Article 9 Prof Questions-Part One Flashcards
Question 1. Marcus wants to borrow $10,000 from his mother, Lucinda, to remodel a bathroom. Lucinda insists on collateral. Marcus offers three collectable Star Wars toys, a ticket to a concert in two weeks, and an assignment of his claim for next week’s wages payable by Publix Super Markets, Inc.
Article 9 will apply to:
A. All three items of collateral.
B. Only the Star Wars toys and the concert ticket.
C. Only the Star Wars toys and the wage claim assignment.
D. None of the items of collateral because Marcus is seeking a loan to remodel real estate.
B. Only the Star Wars toys and the concert ticket.
The wage claim assignment is not personal property. See § 9-109. SCOPE.
”. . . this article applies to: . . . a transaction . . . that creates a security interest in personal property . . . by contract . . . .”
Section 9-109 also expressly provides that “[t]his article does not apply to . . . an assignment of a claim for wages, salary, or other compensation of an employee . . . .”
Question 2. Juniper Nursery sells trees to commercial landscaper clients. Juniper partners with State Bank to offer financing to Juniper’s landscaper clients. Recently, Juniper sold 20 Canary Island Pineapple Date Palms to Green Thumb Landscaping for $20,000. The loan agreement between State Bank and Green Thumb contained the following provision: “Green Thumb Landscaping hereby grants State Bank a security interest in Green Thumb’s inventory and equipment to secure the payment and performance of the Obligation.”
Is there a secured party in this transaction?
A. Yes; Juniper Nursery.
B. Yes; State Bank.
C. Yes; both Juniper Nursery and State Bank.
D. No.
B. Yes; State Bank.
Question 3. The Winter Garden Community Theater (“Theater”) recently entered into several transactions. Which transaction is governed by Article 9?
A. Theater borrowed $50,000 from Micro Loans for the Arts (“MLA”) and granted a security interest to MLA on Theater’s collection of wardrobes and props.
B. Theater borrowed $1,000,000 from State Bank and granted a security interest to State Bank on the theater facility and land beneath it.
C. Theater offered to sell 100 Nutcracker tickets to a high school drama teacher on credit secured by an oral promise by the teacher to repay Theater for the tickets.
D. None of the above.
A. Theater borrowed $50,000 from Micro Loans for the Arts (“MLA”) and granted a security interest to MLA on Theater’s collection of wardrobes and props.
Question 4. West Orange Sheet Metal Works (“West Orange”) fabricates stainless steel countertops, railings, hand rails, islands, cabinets, tables, benches, and other items made of sheet metal. Last year, West Orange borrowed $100,000 from City Bank secured against West Orange’s inventory and equipment. Is City Bank secured against any of the following:
-All of the raw unfabricated sheet metal that West Orange has yet to incorporate into finished items for sale
-The machines West Orange uses to fabricate items made of sheet metal.
A. Yes; the raw sheet metal and the machines are both equipment.
B. Yes; the raw sheet metal is inventory and the machines are equipment.
C. Yes; the raw sheet metal and the machines are both inventory.
D. Yes; the raw sheet metal is inventory and the machines are equipment, but only if neither the sheet metal nor the machines are used to manufacture consumer goods.
B. Yes; the raw sheet metal is inventory and the machines are equipment.
Question 5. Kevin’s Kennels breeds poodle hybrid dogs often referred to as “doodles.” Kevin partners with a local vet, Dr. Nichols, who performs various procedures and examinations on Kevin’s dogs and puppies on a monthly basis. Dr. Nichols invoices Kevin on the 1st of every month for his veterinary services and demands payment on or before the 15th of the same month.
As of December 1st, Kevin had missed 3 months of payments to Dr. Nichols. Also on December 1st, Dr. Nichols phoned up Kevin and stated: “I really don’t want to have to take legal action here. I’ll tell you what. If you’ll pledge that ‘72 John Deere tractor parked behind your kennels as collateral, I’ll give you a break and defer collecting for six months. But if you don’t pay me back in six months, the tractor is mine. Deal?”
Kevin responded: “Deal!”
Did a security interest attached to the pickup truck?
A. No, because Dr. Nichols’s promise to forbear collecting is not “value.”
B. No, because “that ‘72 John Deere tractor parked behind your kennels” is not a sufficient identification of collateral.
C. No, because the parties formed an oral agreement concerning the security interest.
D. Yes.
C. No, because the parties formed an oral agreement concerning the security interest.
Question 6. Suppose the parties in Question 5 memorialized their agreement in a signed writing. To what category of collateral does the tractor belong?
A. Equipment, if Kevin uses the tractor in his dog kennel business.
B. Equipment, even if the tractor is a non-working collectible item that Kevin displays on his property as yard décor.
C. A and B are both correct answers.
D. Inventory, if Kevin uses the tractor in his dog kennel business.
A. Equipment, if Kevin uses the tractor in his dog kennel business.
Question 7. Which of the following is an insufficient description of collateral in a security agreement for purposes of attachment?
I. All accounts
II. All consumer goods
III. All equipment
IV. All inventory
V. All assets
A. V only
B. I, II, and V
C. II only
D. II and V
D. II and V
Question 8. On September 1, Medium-sized Company (“Medium”), a coffee roastery and chain of coffeehouses with location’s across Central Florida, borrowed $250,000 from Big Bank to finance the development of a cellphone app that will allow Medium’s customers to order food and beverages remotely for in-store pickup. On September 1, Medium signed a security agreement granting a security interest in all of its inventory, equipment and accounts in order to secure the loan. Due to a clerical error, Big Bank did not sign the agreement.
On November 1, after deciding to discontinue its coffee roasting operations, Medium sold all of its industrial roasters to Indian River Coffee Co. for $87,000.
Determine whether Big Bank’s security interest is attached to any of the following:
A. The coffee roasters that Medium sold to Indian River Coffee Co.
B. The $87,000 in cash proceeds from the sale of coffee roasters.
C. Both A and B.
D. Since Big Bank did not sign the security agreement, its security interest has not attached to any collateral.
C. Both A and B.
Question 9. Same facts as in Question 9, but assume further that Big Bank filed a UCC Financing Statement in the Florida Secured Transaction Registry (i) identifying Medium as “Medium Company,” (ii) identifying Big Bank as the secured party, and (iii) describing the collateral as “all assets.” Medium is organized in the State of Florida, and its legal name is “Medium-sized Company.” Is Big Bank’s security interest in the industrial coffee roasters perfected?
A. No, unequivocally, because Medium’s legal name is misspelled on the financing statement
B. No, because “all assets” is supergeneric
C. Yes, unequivocally
D. Yes, if if the Florida Secured Transaction Registry’s search logic would identify the erroneous filing if someone searched for “Medium-sized Company”
D. Yes, if if the Florida Secured Transaction Registry’s search logic would identify the erroneous filing if someone searched for “Medium-sized Company”
Question 10. On August 1, Monopoly Man, a wealthy private investor, met with Elizabeth Phillips over lunch to discuss Ms. Phillips blossoming restaurant business, Rolls & Bowls LLC. Ms. Phillips invited Mr. Man to buy into the company as an investor. Mr. Man responded:
“I’m not interested in the downside risk that comes with owning a piece of a restaurant business. Why don’t we structure my involvement as a simple secured loan. I’ll put up $2 million. Rolls & Bowls will pay me back in 36-months plus 12 percent. And Rolls & Bowls can pledge all inventory, equipment, and accounts as collateral.”
Ms. Phillips, acting in her capacity as agent for Rolls & Bowls, agreed and the two shook hands.
On September 1, Mr. Man lent $2 million to Ms. Phillips and both parties signed a written note evidencing the loan. Also on September 1, Mr. Man and Ms. Phillips signed a written security agreement describing the collateral as “all personal property.” On October 1, Mr. Man filed a UCC financing statement in the correct state registry identifying Rolls & Bowls LLC as the debtor, Mr. Man as the secured party, and the collateral as “all assets.” On November 1, Mr. Man and Ms. Phillips amended their security agreement to identify the collateral as “all inventory, equipment, and accounts as collateral.”
On what date did Mr. Man’s security interest become perfected?
A. August 1
B. September 1
C. October 1
D. November 1
D. November 1
