Article 9 Prof Questions-Part Two Flashcards
Question 1. On January 10, 2023, Acme borrowed $10,000 from First Bank. To secure repayment, Acme granted to First Bank an enforceable security interest in Acme’s equipment. On the same day, First Bank filed an adequate and complete financing statement against Acme in the appropriate Illinois state registry. As of January 10, Acme owned 50 DataMax computer servers and no other equipment.
On June 1, 2023, Acme relocated from Illinois to Florida. On August 1, 2023, Acme acquired 25 new GigaSpeed computer servers. Also on August 1, First Bank amended its Illinois financing statement to reflect Acme’s new location in Florida. First Bank did not take any action in Florida.
Which of the following statements is true?
A. First Bank is perfected in the 50 DataMax computer servers and the 25 new GigaSpeed computer servers as of January 10, 2023.
B. First Bank is perfected in the 50 DataMax computer servers as of January 10, 2023, but is not perfected in the 25 new GigaSpeed computer servers.
C. First Bank is perfected in the 50 DataMax computer servers and the 25 new GigaSpeed computer servers; however its perfection is now effective as of August 1, 2023.
D. First Bank is unperfected.
D. First Bank is unperfected.
Question 2. [Same facts as Question 1.] On January 10, 2023, Acme borrowed $10,000 from First Bank. To secure repayment, Acme granted to First Bank an enforceable security interest in Acme’s equipment. On the same day, First Bank filed an adequate and complete financing statement against Acme in the appropriate Illinois state registry. As of January 10, Acme owned 50 DataMax computer servers and no other equipment.
[Additional facts.] On January 15, Acme sold the 50 DataMax computer servers for $150,000. Also on January 15, Acme used the $150,000 in sale proceeds to purchase 25 new GigaSpeed computer servers.
If First Bank takes no action, will First Bank be perfected in the new GigaSpeed computer servers on February 15, 2023?
A. Yes, because First bank filed a financing statement covering the original collateral, and a security interest in the new collateral may be perfected by filing in the office in which First Bank’s initial financing statement was filed.
B. Yes, because the proceeds are identifiable cash proceeds.
C. Yes, because the proceeds were acquired with cash assets.
D. No.
D. No.
Question 3. On January 1, 2019, Beta borrowed $800,000 from First Bank. To secure repayment, Beta granted to First Bank an enforceable security interest in Beta’s inventory and equipment. On the same day, First Bank filed an adequate and complete financing statement against Beta in the appropriate state registry.
On December 1, 2023, after Beta caused an event of default, First Bank took possession of 10 of Beta’s widget machines. The widget machines constitute Beta inventory. The machines were located in an unsecured parking lot and were repossessed without breaching the peace. As of January 2, 2024, is First Bank perfected in the 10 widget machines.
A. Yes, because continuous perfection in inventory is assumed.
B. Yes, and First Bank is continuously perfected in the 10 widget machines as of January 1, 2019.
C. Yes, but First Bank is now perfected in the 10 widget machines as of December 1, 2023.
D. No, because First Bank’s financing statement lapsed 5 years after January 1, 2019.
B. Yes, and First Bank is continuously perfected in the 10 widget machines as of January 1, 2019.
Question 4. Dana borrowed $2,000 from Apple In-Store Financing to purchase a new Apple computer. Do to a clerical oversight, Dana never signed a promissory note, loan agreement, or security agreement evidencing her obligation repay the $2,000 or any other rights and obligations with respect to the $2,000 loan. Does Apple In-Store Financing have a security interest in Dana’s new Apple computer?
A. Yes, because Apple In-Store Financing has an automatically perfected purchase-money security interest in the Apple Computer.
B. Yes; Apple In-Store Financing has a de facto perfected security interest in the Apple Computer because Dana would not have been able to purchase the computer if not for Apple In-Store Financing..
C. Apple has an attached, but not a perfected security interest in Dana’s new Apple computer.
D. No.
D. No.
Question 5. On August 1, David borrowed $5,000 from First Bank. David offered an Omega brand watch as collateral. First Bank agreed, and David and First Bank memorialized their agreement in writing (signed by both parties and adequately describing the watch). First Bank did not take possession of the watch and, due to clerical oversight, failed to file a financing statement.
On October 1, David borrowed $3,000 from Second Bank. David offered the same Omega watch as collateral. Second Bank agreed, and David and Second Bank memorialized their agreement in writing (signed by both parties and adequately describing the watch). Second Bank did not take possession of the watch. However, Second Bank did file a properly completed financing state in the appropriate state registry.
Last week, David defaulted on both loans, having made no payments.
Which of the following statements is true?
A. First Bank’ security interest enjoys priority over Second Bank’s.
B. First Bank does not have a security interest in the Omega watch since it never filed a financing statement.
C. Second Bank’ security interest enjoys priority over First Bank’s.
D. Second Bank does not have a security interest in the Omega watch because it cannot have a security interest in the same watch that First Bank has a security interest in.
C. Second Bank’ security interest enjoys priority over First Bank’s
Question 6. Would your answer to Question 5 change if First Bank filed a properly completed financing state in the appropriate state registry on October 2.
A. No.
B. Yes; First Bank’ security interest now enjoys priority over Second Bank’s.
C. Yes; Second Bank’s security interest would be voided by the filing of First Bank’s financing statement.
D. Yes; now both banks have coequal claims in the watch.
A. No.
Question 7. First Bank has a first-priority perfected security interest in all of Acme’s inventory, including after-acquired inventory. Acme would like to borrow $50,000 from Second Bank to purchase new inventory. Which actions must Acme and/or Second Bank take to enjoy a perfected purchase-money security interest in Acme’s new inventory that has priority over First Bank’s conflicting security interest in the same inventory?
A. Acme must execute an authenticated security agreement sufficiently identifying the collateral.
B. Second Bank must file a proper financing statement covering the collateral.
C. Second Bank must send an authenticated notice to First Bank, which notice must state that Second Bank has or expects to obtain a security interest in the new inventory and describes the inventory.
D. All of the above.
D. All of the above.
Question 8. Choose the most accurate statement below:
A. After default, a secured party may immediately sue the debtor to obtain judgment against the debtor.
B. After default, a secured party must wait a reasonable amount of time before it may sue the debtor to obtain judgment against the debtor.
C. After default, a secured party may not immediately exercise self-help to repossess collateral.
D. After default, a secured party must wait 10 days before it may sue the debtor to obtain judgment against the debtor.
A. After default, a secured party may immediately sue the debtor to obtain judgment against the debtor.
Question 9. On January 1, 2020, Acme borrowed $100,000 from First Bank. To secure repayment, Acme granted to First Bank an enforceable security interest in Acme’s equipment, which grant was memorialized in a writing signed by Acme. The writing contained an acceleration clause. On the same day, First Bank filed an adequate and complete financing statement against Acme in the appropriate state registry.
On October 1, 2020, Acme borrowed $200,000 from Second Bank. To secure repayment, Acme granted to Second Bank an enforceable security interest in Acme’s equipment memorialized in a writing signed by Acme. On the same day, Second Bank filed an adequate and complete financing statement against Acme in the appropriate state registry.
On November 1, 2022, Acme defaulted on its loan payments to Second Bank. First Bank’s loan agreement with with Acme provided that Acme’s default on any other loans would constitute an event of default on her First Bank loan. First Bank thus called a default and hired a repo agent to repossess a portion of Acme’s equipment. The equipment had a fair market value of $75,000. Then, First Bank sent Acme a signed letter demanding the total unpaid balance, plus interest, a $1000 repo agent fee, and $2,000 in attorneys’ fees.
Which statement below is true?
A. Second Bank can redeem the inventory by paying First Bank $78,000.
B. Second Bank can redeem the inventory by paying Acme $78,000.
C. Acme can redeem the inventory by paying First Bank $75,000.
D. Beta, a third-party broker, can redeem the inventory by paying First Bank $100,000.
A. Second Bank can redeem the inventory by paying First Bank $78,000.
Question 10. Which statement below is true?
A. Notice of a foreclosure sale need not be sent to secured parties with superior interests in the collateral to be sold at the foreclosure sale since such secured parties will retain their interests in the collateral.
B. Notice of a foreclosure sale must be sent to all secured parties with security interests in the collateral to be sold.
C. Notice of a foreclosure sale may be made by any commercially reasonable means, including oral notice, if commercially reasonable.
D. Notice of a foreclosure sale sent within 10 days of the sale is deemed “sent within a reasonable time before the disposition.”
B. Notice of a foreclosure sale must be sent to all secured parties with security interests in the collateral to be sold.
