the financing statement as the president of Hamlet Corporation. Elsinore gave the financing statement and the filing fee to a clerk at the Secretary of State's office. The clerk, Ophelia Nunnery, had just announced her intention to quit to her fellow office workers and was not paying attention to her job as she indexed the financing statement under "Shakespeare" instead of "Hamlet." One year later, another finance company loaned Hamlet Corporation more money, taking a SI in the same equipment (the second finance company had checked the records and discovered nothing under "Hamlet Corp."). Since priority of creditors in this situation depends on order of filing, did Elsinore "file" first, or did it bear the risk of clerical error?

Esinore wins. Whichever creditor loses should sue the state for negligence. Some states have set aside a fund from the filing fees with which to pay judgments against the filing officer.

Wallace & Bradford, a general partnership, is a law firm located in New York City. Meredith, a Connecticut resident, is one of the firm's partners. She wants to use her partnership interest as collateral for a $500,000 loan from Gotham Bank. Her other partners have consented. To perfect its security interest in Meredith's partnership interest in the law firm, Gotham Bank should...

File a financing statement, naming Meredith as the debtor in Connecticut.

First Bank takes a security interest in a Picasso painting owned by Gonzalez that Gonzalez intends to have displayed at the Museum of the Arts. What would not constitute perfection by possession once the painting is hung in the museum?

First Bank puts a conspicuous sign next to the painting stating: "Notice. First Bank has a possessory security interest in his painting."

While the parties were negotiating the loan documents, First Bank asked Austin Furniture Company to grant the bank a security interest in its inventory. Before any security interest was granted, Austin, in an authenticated record, authorized First Bank to file a financing statement, which the bank filed on March 2. At this point, what does First Bank have?

First bank doesn't have an attached or perfected security interest.

What type of financing statements would not be filed in the office of the Secretary of State?

Fixtures involve real estate so you file at the county. ex: Timber to be cut from property in Franklin, Tennessee, belonging to Oak Creek Inc., a Tennessee Corporation.

The financing statement described the collateral as: "All assets of the Debtor, including but not limited to..... Located at the premises at 100 River Rock Drive" After the financing statement was filed and payment commenced, the debtor moved everything in the business to a new location. No one thought to amend the financing statement. Will the description be sufficient to give the creditor a valid interest in the same assets at the new location?

Got lucky, probably fine because of "including but not limited to" but typically not a good idea to put the address on the collateral line.

On June 1, Cheesehead Farms, Inc. which does business in both Illinois and Wisconsin, borrowed $10,000 from First Security Bank and gave First Security a security interest in its 30 portable cow-milking machines. At that time the machines were located in Illinois and the parties expected that they would remain there. After receiving the cash but before First Security filed, Cheesehead changed its corporate mind in good faith and, on June 10, moved the machines to Wisconsin. On June 15, First Security filed a properly completed financing statement in Illinois. At all relevant times, Cheesehead had its chief executive office in Wisconsin but was incorporated in Delaware. A filing in Wisconsin is...

Is ineffective.

Aware of difficulties with cross-collateralization clauses, rancher Howard Poll was always careful to keep his consumer obligations (from his Visa card, using the objects purchased as collateral) with a different bank than the one that financed his ranching operations (with a traditional loan, using his cattle as collateral). Both banks had him sign SAs that provided that the collateral nominated for each debt would also protect "any and all debts, now existing or after-acquired" owed to the same creditor. Howard was therefore distressed to learn that when the 2 banks merged, the new bank's loan officer now insisted that his cattle also protect the debts he owed on his Visa card. Is that right?

It's not clear, but you would probably have a good equity argument before the court that you didn't intend to do this.

Alpha perfects its security interest by properly filing a financing statement on January 1, 2010. Alpha files a continuation statement on June 1, 2014. When will Alpha's financing statement expire?

January 1, 2015 Continuation statement was too early to be affective

ABC Corp. is incorporated in Illinois but has offices in many states. Bank has a security interest in ABC's "equipment" and perfected that security interest by filing a financing statement in Illinois. A piece of equipment (i.e., a copy machine) at ABC's office in Ohio needs repair. ABC takes the copy machine to Joe's Repair Shop (located in Cleveland), which makes the repair. ABC fails to pay Joe's for the repair, so Joe's retains possession of the copy machine as a statutory lien creditor. ABC then defaults on its loan to Bank. Under Illinois law, Bank's perfected security interest has priority over Joe's interest in the copy machine. Under Ohio law, Joe's has priority over Bank. Who prevails?

Joe. Although Illinois law determines the place of perfection, the effect of perfection and priority are determined by the law of the location of the collateral—in this case, Ohio.

Bob the Builder is a sole proprietor that lives in Iowa. He granted a security interest in his Ford F150 to Bank of Nebraska on January 1, 2022, in return for a $5,000 small business loan. Bob had purchased the truck in Missouri; the truck was titled in Kansas. On January 1, 2023, Bob moves to Illinois. He has not gotten around to having the car retitled in Illinois (although, under Illinois law, he was supposed to have done so within 60 days). Assume it is May 2, 2023. Which state's law governs whether Bank of Nebraska's security interest is perfected?

Kansas (where the truck is titled)

MegaBank made a secured loan to Friendly. A filing officer records MegaBank's financing statement on August 12, 2010. The parties contemplate that Friendly will be making periodic loan payments through December 2018. MegaBank's lawyer anticipates filing a continuation statement sometime prior to Friendly's last loan payment. What would be the best date on which to file the continuation statement?

March 6, 2015.

Donald R. Willett lives in Williamstown, Massachusetts. Willett operates an accounting business called DRW Accounting as a sole proprietorship across the state line in Vermont. Willett bought a new computer system for his business on credit from Purple Cow Computer Co. of Troy, New York, and granted Purple Cow a security interest in the computer system. To perfect its security interest, where should Purple Cow file its financing statement?

Massachusetts bc sole so where he resides

MegaBank's lawyer files a continuation statement ten days after the original financing statement has expired. The original filing remains in the public records, and the filing clerk records the continuation statement. What statement is true?

MegaBank does not have, and is unable to take any action that will result in, continuous and uninterrupted perfection.

Tom, a resident of Oklahoma, entered into a security agreement by pledging his wedding ring at a pawnshop in Las Vegas, Nevada, that is owned by a California corporation. Which state's laws govern whether the security interest is perfected?

Nevada, because it is the state in which the collateral is located.

Suppose Bank makes a loan to a car dealer, secured by the car dealer's inventory of cars. Must the Bank get its security interest noted on every car that comes through the dealership, in order to be perfected in case the dealer goes under?

No

If KD (prior to bankruptcy) wanted to get the warehouse receipt back from the bank in order to present it to the warehouseman (Mort), get the goods, clean them, return them to the field warehouse, and get back the receipt for the rehypothecation to the bank, will the bank lose its perfection if it turns the document over to the debtor?

No, 9-312 allows the debtor to have some access to the goods to deal with them in some manner preliminary to their sale or exchange. Grace periods for possession; perfection remains during those times.

Monopoly railway went to ONB and asked to borrow money, using as part of the collateral its extensive network of railroad track (rails and ties), which winds through 12 western states. ONB consults you, The track is installed in a total of 117 counties. Must it file a financing statement in each one?

No, but they must in each state.

Barbara Song borrowed $50K from ONB in order to start a business called "Barb's Interiors," interior design being her specialty. ONB & Song signed a SA showing her as the debtor & giving ONB an interest in the inventory & equipment. ONB duly filed a FS. Subsequently, Song married Fred Dancer & she changed her name to Barbara Dancer. She borrowed another $50K from the Nighflyer Finance Co., which loaned her the money after searching the record under "Dancer" and finding no prior encumbrances on the business's inventory & equipment. Did ONB lose its security interest because it failed to refile when her name changed?

No, except for new collateral first falling under the floating lien 4 mo. after the change. They lose the SI if they don't refile after the 4 mo. with her correct name. Her bldg. would not be included as a SI bc it is a mortgage. Every quarter a creditor should check on his debtor for any changes.

Your client, Archibald Gracie, owns The White Star of England, a famous large diamond currently on display at the Astor Museum in NY. Molly Brown, a wealthy Colorado investor, has agreed to buy the diamond from Gracie, and she has made a substantial down payment, with an agreement to make 3 more payments before she gets possession. Gracie & Brown have signed the purchase agreement, which contains a clause granting him a SI in his own diamond until she has made all the required payment. Can he perfect a SI in the diamond by simply notifying Astor Museum of the sale and telling the museum to hold it for his benefit until she makes payment in full, thus creating an escrow arrangement in which possession is held by the escrow agent?

No, not until the bailee acknowledged in an authenticated record that it holds for the secured party

Octopus National Bank (ONB) makes a loan to Pi Solutions, secured by Pi's patent on a solar powered night light. ONB learns that it is unsettled whether a security interest is perfected by filing in the state UCC office or the federal patent and trademark office. ONB has a brainwave. Rather than filing, can ONB perfect with a pledge—taking possession of Pi's patent certificate?

No.

Suppose that Factory, Factory & Money, the Chicago law firm in the last problem, had 2 creditors before its permanent move to DC, both of which had a perfected SI in the firm's accounts receivable—ONB, which had filed its financing statement first, & Last National Bank, which had filed second, both creditors filing in Chicago early in the year 2016. When the move occurred on Jan. 1, 2017, Last National promptly refilled in DC before the end of March of that year, but Octopus National was careless and didn't realize that the firm had moved until that September. If it files in DC in September, will it retain its priority over Last National?

No. If ONB's SI does not become perfected under the law of DC before the required time, then it becomes unperfected & is deemed never to have been perfected as against a purchaser of collateral for value (LNB).

On Monday, Pat and Mike were having a few drinks at the local tavern, when Pat asked Mike if he could borrow $500. Mike responded, "It's not that I don't trust you, but I'd feel a lot better about it if I could hold on to your Ted Williams rookie baseball card until you pay it back." "It's a deal," Pat said, and they shook hands on it. On Tuesday, Pat gave the baseball card to Mike and Mike gave $500 to Pat. When, if ever, did perfection occur?

On Tuesday, when Pat gave Mike the baseball card

Joseph Armstrong bought a yacht in his home state that did not use certificates of title for baots and that required filing for perfoection in such collateral, a step that the financing bank, ONB, duly took. Armstrong then moved to a state that required all security interests on boats to be noted on certificates of title issued by that state, but he never took the time to get such a certificate. Does ONB's perfection in the second state as long as its filed financing statement is still effective or only for four months?

Only the 4 month window. After that, it has to get title.

Lyle Saylor was a trucker who lived and worked in the State of Michigan. When his old rig wore out and he decided to buy a completely new truck, he went to Pennsylvania and purchased a truck on credit from Ringer Truck City. Because the State of Indiana charged a great deal less for licenses & other registration fees, Saylor told the dealership that he lived in Indiana & the truck would be domiciled there. He gave Ringer Truck City the address of his sister, who did live in Indiana. Indiana law requires that lien interests be noted on the certificate of title, a step that Ringer Truck City duly took when it procured the Indiana certificate. When Saylor went bankrupt a year later, the trustee in bankruptcy argued that Ringer Truck City was unperfected bc it had not gotten a Michigan certificate of title & had its lien interest noted thereon, as Michigan law required. Ringer Truck City argued that it was entitled to believe the debtor when he told the company that he lived in Indiana. How should this come out?

Ringer wins.

When attorney Sam Ambulance handled a divorce for a client, he incurred the wrath of her ex-husband, Andrew Anarchist, president of the Freeman Common Law Movement, a group that did not recognize the authority of the state or federal government. The irate ex-spouse filed 42 phony financing statement in the public records to show that all of Sam's assets were security for various non-existent loans in favor of Anarchist, the secured party of record. What can Sam do to clear up these clouds on his title to his property (which the common law would have regarded as defamation)?

Sam can file a correction statement explaining his side of things and put them in the record 9-518.

Armstrong starts in a title state and ONB's interest is duly noted on that state's certificate. Armstrong moves to a state that has no certificates of title at all for boats, ONV never files there, and Armstrong never re-registers the yacht. What result?

Still perfected as long as the certificate is in place. No 4 month rule.

Alex Garza borrowed $15,000 from Essex Financing for the purpose of opening a restaurant. The loan is secured by an enforceable interest in Alex's personal and business assets. In addition to a central filing, Essex Financing should consider a county filing if...

The collateral includes restaurant equipment. (fixture)

On July 1, 2005, a secured creditor properly filed a financing statement against an individual debtor, Joseph Smith, in Ohio, the state in which Smith resided. On July 1, 2006, Smith moved to Utah. What is true about perfection?

The creditor has until four month after July 1, 2006 to file in Utah or the security interest becomes unperfected.

Secured Party Finance Company's security interest in Dirk Debtor's car was perfected by notation on a certificate of title issued by State A. Debtor moved from State A to State B. No new certificate of title has been issued. More than four months have elapsed since Debtor moved to State B. The certificate of title is still effective under the law of State A. What state laws govern perfection?

The law governing perfection is the law of State A.

A department store sells a customer a pair of socks for $8.99 for the customer's personal use. The customer uses his store credit card, and the receipt signed by the customer states that the store takes a security interest in the socks. Which of the following suggestions would you give to the department store?

The security interest is automatically perfected because it is a purchase money security interest in consumer goods.

A financing statement states: "This Financing Statement also relates to an obligation secured by a security interest in collateral and is evidenced by the Mortgage referred to above and the All-Assets Security Agreement executed on September 28, 2015." Does the financing statement perfecta security interest in collateral listed in the All-Assets Security Agreement?

Typically no, unless you are in the 7th circuit.

Thomas approaches U.S. Bank for a loan for $250,000, using his equipment as collateral. The equipment is valued at $500,000. U.S. Bank is located in Missouri. Thomas moved to Missouri from Illinois three months ago. Which statement describes what action, if any, U.S. Bank should take before making the loan and taking a security interest in the collateral?

U.S. Bank should search the UCC records in both Illinois and Missouri to ensure that there is no prior perfected security interest in the equipment.

Regions Bank in Columbia, Missouri is preparing to lend $200,000 to Houston PolyTank, LLC, which does business in Missouri under the name "Midwestern Fish Tanks." Houston PolyTank, LLC is organized under Iowa law, and has its headquarters there. Regions Bank will take a security interest in all of the (non-fixture) equipment of Midwestern Fish Tanks. In what state and under what name should Regions Bank file its UCC-1 financing statement to perfect its security interest?

Under the name "Houston PolyTank, LLC" in Iowa.

First Bank filed a financing statement in the appropriate place under the debtor name "James Bond Stirred Martinis Inc." The legal name of the debtor is "James Bond Shaken Martinis Inc." When the debtor declared bankruptcy, the trustee claimed that the security interest of First Bank is unperfected. This issue would be resolved by determining what?

Whether a reasonable searcher would have found the filing.

May 10, Holly Tourist, a resident of Dallas, Texas, bought a new car on credit while on vacation in Norman, Oklahoma, from Norman Car Sales (NCS), Inc. Oklahoma law required lien interests to be noted on the certificate of title as a condition of perfection, which NCS did on May 12. On May 14, Holly drove the car to Dallas, and that same day she re-registered the car there & received a Texas certificate. Somehow she was able to do this without surrendering the Oklahoma certificate (though Texas law apparently required her to turn in the old certificate before a new one should have been issued). Texas required lien interests to be noted on the certificate of title as a condition of perfection, but the Texas certificate showed no liens of any kind thereon. On May 26, Holly sold the car to her neighbor, William Innocent, who paid full value therefor without knowledge of the NCS's interest. On May 28, learning of the sale to William, NCS arranged for the car to be repossessed from in front of his house. Assuming that her resale of the car was a "default" so as to entitle NCS to repossess, decide which of them is entitled to the car? Why?

William wins—he is entitled to rely on the Texas certificate. NCS entrusted the car to Holly. This is different than stolen property. A more sophisticated buyer (i.e. the used car lot) is more likely to know of the rules.

If a lien creditor levies on the cow-milking machines while they are still in Wisconsin, which state's law governs priority?

Wisconsin

Al, who owned and operated a women's shoe store, needed funds to pay his employees' salaries. In addition to shoes, the store sold belts and purses. First National Bank agreed to loan the necessary funds provided that Al gave sufficient security for the loan. Al agreed and signed a security agreement granting Bank a security interest in his computer (which he used to keep track of purchase orders, sales, and inventory) and in all of his existing and after-acquired women's shoes. The financing statement listed the collateral as "existing and after-acquired inventory and accounts." Assuming First National files the financing statement in the proper place, First National will have a perfected security interest in:

Women's shoes (existing and after-acquired).