BLAW ch 37 quizzes

With regard to a prior perfected security interest in goods for which a financing statement has been filed, which of the following parties is most likely to have a superior interest in the same collateral?

A. A buyer in the ordinary course of business.

Migrane Financial does a wide variety of lending. It provides funds to manufacturers, middlemen, retailers, consumers, and home owners. In all instances it intends to create a security interest in the loan transactions it enters into. To which of the following will Article 9 (Secured Transactions) of the Uniform Commercial Code not apply?

A. A second mortgage on the borrower's home.

A secured creditor wants to file a financing statement to perfect its security interest. Under the UCC Secured Transactions Article, which of the following must be included in the financing statement?

A. An indication of the collateral.

Retailer was in need of financing. To secure a loan, it made an oral assignment of its accounts receivable to J. Roe, a local investor, under which Roe lent Retailer, on a continuing basis, 90% of the face value of the assigned accounts receivable. Retailer collected from the account debtors and remitted to Roe at intervals. Before the debt was paid, Retailer filed a petition in bankruptcy. Which of the following is true?

A. As between the account debtors and Roe, the assignment is not an enforceable security interest.

Dart Co., which is engaged in the business of selling appliances, borrowed $8,000 from Arco Bank. Dart executed a promissory note for that amount and pledged all of its customer installment receivables as collateral for the loan. Dart authenticated a security agreement that described the collateral, but Arco did not file a financing statement. With respect to this transaction,

A. Attachment of the security interest took place when Dart authenticated the security agreement.

Edie owned and operated a bowling alley. She obtained a loan from Bank secured by "the equipment and all other chattels and personal property used in the business." Bank properly filed a financing statement. Edie then borrowed funds from S & L, giving a first mortgage on "all real property used in the business." Edie became insolvent and filed a petition in bankruptcy. Which of the following is true?

A. Bank is entitled to resort to the personal property even against a trustee in bankruptcy.

Buyer purchases a new smartphone for her personal enjoyment from Electronics Dealer. Without the knowledge of Buyer, Dealer has financed the purchase of all its inventory through Bux Finance Co. It also has given Bux a security interest in the inventory that Bux perfected by filing. On these facts,

A. Bux loses its security interest because Buyer was a buyer in the ordinary course of business.

Under the UCC Secured Transactions Article, for a security interest to attach, the

A. Debtor must agree to the creation of the security interest.

A fixture is a good that has become so related to particular real property that an interest in the fixture arises under real property law. Perfection of a security interest in a fixture usually requires

A. Filing of a financing statement in the office where a mortgage on the real estate would be recorded.

Tawney Manufacturing approached Worldwide Lenders for a loan of $50,000 to purchase vital components it used in its manufacturing process. Worldwide decided to grant the loan but only if Tawney would agree to a field warehousing arrangement. Pursuant to their understanding, Worldwide paid for the purchase of the components, took a negotiable bill of lading for them, and surrendered the bill of lading in exchange for negotiable warehouse receipts issued by the bonded warehouse company that had established a field warehouse in Tawney's storage facility. Worldwide did not file a financing statement. Under the circumstances, Worldwide

A. Has a security interest in the goods that has attached and is perfected.

If collateral is described in a security agreement as the debtor's currently existing and after acquired inventory, the description

A. Is sufficient for the security interest to attach to the after-acquired inventory.

Mozart Manufacturers of Florida manufactured and sold three pianos to Virtuoso Piano School of Vandelay, Florida in a credit transaction. Mozart properly filed a 5-year financing statement with regard to the pianos in Florida on February 2, the day after the sale. Finding its business a trifle slow in Vandelay, Virtuoso packed up its pianos and moved to Atlanta, Georgia on May 2 of the same year. On September 1, Mozart properly filed a financing statement in Georgia. What is the status of Mozart's security interest?

A. Mozart's security interest was continuously perfected.

Jay Thrush, a wholesaler of television sets, contracted to sell 100 sets to Kara Kelly, a retailer. Kelly signed a security agreement with the 100 sets as collateral. The security agreement provided that Thrush's security interest extended to the inventory, to any proceeds therefrom, and to the after-acquired inventory of Kelly. Thrush filed his security interest. Later, Kelly sold one of the sets to Myra Haynes who purchased with knowledge of Thrush's perfected security interest. Haynes gave a note for the purchase price and signed a security agreement using the set as collateral. Kelly is now in default. Thrush can

A. Not repossess the set from Haynes but is entitled to any payments Haynes makes to Kelly on her note.

Which of the following is a false statement about priorities among conflicting security interests in the same collateral?

A. Priority among conflicting perfected nonpurchase money security interests depends upon the order of attachment.

Mozart Manufacturers has a perfected security interest in pianos owned by the Virtuoso Piano School. Virtuoso sends one of the pianos to Rachmaninoff Repair Service, which makes extensive repairs to the instrument. Virtuoso is unable to make payment for the repairs, and the piano remains in Rachmaninoff's possession. A state statute establishes an artisan's lien but is silent with regard to priority as against a perfected security interest.

A. Rachmaninoff will prevail in a priority contest because the statute did not expressly provide that the security interest took priority.

Roth and Dixon both claim a security interest in the same collateral. Roth's security interest attached on January 1, and it was perfected by filing on March 1. Dixon's security interest attached on February 1, and it was perfected on April 1 by taking possession of the collateral. Which of the following statements is true?

A. Roth's security interest has priority because Roth perfected before Dixon perfected.

The perfection of a security interest by filing a financing statement

A. Serves to protect the secured party's interest in the collateral against most creditors who acquire a security interest in the same collateral after the filing.

Case Corporation manufactures electric drills and sells them to retail hardware stores. Under the Uniform Commercial Code, it is likely that

A. The drills are inventory in Case's hands.

A filing requirement for perfection applies to which of the following transactions under Article 9 (Secured Transactions) of the Uniform Commercial Code?

A. The factoring of a significant amount of the assignor's accounts receivable.

Field warehousing is a well-established means of securing a loan. It resembles a pledge in many legal respects. Which of the following is true?

A. The field warehouser must maintain physical control of and dominion over the property.

Which of the following is a true statement about priorities among conflicting security interests in the same collateral?

B. A perfected purchase money security interest has priority over an existing security interest in inventory if the former is perfected when the debtor receives possession and the purchase money secured party gives any required notice.

Which of the following is most likely covered by Article 9 (Secured Transactions) of the UCC?

B. A transaction intended to create a security interest in personal property.

For purposes of the Secured Transactions Article of the Uniform Commercial Code, a security interest includes

B. An interest in personal property or fixtures that secures payment or performance of an obligation.

Two Uniform Commercial Code concepts relating to secured transactions are "attachment" and "perfection." Which of the following is true in connection with the similarities and differences between these two concepts?

B. Attachment relates primarily to the rights against the debtor, and perfection relates primarily to the rights against third parties.

Bass, an automobile dealer, had an inventory of 40 cars and 10 trucks. He financed the purchase of this inventory with County Bank under an agreement dated January 5 that gave the bank a security interest in all vehicles on Bass's premises, all future-acquired vehicles, and the proceeds from their sale. Bass received possession of the inventory on the same date. On January 10, County Bank properly filed a financing statement that identified the collateral in the same way that it was identified in the agreement. On April 1, Bass sold a passenger car to Dodd for family use and a truck to Diamond Company for its hardware business. Which of the following is true?

B. County Bank's security interest is perfected as of January 10.

Motor Sales, Inc., sells motor vehicles at retail. It borrowed money from Finance Company and gave a properly executed security agreement in its present and future inventory and in the proceeds therefrom to secure the loan. The security interest was duly perfected under the laws of the state where Motor does business and maintains its entire inventory. Thereafter, Motor sold a new pickup truck from its inventory to a consumer and received a certified check in payment of the full price. Which of the following is true?

B. Finance's security interest in the certified check Motor received is perfected against Motor's other creditors.

According to the UCC, which of the following statements is true regarding the rights and duties of the parties when collateral is in the secured party's possession or control?

B. If stock is pledged as security, a stock dividend on it may be retained by the secured party as additional security.

Cross has an unperfected security interest in the inventory of Safe, Inc. The unperfected security interest

B. Is subordinate to lien creditors of Safe who become such prior to any subsequent perfection by Cross.

Maxim Corporation, a wholesaler, was indebted to the Wilson Manufacturing Corporation in the amount of $50,000 arising out of the sale of goods delivered to Maxim on credit. Maxim authenticated a security agreement creating a security interest in certain collateral of Maxim. The collateral was described in the security agreement as 'The inventory of Maxim Corporation, presently existing and thereafter acquired." In general, this description of the collateral

B. Is sufficient to cover all inventory.

On January 1, Shemwell Co. signed a security agreement giving Jones a security interest in a crane. Shemwell was planning to buy for its business. In exchange for the security agreement, Jones signed a contract to lend Shemwell $10,000 on request. On January 9, Shemwell purchased the crane. On January 15, Jones delivered $10,000 to Shemwell. On January 20, Jones filed the security agreement with the appropriate public officials. Under the UCC, when did Jones's security interest in the crane attach?

B. On January 9, when Shemwell purchased the crane for its business.

Mern Corp. is in the business of selling computers and computer software to the public. Mern sold and delivered a personal computer to Whyte on credit. Whyte executed and delivered to Mern a promissory note for the purchase price and authenticated a security agreement describing the collateral. If Whyte purchased the computer for personal use and Mern fails to file a financing statement, which of the following statements is true?

B. Perfection of Mern's security interest occurred at the time of attachment.

Assuming that the special priority rules do not apply, which of the following is the most accurate statement regarding conflicts between competing security interests?

B. The first to attach has priority if neither security interest is perfected.

Fun Furn Co. manufactures many types of furniture and sells the furniture to various retail furniture stores. Under the UCC,

B. The furniture in work-in-process is inventory in Fun Furn's hands.

On July 8, Ace, a refrigerator wholesaler, purchased 50 refrigerators that constituted Ace's entire inventory. They were financed under an agreement with Rome Bank that gave Rome a security interest in all refrigerators on Ace's premises, all future acquired refrigerators, and the proceeds of sales. On July 12, Rome filed a financing statement sufficiently indicating the collateral covered. On August 15, Ace sold one refrigerator to Cray for personal use and four refrigerators to Zone Co. for its business. Which of the following statements is true?

B. The refrigerator sold to Cray will not be subject to Rome's security interest.

Bonn, a secured party, sells collateral at a private sale to a good faith purchaser for value after the debtor defaults. Which of the following statements is most likely true under the UCC Secured Transactions Article?

B. The security interest under which the sale was made and security interests or liens subordinate to it will be discharged.

Which of the following is a false statement concerning priority under UCC Article 9?

C. A lien arising by operation of law subsequent to the perfection of any security interest will be subordinate to the earlier perfected security interest because of the first-in-time, first-in-priority rule.

Under the Secured Transactions Article of the UCC, which of the following security agreements does not need to be in writing to be enforceable?

C. A security agreement where the collateral is in the possession of the secured party.

Attachment and perfection will occur simultaneously when

C. Attachment is by possession.

Conco of North Carolina manufactured and sold two cranes to Nema Co. on credit under a security agreement. Conco properly filed a financing statement in North Carolina on March 8, the day after the sale. Nema Co. moved its operations and the cranes to a town outside of Phoenix, Arizona on June 14 of the same year. On November 7, Conco properly filed a financing statement in Arizona. Which of the following statements is true?

C. Conco's Arizona filing was necessary for perfection because the North Carolina filing was ineffective after October 14.

The Secured Transactions Article of the UCC recognizes various methods of perfecting a security interest in collateral. Which of the following is not recognized by the UCC?

C. Consent.

Even if provided for in a security agreement, the secured party will ordinarily have no right in

C. Consumer goods acquired more than 10 days after the security interest attached.

Which is the true classification of goods under Article 2 of the UCC?

C. Consumer goods, equipment, farm products, inventory.

Wurke, Inc., manufactures and sells household appliances on credit directly to wholesalers, retailers, and consumers. Wurke can perfect its security interest in the appliances without having to file a financing statement or take possession of the appliances if the sale is made by Wurke to

C. Consumers.

Article 9 of the UCC applies to any transaction that establishes by contract a security interest in personal property or fixtures. Which is the false statement about the forms of property in which a security interest may be conveyed?

C. Documents include bills of lading, warehouse receipts, and promissory notes.

In what order are the following obligations paid after a secured party rightfully sells the debtor's collateral after repossession? I. Debt owed to any junior security holder II. Secured party's reasonable sales expenses III. Debt owed to the secured party

C. II, III, I

A financing statement

C. Is usually effective for up to 5 years. A continuation statement may be filed before the lapse of the period.

Which of the following statements is true concerning field warehousing?

C. It allows for temporary relinquishment of the goods.

Kelcar, Inc. designs and markets antipollution It has developed several patents, one of which it has licensed to a major processor of cloves. To finance expansion, Kelcar has taken out a loan from Incensed Finance Co. and given its accounts, rights under the patent license, and chattel paper as collateral. If Kelcar defaults,

C. Kelcar is entitled to any surplus of collections made by Incensed after deduction of expenses.

Larkin is a wholesaler of computers in the state of Whiteacre. Larkin sold 40 computers to Elk Appliance, which also does business in the state of Whiteacre, for $80,000. Elk paid $20,000 down and signed a promissory note for the balance. Elk also executed a security agreement giving Larkin a security interest in Elk's inventory, including the computers. Larkin perfected its security interest by properly filing a financing statement in the state of Whiteacre. Six months later, Elk moved its business to the state of Blackacre, taking the computers. On arriving in Blackacre, Elk secured a loan from Quarry Bank and signed a security agreement, putting up all inventory (including the computers) as collateral. Quarry perfected its security interest by properly filing a financing statement in the state of Blackacre. Two months after arriving in Blackacre, Elk went into default on both debts. Which of the following statements is true?

C. Larkin's security interest is superior even though at the time of Elk's default Larkin had not perfected its security interest in the state of Blackacre.

On May 17, Debtor borrowed $100,000 from Secured Bank to finance its current and future inventory. On May 19, Debtor authenticated a security agreement giving Bank a security interest in the inventory. On the same date, Debtor also authenticated a financing statement. Bank filed the financing statement on May 21 and the security agreement on May 22. Bank's security interest was perfected on

C. May 21

The Uniform Commercial Code contains numerous provisions relating to the rights and remedies of the parties upon default. With respect to a buyer, these provisions may

C. Not be varied insofar as they require the secured party to account for any surplus realized on the disposition of collateral securing the obligation.

Acorn Marina, sells and services boat motors. On April 1, Acorn financed the purchase of its entire inventory with GAC Finance Company. GAC required Acorn to execute a security agreement and financing statement covering the inventory and proceeds of sale. On April 14, GAC properly filed the financing statement pursuant to the UCC Secured Transactions Article. On April 27, Acorn sold one of the motors to Mary Wilks for use in her charter business. Wilks, who had once worked for Acorn, knew that Acorn regularly financed its inventory with GAC. Acorn has defaulted on its obligations to GAC. The motor purchased by Wilks is

C. Not subject to the GAC security interest because Wilks is regarded as a buyer in the ordinary course of Acorn's business.

On October 1, Winslow Corporation obtained a loan commitment of $250,000 from Liberty National Bank. Liberty filed a financing statement on October 2. On October 5, the $250,000 loan was consummated, and Winslow signed a security agreement granting the bank a security interest in inventory, accounts receivable, and proceeds from the sale of the inventory and collection of the accounts receivable. Liberty's security interest was perfected

C. On October 5.

On May 2, Safe Bank agreed to lend Tyler $50,000. Tyler signed a security agreement and financing statement covering its existing equipment. On May 4, Safe filed the financing statement. On May 7, State Bank lent Tyler $60,000. State had notified Safe on May 5 of its intention to make the loan. Tyler signed a security agreement and financing statement covering the same existing equipment. On May 8, State filed the financing statement. On May 10, Safe lent Tyler $50,000. If Tyler defaults on both loans, who will have a priority security interest in the equipment?

C. Safe. It was the first to file.

Suretee, Inc., sells home appliances. It finances its inventory with suppliers who perfect their security interests by prompt and proper filing. Hi Homme, a consumer, purchased a washing machine and a refrigerator on credit from Suretee, which has a security interest but has not filed a financing statement. Homme then sold the refrigerator to Femme for her personal use.

C. Suretee will lose in a contest with Femme if she had no knowledge of its security interest.

Pine has a security interest in certain goods purchased by Byron on an installment contract. Byron has defaulted on the payments resulting in Pine's taking possession of the collateral. Which of the following is true?

C. The collateral may be sold by Pine at a private proceeding and, if it is consumer goods, without notice to other secured parties.

Under the Secured Transactions Article of the UCC, if a secured creditor rightfully repossesses and sells a debtor's collateral, which of the following obligations is the first to be paid from the proceeds of the sale?

C. The reasonable expenses incurred by the sale.

Wine purchased a computer using the proceeds of a loan from MJC Finance Company. Wine gave MJC a security interest in the computer. Wine executed a security agreement and financing statement, which was filed by MJC. Wine used the computer to monitor Wine's personal investments. Later, Wine sold the computer to Jacobs, who used it for family purposes. Jacobs was unaware of MJC's security interest. Wine now is in default under the MJC loan. May MJC repossess the computer from Jacobs?

C. Yes, because MJC's security interest was perfected before purchase by Jacobs.

Taso Corp. sells laptop computers to the public. Taso sold and delivered a laptop to Cara on credit. Cara gave Taso a purchase money security interest in the laptop by executing and delivering to Taso a promissory note for the purchase price and a security agreement covering the laptop. Cara purchased the laptop for personal use. Taso did not file a financing statement. Under the Secured Transactions Article of the UCC, is Taso's security interest perfected?

C. Yes, because it was perfected at the time of attachment.

A party who filed a financing statement covering inventory on April 1 would have a superior interest to which of the following parties?

D. A judgment lien creditor who filed its judgment on April 15.

Which of the following transactions illustrates a secured party's perfection of its security interest by taking possession of the collateral?

D. A pawnbroker's lending money.

Which of the following is a true statement about the perfection of a security interest?

D. A purchase money security interest in fixtures is perfected only by filing.

Perfection of a security interest in personal property may be accomplished in many cases by filing a financing statement. A financing statement is

D. Any writing filed in the public records that provides notice of a security interest in collateral.

Forward Motors, Inc., is a franchised automobile dealer for National Motors. National provides the financing of the purchase of its automobiles by Forward. It sells Forward 25 to 50 automobiles at a time and takes back promissory notes, a security agreement, and a financing statement on each sale. The agreement between Forward and National includes an after acquired property clause. The financing statement covering this revolving inventory has been duly filed.

D. As against the creditors of Forward, National has a valid "floating lien" against the automobiles and the proceeds from their sale.

Under the Secured Transactions Article of the UCC, a secured party generally must comply with each of the following duties except

D. Assigning the security interest to another party at the debtor's request.

If a secured party does not comply with the UCC rules with respect to collateral after a debtor's default, the secured party will

D. Be liable to another known secured party for losses resulting from not sending notification of sale.

On June 15, Harper purchased equipment for $100,000 from Imperial Corp. for use in its manufacturing process. Harper paid for the equipment with funds borrowed from Eastern Bank. Harper gave Eastern an authenticated security agreement covering Harper's existing and after acquired equipment. On June 21, Harper was petitioned involuntarily into bankruptcy under Chapter 7 of the Federal Bankruptcy Code. A bankruptcy trustee was appointed. On June 23, Eastern duly filed a sufficient financing statement. Which of the parties will have a superior security interest in the equipment?

D. Eastern, because it perfected its security interest within the permissible time limits.

Which of the following is false with regard to the attachment of a security interest?

D. Filing may be necessary for the attachment of a security interest.

For a security interest in goods to attach, one of the requirements is that the debtor

D. Have rights in the goods.

Under the UCC Secured Transactions Article, upon default, the secured party has the right to I. Reduce the claim to a judgment II. Sell the goods and apply the proceeds toward the debt III. Peacefully repossess the goods without judicial process

D. I, II and III

Vega Manufacturing, Inc., manufactures and sells stereo systems and components to wholesalers and at retail. Repossession is frequently made from customers who are in default. Which of the following statements is true concerning the rights of the defaulting debtors who have had property repossessed by Vega?

D. If a debtor has paid 60% or more of the cash price of consumer goods in satisfaction of a purchase money security interest, the debtor has the right to have the creditor dispose of the goods.

Which is the true statement about the rights of the debtor and the secured party after default?

D. If the security interest secured payment or performance of an obligation, a debtor who has not allowed the secured party to retain the collateral has an absolute right to an accounting for any surplus upon disposition.

Which is the true statement about the rights of the debtor and the secured party after default?

D. If the security interest secured payment or performance of an obligation, the debtor has an absolute responsibility to pay any deficiency remaining following disposition.

Gilbert borrowed $10,000 from Merchant National Bank and signed a negotiable promissory note containing an acceleration clause. In addition, securities valued at $11,000 at the time of the loan were pledged as collateral. Gilbert has defaulted on the loan repayments. At the time of default, $9,250 plus interest of $450 was due, and the securities had a value of $8,000. Merchant

D. Is entitled to proceed against Gilbert on either the note or the collateral or both.

Under the Secured Transactions Article of the UCC, which of the following statements is correct regarding a security interest that has not attached?

D. It is not effective against either the debtor or third parties.

Milo Manufacturing sells baseball equipment to distributors, who in turn sell it to various retailers throughout the United States. The retailers then sell the equipment to consumers who use it for their own personal use. In all cases, the equipment is sold on credit with a security interest taken in the equipment by each of the respective sellers. Which of the following is true?

D. Milo and the distributors must file a financing statement or take possession of the baseball equipment to perfect their security interests.

Which of the following statements about a debtor's notice for foreclosure sales is false?

D. Notice required for a public disposition is the same as notice required for a private disposition.

The Bicycle Shop obtained financing from Spoke, who agreed to lend to Bicycle Shop 75% of the face amount of any accounts receivable it orally assigned to Spoke. Bicycle is now in bankruptcy, and the debt has not been paid. Which of the following statements is true?

D. Spoke is an unsecured creditor because the assignment was oral.

Under the Secured Transactions Article of the UCC, which of the following items can usually be excluded from a filed original financing statement?

D. The amount of the obligation secured.

Under the UCC Secured Transactions Article, when collateral is in a secured party's possession, which of the following conditions also must be satisfied for a security interest to attach?

D. The debtor must have rights in the collateral.

Under the Secured Transactions Article of the UCC, a financing statement generally must contain

D. The name of the debtor.

Under the UCC Secured Transactions Article, what is the effect of perfecting a security interest by filing a financing statement?

D. The secured party has priority in the collateral over most creditors who acquire a security interest in the same collateral after the filing.

Under the Secured Transactions article of the UCC, a security interest becomes enforceable when

D. The value has been given, the secured party receives a security agreement describing the collateral authenticated by the debtor, and the debtor has rights in the collateral.

The Town Bank makes collateralized loans to its customers at 1% above prime on securities owned by the customer, subject to existing margin requirements. In doing so, which of the following is true?

D. Town Bank can obtain a perfected security interest in the securities by control.

Under the UCC Secured Transactions Article, which of the following after-acquired property may be covered by a debtor's security agreement with a secured lender?

Inventory Yes Equipment Yes

Under the UCC Secured Transactions Article, if a debtor is in default under a payment obligation secured by goods, the secured party has the right to

Reduce the Claim to a Judgement: Yes Sell the Goods Secured and Apply the Proceeds toward the Obligations: Yes Peacefully Repossess the Goods without Judicial Process: Yes