deck_8022987 Flashcards
02/14 #3: On July 2, 2013: Electronics borrowed $50k from First Bank to finance inventory. Electronics president signs p/n and s/a giving First Bank s/i in Electronics’ current and after-acquired inventory.On July 3, 2013: First bank filed a f/s with Tx Sec of State.On Feb 3, 2014: Electronics ordered 10 notebook computers on credit from Bell. Electronics signed s/a giving Bell s/i in 10 notebook comp. Bell filed f/s with Tx Sec. of State on Feb 8, 2014 and delivered computers to Electronics the next day.Electronics sold 1 computer to Pat on Feb 18, 2014 to use in his business as accountant. Pat paid for computer by check for $1k. Electronics hasn’t deposited Patrick’s $1k check.Electronics has defaulted on its obligations to First Bank and Bell.Between Electronics, First Bank, Bell and Patrick, who has superior interest in 9 notebooks still in Electronics’ inventory?
The issue is who has the superior interest in inventory when there is a perfected creditor who filed first in after-acquired inventory and a perfected creditor with a PMSI in inventory who filed before the debtor took possession of the collateral but did not give notice to other creditors. Under the U.C.C., when two perfected creditors have an interest in the same collateral, the first to perfect or file a financing statement has the superior interest. However, a creditor who has a Purchase Money Security Interest (PMSI) in the collateral has a superior interest to a non-PMSI creditor. To have a PMSI, the creditor must loan the debtor money, and the debtor must give a security interest to the creditor in the exact collateral that was purchased from that loan money. For a creditor with a PMSI in inventory, the creditor must file the financing statement before the debtor takes possession of the collateral, or within 20 days of the debtor taking possession. The creditor must also file notice to any creditor’s with a competing interest in the collateral, describing the collateral. Inventory is collateral that is used for sale by a business.
02/14 #3: On July 2, 2013: Electronics borrowed $50k from First Bank to finance inventory. Electronics president signs p/n and s/a giving First Bank s/i in Electronics’ current and after-acquired inventory.On July 3, 2013: First bank filed a f/s with Tx Sec of State.On Feb 3, 2014: Electronics ordered 10 notebook computers on credit from Bell. Electronics signed s/a giving Bell s/i in 10 notebook comp. Bell filed f/s with Tx Sec. of State on Feb 8, 2014 and delivered computers to Electronics the next day.Electronics sold 1 computer to Pat on Feb 18, 2014 to use in his business as accountant. Pat paid for computer by check for $1k. Electronics hasn’t deposited Patrick’s $1k check.Electronics has defaulted on its obligations to First Bank and Bell.Between Electronics, First Bank, Bell and Patrick, who has superior interest in the notebook computer sold to Patrick?
The issue is who has the superior interest in sold inventory when a creditor is perfected and secured in inventory, but a buyer purchases the inventory within the ordinary course of business. Under the U.C.C., a buyer in the ordinary course of business (BIOC) has a superior interest over a perfected and secured creditor. To be a buyer in the ordinary course of business, the buyer must give value, have no notice of a security agreement, the creditor must not have possession of the collateral, the item must be an item that the seller sells in its ordinary course of business, and the buyer must purchase it in the ordinary course of business.
02/14 #3: On July 2, 2013: Electronics borrowed $50k from First Bank to finance inventory. Electronics president signs p/n and s/a giving First Bank s/i in Electronics’ current and after-acquired inventory.On July 3, 2013: First bank filed a f/s with Tx Sec of State.On Feb 3, 2014: Electronics ordered 10 notebook computers on credit from Bell. Electronics signed s/a giving Bell s/i in 10 notebook comp. Bell filed f/s with Tx Sec. of State on Feb 8, 2014 and delivered computers to Electronics the next day.Electronics sold 1 computer to Pat on Feb 18, 2014 to use in his business as accountant. Pat paid for computer by check for $1k. Electronics hasn’t deposited Patrick’s $1k check.Electronics has defaulted on its obligations to First Bank and Bell.Between Electronics, First Bank, Bell and Patrick, who has superior interest in the $1k check given by Patrick to pay for the computer?
The issue is who has the superior interest in proceeds from the sale of inventory when it is within 20 days of the payment.A perfected, secured creditor has temporary perfection from the proceeds of the sale of any collateral it has a perfected security interest in for 20 days. It must file a financing statement over the proceeds within the 20 days, or it loses its perfection.
07/13 #4: Landscape is a Tx Corp.Jan 3, 2013: Landscape borrowed $1k from C and promised to repay in 6 months, gave C a lawnmower as collateral until loan repaid. C still has lawnmower. C never filed anything.Jan 15, 2013: Landscape borrowed $10k from Bank. Landscape signed p/n and s/a giving Bank s/i in “all equip and tools now owned/hereafter acquired.”At the time, Landscape owned lawnmower and wheelbarrows, shovels, rakes. Bank properly perfected its s/i on Jan 15 by filing f/s with Tx Sec of State.Feb 15, 2013: Landscape reorganized, changed name to “Builder.” Same day, Landscape’s owner changed name on checking account at Bank from “Landscape” to “Builder.”March 30, 2013: Builder paid cash for and took deleivery of table saw from Equipment.April 1, 2013: Builder purchased from Lumber on credit plywood. Builder gave Lumber p/n and s/a covering plywood. Lumber has not filed f/s.April 15, 2013: Builder purchased from Tools on credit hand tools. Builder gave p/n and s/a covering hand tools. Tools properly perfected its s/i on April 16, 2013 by filing f/s with Tx Sec of State.July 15, 2013: Builder can’t pay.Among C, Bank, Equipment, Lumber, Tools, which has priority over The lawnmower?
Under Texas law, attachment requires (1) value given by the creditor, (2) a contract (security agreement, usually), and(3) the debtor has rights in the collateral. Perfection requires attachment as well as an act of perfection, including the signing and filing of a financing statement. For most kinds of property, attachment can occur through possession, where the creditor takes possession of the property. Possession can also constitute an act of perfection. As between two secured perfected creditors, the first to (1) file a financing statement, or (2) perfect prevails.
07/13 #4: Landscape is a Tx Corp.Jan 3, 2013: Landscape borrowed $1k from C and promised to repay in 6 months, gave C a lawnmower as collateral until loan repaid. C still has lawnmower. C never filed anything.Jan 15, 2013: Landscape borrowed $10k from Bank. Landscape signed p/n and s/a giving Bank s/i in “all equip and tools now owned/hereafter acquired.”At the time, Landscape owned lawnmower and wheelbarrows, shovels, rakes. Bank properly perfected its s/i on Jan 15 by filing f/s with Tx Sec of State.Feb 15, 2013: Landscape reorganized, changed name to “Builder.” Same day, Landscape’s owner changed name on checking account at Bank from “Landscape” to “Builder.”March 30, 2013: Builder paid cash for and took deleivery of table saw from Equipment.April 1, 2013: Builder purchased from Lumber on credit plywood. Builder gave Lumber p/n and s/a covering plywood. Lumber has not filed f/s.April 15, 2013: Builder purchased from Tools on credit hand tools. Builder gave p/n and s/a covering hand tools. Tools properly perfected its s/i on April 16, 2013 by filing f/s with Tx Sec of State.July 15, 2013: Builder can’t pay.Among C, Bank, Equipment, Lumber, Tools, which has priority over The wheelbarrows, shovels, rakes?
. At issue is whether Bank’s security agreement properly covers Landscape’s existing equipment and tools. A proper security agreement must state with adequate specificity what collateral is covered by the agreement. “All equipment” is sufficiently specific.
07/13 #4: Landscape is a Tx Corp.Jan 3, 2013: Landscape borrowed $1k from C and promised to repay in 6 months, gave C a lawnmower as collateral until loan repaid. C still has lawnmower. C never filed anything.Jan 15, 2013: Landscape borrowed $10k from Bank. Landscape signed p/n and s/a giving Bank s/i in “all equip and tools now owned/hereafter acquired.”At the time, Landscape owned lawnmower and wheelbarrows, shovels, rakes. Bank properly perfected its s/i on Jan 15 by filing f/s with Tx Sec of State.Feb 15, 2013: Landscape reorganized, changed name to “Builder.” Same day, Landscape’s owner changed name on checking account at Bank from “Landscape” to “Builder.”March 30, 2013: Builder paid cash for and took delivery of table saw from Equipment.April 1, 2013: Builder purchased from Lumber on credit plywood. Builder gave Lumber p/n and s/a covering plywood. Lumber has not filed f/s.April 15, 2013: Builder purchased from Tools on credit hand tools. Builder gave p/n and s/a covering hand tools. Tools properly perfected its s/i on April 16, 2013 by filing f/s with Tx Sec of State.July 15, 2013: Builder can’t pay.Among C, Bank, Equipment, Lumber, Tools, which has priority over The table saw?
At issue is whether Bank’s security agreement adequately covered a table saw acquired after their agreement and after a name change. A security agreement may permissibly cover after acquired equipment and inventory. Additionally, a financing statement filed with the Secretary of State is valid to perfect newly acquired items for four months after a company changes its name and a creditor has notice of the name change.
07/13 #4: Landscape is a Tx Corp.Jan 3, 2013: Landscape borrowed $1k from C and promised to repay in 6 months, gave C a lawnmower as collateral until loan repaid. C still has lawnmower. C never filed anything.Jan 15, 2013: Landscape borrowed $10k from Bank. Landscape signed p/n and s/a giving Bank s/i in “all equip and tools now owned/hereafter acquired.”At the time, Landscape owned lawnmower and wheelbarrows, shovels, rakes. Bank properly perfected its s/i on Jan 15 by filing f/s with Tx Sec of State.Feb 15, 2013: Landscape reorganized, changed name to “Builder.” Same day, Landscape’s owner changed name on checking account at Bank from “Landscape” to “Builder.”March 30, 2013: Builder paid cash for and took deleivery of table saw from Equipment.April 1, 2013: Builder purchased from Lumber on credit plywood. Builder gave Lumber p/n and s/a covering plywood. Lumber has not filed f/s.April 15, 2013: Builder purchased from Tools on credit hand tools. Builder gave p/n and s/a covering hand tools. Tools properly perfected its s/i on April 16, 2013 by filing f/s with Tx Sec of State.July 15, 2013: Builder can’t pay.Among C, Bank, Equipment, Lumber, Tools, which has priority over The plywood?
At issue is whether an unperfected secured creditor can have priority in plywood over a perfected creditor in equipment. A creditor validly attaches when he gives value, has a security agreement, and the debtor has rights to the collateral. Here, the plywood is inventory, because Builder will use it to create the houses – its product. A purchase money security interest in inventory is only perfected with priority with the creditor provides notice to all other creditors with an interest in inventory because the security interest attaches.
07/13 #4: Landscape is a Tx Corp.Jan 3, 2013: Landscape borrowed $1k from C and promised to repay in 6 months, gave C a lawnmower as collateral until loan repaid. C still has lawnmower. C never filed anything.Jan 15, 2013: Landscape borrowed $10k from Bank. Landscape signed p/n and s/a giving Bank s/i in “all equip and tools now owned/hereafter acquired.”At the time, Landscape owned lawnmower and wheelbarrows, shovels, rakes. Bank properly perfected its s/i on Jan 15 by filing f/s with Tx Sec of State.Feb 15, 2013: Landscape reorganized, changed name to “Builder.” Same day, Landscape’s owner changed name on checking account at Bank from “Landscape” to “Builder.”March 30, 2013: Builder paid cash for and took deleivery of table saw from Equipment.April 1, 2013: Builder purchased from Lumber on credit plywood. Builder gave Lumber p/n and s/a covering plywood. Lumber has not filed f/s.April 15, 2013: Builder purchased from Tools on credit hand tools. Builder gave p/n and s/a covering hand tools. Tools properly perfected its s/i on April 16, 2013 by filing f/s with Tx Sec of State.July 15, 2013: Builder can’t pay.Among C, Bank, Equipment, Lumber, Tools, which has priority over The hand tools?
At issue is which of two perfected creditors has priority in equipment. Generally, between two perfected creditors, the first to file or perfect has priority in the security interest. However, a purchase money security interest in equipment is automatically perfected for 20 days. As long as the interest is perfected some other way within those twenty days, the date of perfection relates back. A validly perfected purchase money security interest has a super priority over previously filed perfected interests.
02/13 # 3: W borrowed desk from G, to use in business, WW. Desk destroyed in fire July 2011. G wants $1k for destroyed desk. W signed and delivered p/n to G for $1k payable July 31, 2012 (W felt coerced to sign).Aug 15, 2011: W borrows $10k from Bank to reopen business. W signed s/a giving Bank s/i in:1) current and after-acquired inventory of WW2) Amount in W’s savings account.Bank didnt file any documentation regarding its s/i.September 3, 2011, W borrowed another $5k from Bank signing s/a giving Bank s/i in all equipment owned d subsequently acquired by WW. Bnk filed f/s Sept 4, 2011.Oct 15, 2011: W borrows another $20k from Loan Comp. W signs s/a giving Loan Comp interest in:1) savings account at Bank2) all inventory currently held and after-acquired 3) all equipment owned and after acquired.Loan Comp files f/s in all required offices Oct 20, 2011.October 19, 2011: W buys $7k cash for widget machine for business.December 11, 2011: G indorsed W’s $1k p/n and gave it to Bank to settle $1,500 loan from Bank to G. One week later, G says to Bank “good luck collecting. I forced W to sign. W will never pay.”July 31, 2012: Bank presented $1k note to W and demanded payment. W refused. W also defaulted on $5k and $10k notes pyable to Bank and $20k note patable to Loan Comp.Between Bank and Loan Comp, who has superior interest in:A) savings account;B) inventory held by WW;C) widget machine
NUMBER ONE: The first question is whether or not the secured parties interests in the savings accounts attached. For a security interest to attach, 1) there must be a security agreement, 3) the secured party must give value, and 3) the debtor must have rights in the collateral.The next question is whether or not the parties’ security interests were perfected. Typically perfection occurs by filing a financing statement. However, deposit accounts are not perfected by the filing of a financing statement. Rather, deposit accounts are perfected in one of 3 ways: 1. the secured party and the debtor entered into an agreement with the depositary bank that the depositary bank will follow the directions of the secured creditor; 2. the secured creditor becomes the owner of the deposit account, or 3. the funds are maintained at the secured creditor’s bank.NUMBER TWO: Inventory is defined under Article 9 as things which are sold as part of a business and any works in progress. These come under the category of goods for purposes of Article 9. The first question is attachment. As with the savings accounts, there is no indication that the parties interests did not attach. As such, the question is whether or not the parties are perfected. To perfect in inventory, a secured party must 1) either file a financing statement or 2) have possession. Furthermore, while a purchase money security interest (pmsi) In goods typically has 20 days after receipt of the goods to perfect to retain priority, this does not apply to inventory. Rather, for inventory the secured creditor must file a financing statement prior to the debtor’s receipt of the inventory, and must notify the other potential creditors of their interestNUMBER THREE:At issue is whether the machine is categorized as “equipment,” and whether LoanCo’s loan will be treated as a purchase money security interest. In Texas, to perfect a security interest, a creditor must normally file a financing statement. There are a number of exceptions, but none of them are applicable to the widget making machine. The widget making machine is classified as equipment for Wally’s Widgets since it is an item that Wally’s uses in the ordinary course of business. His business being widgets, a widget making machine clearly fits within the definition of equipment. Where money is given directly for the purchase of particular collateral, it is considered a purchase money security interest (PMSI). If a creditor obtains a PMSI in after-acquired inventory or equipment, they have 20 days from the date of delivery of the collateral in which their interest is automatically perfected. If they fail to perfect within that 20 day window, their interest becomes unperfected.
02/13 # 3: W borrowed desk from G, to use in business, WW. Desk destroyed in fire July 2011. G wants $1k for destroyed desk. W signed and delivered p/n to G for $1k payable July 31, 2012 (W felt coerced to sign).Aug 15, 2011: W borrows $10k from Bank to reopen business. W signed s/a giving Bank s/i in:1) current and after-acquired inventory of WW2) Amount in W’s savings account.Bank didnt file any documentation regarding its s/i.September 3, 2011, W borrowed another $5k from Bank signing s/a giving Bank s/i in all equipment owned d subsequently acquired by WW. Bnk filed f/s Sept 4, 2011.Oct 15, 2011: W borrows another $20k from Loan Comp. W signs s/a giving Loan Comp interest in:1) savings account at Bank2) all inventory currently held and after-acquired 3) all equipment owned and after acquired.Loan Comp files f/s in all required offices Oct 20, 2011.October 19, 2011: W buys $7k cash for widget machine for business.December 11, 2011: G indorsed W’s $1k p/n and gave it to Bank to settle $1,500 loan from Bank to G. One week later, G says to Bank “good luck collecting. I forced W to sign. W will never pay.”July 31, 2012: Bank presented $1k note to W and demanded payment. W refused. W also defaulted on $5k and $10k notes pyable to Bank and $20k note patable to Loan Comp.If BAnk sues W to collect $1k note, does W have any defense on which he can prevail (Comm Paper Answer)?
At issue is whether Bank is a Holder in Due Course, and whether George’s conduct was sufficient to constitute duress. To qualify as a holder in due course (HDC), Bank must 1) have a negotiable instrument, 2) be a holder, 3) with authenticity of the note not apparently questioned, take 4) for value, 5) in good faith, and 6) notice of any defenses. Reduced consideration of a past debt is sufficient value to satisfy the holder in due course requirement. And taking without notice only requires that the holder not have notice at the time they obtain the note. Where a holder is a holder in due course, they are not subject to personal defenses such as failure of consideration or other contracts defenses, but are subject only to the so-called Real Defenses (such as fraud-in-the-factum, forgery, authenticity, adjudicated incapacity, infancy, etc…). Duress requires such force applied to the maker/drawer that the will of the person originally receiving the note is substituted for the will of the maker/drawer. Courts have found many levels of coercion, manipulation and even threats to fall short of the level of force required to successfully assert duress.
07/12 #6:March 2011: E had business named CopyCo (CC)April 1, 2011: Printers sold CC a copier on credit. E agreed to sign and return a s/a granting Printers a s/i in the copier, E failed to do so.May 1, 2011: CC got $20k loan from Bank for CC’s operation signing a p/n. Note to be paid on/before Oct 31, 2011. As collateral, E signed s/a giving Bank s/i in CC’s currently owned and after-acquired furniture, equipment, inventory, and accounts receivable. On May 2, 2011, Bank filed f/s in all required public offices.June 1, 2011: Technology sold and delivered 5 computers to CC. E, on behalf of CC, signed p/n and s/a granting Technology s/i in 5 computers and in CC’s accounts receivable. On June 10, 2011, Technology filed f/s in all required public offices.November 1, 2011: Banks president met with E to discuss CC’s default on loan. Next day, CC delivered 50 shares of Widget Stock to Bank as additional collateral for the loan. Bank agrees to extend p/n’s due date.November 10, 2011: Furniture sells 5 workstations to CC on credit, E signs note and s/a granting Furniture a s/i in the workstations. Furniture delivered workstations to CC on Nov 28, 2011.December 10, 2011: CC filed bankruptcy and S appointed Trustee of Estate of CC.December 15, 2011, Furniture, after learning CC filed bankruptcy, filed f/s in all required public offices.Among Printers, Bank, Furniture, Technology, and S, who holds superior interests in:Copier?
• The copier: bank has a superior interest in the copier. A security interest attaches to tangible collateral when: 1) the debtor agrees to give the creditor a security interest in it, which may be evidenced by an authenticated security agreement or the secured parties possession of the goods; 2) the creditor gives value for the security interest; and 3) the debtor has rights in the collateral. Edward never assigned a security agreement granting printers a security interest and printers is not in possession of the copier. Thus, printers is an unsecured creditor. Edward signed a security agreement on behalf of bank covering inventory and equipment. Inventory is any good held for sale or lease, and office furnishings qualify as equipment. Thus, the copier is equipment if used in copy company’s business and inventory if copy company held it for sale. In either case, it is covered by the security agreement. Bank also gave value in form of $20,000 loan and Edward owned the copier. Accordingly, bank took a security interest in the copier. A security interest in goods can be perfected by filing a financing statement. Bank perfected its security interest by filing a financing statement “in all required public offices” on May 2 2011. For purposes of priority, a trustee is treated as a hypothetical judicial Lien creditor who received his Lien on the date of the bankruptcy filing. Thus, Steve is treated as effectively holding a judicial Lien as of December 10, 2011. The secured creditor who perfects before a Lien creditor gets its Lien has priority over the Lien creditor. Thus banks May 2 perfection beats steve’s December 10 Lien and bank has priority in the copier.
07/12 #6:March 2011: E had business named CopyCo (CC)April 1, 2011: Printers sold CC a copier on credit. E agreed to sign and return a s/a granting Printers a s/i in the copier, E failed to do so.May 1, 2011: CC got $20k loan from Bank for CC’s operation signing a p/n. Note to be paid on/before Oct 31, 2011. As collateral, E signed s/a giving Bank s/i in CC’s currently owned and after-acquired furniture, equipment, inventory, and accounts receivable. On May 2, 2011, Bank filed f/s in all required public offices.June 1, 2011: Technology sold and delivered 5 computers to CC. E, on behalf of CC, signed p/n and s/a granting Technology s/i in 5 computers and in CC’s accounts receivable. On June 10, 2011, Technology filed f/s in all required public offices.November 1, 2011: Banks president met with E to discuss CC’s default on loan. Next day, CC delivered 50 shares of Widget Stock to Bank as additional collateral for the loan. Bank agrees to extend p/n’s due date.November 10, 2011: Furniture sells 5 workstations to CC on credit, E signs note and s/a granting Furniture a s/i in the workstations. Furniture delivered workstations to CC on Nov 28, 2011.December 10, 2011: CC filed bankruptcy and S appointed Trustee of Estate of CC.December 15, 2011, Furniture, after learning CC filed bankruptcy, filed f/s in all required public offices.Among Printers, Bank, Furniture, Technology, and S, who holds superior interests in:Computers?
• The computers: Technology has the superior interest in the computers. Bank’s security agreement covers after acquired equipment. Thus, bank has a security interest in the computers that also was perfected by filing a financing statement “and all required public office is” on May 2, 2011. Technology sold the computers to copy company on credit. A PMSI is created when on item is sold on credit and when the seller takes a security interest in the item to secure payment of the price. Edward signed a promissory note and a security agreement on copy companies behalf, which created a PMSI in favor of technology. Technology perfected its security interest by filing a financing statement on June 10, 2011. Between Bank and technology, the rule is that a PMSI in equipment trumps a conflicting security interest if the PMSI is perfected within 20 days after the debtor receives possession of the collateral. Technology perfected by filing nine days after the computers were delivered. Technologies Lien is prior to banks Lien even though bank filed back in may. Technology also beats Steve because technologies lien was perfected on June 10 before steve’s December 10 Lien. Technology has priority.
07/12 #6:March 2011: E had business named CopyCo (CC)April 1, 2011: Printers sold CC a copier on credit. E agreed to sign and return a s/a granting Printers a s/i in the copier, E failed to do so.May 1, 2011: CC got $20k loan from Bank for CC’s operation signing a p/n. Note to be paid on/before Oct 31, 2011. As collateral, E signed s/a giving Bank s/i in CC’s currently owned and after-acquired furniture, equipment, inventory, and accounts receivable. On May 2, 2011, Bank filed f/s in all required public offices.June 1, 2011: Technology sold and delivered 5 computers to CC. E, on behalf of CC, signed p/n and s/a granting Technology s/i in 5 computers and in CC’s accounts receivable. On June 10, 2011, Technology filed f/s in all required public offices.November 1, 2011: Banks president met with E to discuss CC’s default on loan. Next day, CC delivered 50 shares of Widget Stock to Bank as additional collateral for the loan. Bank agrees to extend p/n’s due date.November 10, 2011: Furniture sells 5 workstations to CC on credit, E signs note and s/a granting Furniture a s/i in the workstations. Furniture delivered workstations to CC on Nov 28, 2011.December 10, 2011: CC filed bankruptcy and S appointed Trustee of Estate of CC.December 15, 2011, Furniture, after learning CC filed bankruptcy, filed f/s in all required public offices.Among Printers, Bank, Furniture, Technology, and S, who holds superior interests in:Workstations?
• The workstations: furniture has the superior interest. Bank’s security agreement covers after-acquired furniture and equipment so it has a security interest in the workstations which was perfected by filing a financing statement on May 2, 2011. Furniture sold the workstation on credit to copy company. Edwards signed a promissory note and a security agreement on copy company’s behalf creating a PMSI in favor of furniture. Filing for bankruptcy imposes an automatic stay which prevents creditors from pursuing remedies against the debtor or his assets. Thus, a stay was imposed on December 10 when bankruptcy was filed. Despite the stay, if a secured creditor files a financing statement with respect to a PMSI before or within 20 days after the debtor receives delivery of the collateral, the security interest takes priority over the rights of a Lien creditor who arose between the time of attachment and the time of filing. Here furniture filed on December 15 (within 20 days of the debtor receiving delivery of the collateral on November 28). Thus furniture trumps steve’s interest, which arose on December 10 because that interest arose between the time of attachment (November 10) and the time of filing (December 15). A bankruptcy trustee may avoid preferential transfers. However, a PMSI is not a voidable preference if it secures new value that was given by the secured party at or after the signing of a security agreement if it is perfected within 30 days of the debtor receiving possession of the collateral. Furniture’s PMSI meets this requirement. Creditor perfected its security interest on December 15 and copy company acquired possession on November 28. Furniture’s Lien is prior to banks Lien and has priority in the workstations.
07/12 #6:March 2011: E had business named CopyCo (CC)April 1, 2011: Printers sold CC a copier on credit. E agreed to sign and return a s/a granting Printers a s/i in the copier, E failed to do so.May 1, 2011: CC got $20k loan from Bank for CC’s operation signing a p/n. Note to be paid on/before Oct 31, 2011. As collateral, E signed s/a giving Bank s/i in CC’s currently owned and after-acquired furniture, equipment, inventory, and accounts receivable. On May 2, 2011, Bank filed f/s in all required public offices.June 1, 2011: Technology sold and delivered 5 computers to CC. E, on behalf of CC, signed p/n and s/a granting Technology s/i in 5 computers and in CC’s accounts receivable. On June 10, 2011, Technology filed f/s in all required public offices.November 1, 2011: Banks president met with E to discuss CC’s default on loan. Next day, CC delivered 50 shares of Widget Stock to Bank as additional collateral for the loan. Bank agrees to extend p/n’s due date.November 10, 2011: Furniture sells 5 workstations to CC on credit, E signs note and s/a granting Furniture a s/i in the workstations. Furniture delivered workstations to CC on Nov 28, 2011.December 10, 2011: CC filed bankruptcy and S appointed Trustee of Estate of CC.December 15, 2011, Furniture, after learning CC filed bankruptcy, filed f/s in all required public offices.Among Printers, Bank, Furniture, Technology, and S, who holds superior interests in:Accounts Receivable?
• The accounts receivable: bank has superior interest in accounts receivable. Banks security agreement covers present and after acquired accounts. Technology has a PMSI in the computers, but a PMSI does not exist in the accounts because accounts are not goods. Technology perfected its security interest by filing a financing statement on June 10, 2011. Between banks and technology rule is that the first to file or perfect has priority. Bank filed and perfected on May 2 which was before technologies filing and perfection on June 10. Thus bank has priority an all accounts. Because bank was perfected on May 2 (before steve’s December 10 Lien) banks interest defeats steve’s and bank has priority in accounts.
07/12 #6:March 2011: E had business named CopyCo (CC)April 1, 2011: Printers sold CC a copier on credit. E agreed to sign and return a s/a granting Printers a s/i in the copier, E failed to do so.May 1, 2011: CC got $20k loan from Bank for CC’s operation signing a p/n. Note to be paid on/before Oct 31, 2011. As collateral, E signed s/a giving Bank s/i in CC’s currently owned and after-acquired furniture, equipment, inventory, and accounts receivable. On May 2, 2011, Bank filed f/s in all required public offices.June 1, 2011: Technology sold and delivered 5 computers to CC. E, on behalf of CC, signed p/n and s/a granting Technology s/i in 5 computers and in CC’s accounts receivable. On June 10, 2011, Technology filed f/s in all required public offices.November 1, 2011: Banks president met with E to discuss CC’s default on loan. Next day, CC delivered 50 shares of Widget Stock to Bank as additional collateral for the loan. Bank agrees to extend p/n’s due date.November 10, 2011: Furniture sells 5 workstations to CC on credit, E signs note and s/a granting Furniture a s/i in the workstations. Furniture delivered workstations to CC on Nov 28, 2011.December 10, 2011: CC filed bankruptcy and S appointed Trustee of Estate of CC.December 15, 2011, Furniture, after learning CC filed bankruptcy, filed f/s in all required public offices.Among Printers, Bank, Furniture, Technology, and S, who holds superior interests in:Widget Stock?
• The widget stock: Steve probably has superior interest. Its security interest in stock to be avoided as a preference added a preference is a transfer of a debtor’s interest in property for or on account of an antecedent debt made or suffered by the debtor while insolvent and within 90 days before filing bankruptcy. The trustee has the power to avoid such preferences. If banks security interest in the stock is avoided it loses it’s a Lien in the stock and has no priority in it. Steve would have priority in the stock as a hypothetical judicial Lien creditor. (#40 in BarBri book; pg. 42)
02/12 #10: W owned Home Appliance Store. W borrowed $50k from Bank and signed s/a, giving Bank a s/i in currently owned and after-acquired inventory and equipment. Bank promptly and properly filed f/s with Tx Sec of State to perfect its interest.W donated to Charity a microwave from inventory to use in soup kitchen. Charity had no knowledge of Bank’s s/i.After, W began having cashflow problems. W offered Ira new Oven from inventory, at 30% discount. Ira knew that Bank had financed W’s business. Ira gave W cash and took possession of Oven.W owned Fork Lift used to move appliances around store. W offered to sell it to F for $2500. F gave W $2500 and took possession of Fork Lift. F was unaware of W’s dealings with Bank.Do any of the following now own the goods they received from W free of Bank’s s/i?1) Charity?
• Does charity own the microwave oven: charities interest in the microwave is subordinate to banks claim. The issue is who has priority in the microwave between bank, a perfected security creditor in inventory, and charity, a donee. When a debtor makes a gift of collateral to a donee, the collateral remains subject to the security interest in the donee’s hands, even if the done has no knowledge of the security interest.
02/12 #10: W owned Home Appliance Store. W borrowed $50k from Bank and signed s/a, giving Bank a s/i in currently owned and after-acquired inventory and equipment. Bank promptly and properly filed f/s with Tx Sec of State to perfect its interest.W donated to Charity a microwave from inventory to use in soup kitchen. Charity had no knowledge of Bank’s s/i.After, W began having cashflow problems. W offered Ira new Oven from inventory, at 30% discount. Ira knew that Bank had financed W’s business. Ira gave W cash and took possession of Oven.W owned Fork Lift used to move appliances around store. W offered to sell it to F for $2500. F gave W $2500 and took possession of Fork Lift. F was unaware of W’s dealings with Bank.Do any of the following now own the goods they received from W free of Bank’s s/i?2) Ira?
• does Ira own the built-in oven: the issue is who has priority in the oven between bank, a perfected secured creditor in inventory, and Ira, a purchaser of the collateral. Ira will have priority if he can qualify as a buyer in the ordinary course of business from one who is in the business of selling appliances. However, Ira must have purchased the oven in good faith, which means to act honestly and observe reasonable commercial standards. Ira purchased the oven at a 30% discount. Whether or not a 30% discount is considered a normal markup on ovens or whether the 30% discount is sufficient to place Ira on notice that something is wrong with of the transaction would need to be investigated. Assuming Ira was acting in good faith, it would not matter that he knew of bank’s security interest. A purchaser does not lose the ability to achieve the BIOC protection merely because the buyer knows that the purchased property is subject to a creditors security interest.
02/12 #10: W owned Home Appliance Store. W borrowed $50k from Bank and signed s/a, giving Bank a s/i in currently owned and after-acquired inventory and equipment. Bank promptly and properly filed f/s with Tx Sec of State to perfect its interest.W donated to Charity a microwave from inventory to use in soup kitchen. Charity had no knowledge of Bank’s s/i.After, W began having cashflow problems. W offered Ira new Oven from inventory, at 30% discount. Ira knew that Bank had financed W’s business. Ira gave W cash and took possession of Oven.W owned Fork Lift used to move appliances around store. W offered to sell it to F for $2500. F gave W $2500 and took possession of Fork Lift. F was unaware of W’s dealings with Bank.Do any of the following now own the goods they received from W free of Bank’s s/i?3) Franklin?
• does Franklin on the cart: franklin’s interest in the cart is a subordinate to banks claims. The issue is who has priority in the cart between bank, a perfected secured creditor in equipment, and Franklin, a purchaser of the collateral. Generally, a purchaser of collateral from a debtor remains subject to a prior perfected security interest. There are several exceptions to this rule, but they are not available to protect Franklin. Franklin cannot obtain BIOC protection because W does not sell carts as part of her business. Franklin cannot use the consumer purchaser of consumer goods exception because in Franklin’s hands, it is neither inventory nor consumer goods (it is equipment) in lilies hands. Whether Franklin was aware or unaware of lilies dealing with the bank is irrelevant. Franklin is on constructive notice of the financing statement because bank properly filed it with the secretary of state.
07/11 #4:Facts: Elbert operated a food catering business. In April 2010, Elbert persuaded his sister in law, Ruth, to loan him $1000. Elbert told Ruth she could keep his mobile propane pizza oven until he repaid her. Ruth promptly put the pizza oven in her garage. Elbert needed additional money to replenish his food inventory. On May 5, 2010, Elbert borrowed $5000 from bank. Elbert secured the loan by signing a security agreement giving bank a security interest in the following: “all accounts, equipment, and all other assets owned by Elbert.” Bank properly filed a financing statement with the secretary of state on May 6, 2010. On June 24, 2010, Elbert borrowed $8000 from his brother in law, Walter, and signed a document granting Walter a security interest in the following: “Elberts personal gold coin collection located in Elberts safe deposit box, and in all other assets owned by Elbert.” Who has the superior interest in:• gold coin collection:
Walter has priority in the collection. The collection belongs to Elbert personally and is classified as consumer goods. Walter obtained in interest on June 24 when Elbert signed the security agreement and Walter lent and the money. Walter did not take any additional steps to perfect and thus is unperfected. Walter nonetheless prevails because neither of the other claimants has an interest in the coin collection. Ruth has an interest in only the pizza oven/equipment. Bank has an interest in accounts and equipment, not consumer goods. The property description in the security agreement must reasonably describe the collateral, and for consumer goods, must be more specific than a general reference to consumer goods. The reference in bank’s security agreement to “all other assets owned by Elbert” is a generic description and does not reasonably describe the coin collection.
07/11 #4:Facts: Elbert operated a food catering business. In April 2010, Elbert persuaded his sister in law, Ruth, to loan him $1000. Elbert told Ruth she could keep his mobile propane pizza oven until he repaid her. Ruth promptly put the pizza oven in her garage. Elbert needed additional money to replenish his food inventory. On May 5, 2010, Elbert borrowed $5000 from bank. Elbert secured the loan by signing a security agreement giving bank a security interest in the following: “all accounts, equipment, and all other assets owned by Elbert.” Bank properly filed a financing statement with the secretary of state on May 6, 2010. On June 24, 2010, Elbert borrowed $8000 from his brother in law, Walter, and signed a document granting Walter a security interest in the following: “Elberts personal gold coin collection located in Elberts safe deposit box, and in all other assets owned by Elbert.” Who has the superior interest in:• food inventory:
Elbert has priority in the food inventory. The issue is whether Elbert gave a security interest in the food inventory to another claimant. Ruth has an interest only in the pizza oven/equipment. Banks interest is in accounts in equipment, not inventory. Walter’s security agreement of “all other assets owned by Elbert” is inadequate to give him an interest in the inventory. The property description in the security agreement must reasonably describe the collateral. A generic description does not reasonably describe inventory.
07/11 #4:Facts: Elbert operated a food catering business. In April 2010, Elbert persuaded his sister in law, Ruth, to loan him $1000. Elbert told Ruth she could keep his mobile propane pizza oven until he repaid her. Ruth promptly put the pizza oven in her garage. Elbert needed additional money to replenish his food inventory. On May 5, 2010, Elbert borrowed $5000 from bank. Elbert secured the loan by signing a security agreement giving bank a security interest in the following: “all accounts, equipment, and all other assets owned by Elbert.” Bank properly filed a financing statement with the secretary of state on May 6, 2010. On June 24, 2010, Elbert borrowed $8000 from his brother in law, Walter, and signed a document granting Walter a security interest in the following: “Elberts personal gold coin collection located in Elberts safe deposit box, and in all other assets owned by Elbert.” Who has the superior interest in:• pizza oven:
Ruth has priority in the pizza oven. The issue is who has priority in the pizza oven. The pizza oven is Elberts Equipment because uses the oven in his food catering business. Ruth obtained her interest in the pizza oven by loaning Ellbert $1000 and taking possession of the pizza oven. Because Ruth has possession of the oven, a written security agreement is not needed. Possession of the oven acts to perfect her interest in the oven. Bank Also has a security interest in the oven because the security agreement encompasses equipment. Banks interest is perfected because it filed with the secretary of state. Walter does not have an interest in the oven because Walters inclusion of “all other assets owned by Elbert” is inadequate to give him a security interest in the equipment. Both Ruth and Bank have perfected security interests in the oven. Between two perfected creditors, the first creditor who either filed or perfected prevails. Ruth perfected in April 2010 when she took possession of the oven; she never filed. Bank filed and perfected by filing on May 6, 2010. Because Ruth was the first claimant to file or perfect, her interest in the oven has priority.
02/11 #9:WEIRD QUESTION
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07/10 # 2:G sells computers and electronic equipment. Last January, G financed inventory with Bank giving s/i in current and after-acquired property. Bank properly filed f/s with Tx Sec of State.Feb 1: G ordered 5 computers from Archway, agreeing to pay for them in 60 days. G signed s/a giving Archway a s/i in the 5 computers. Archway filed f/s with Tx Sec of State prior to delivery to G on Feb 7.G sold one Archway computer to W on Feb 10. W paid for the computer with $2k check. Feb 25: G hasn’t deposited the check.Who among Bank, Archway, W and G has the superior interest ans of Feb 25 in the following:4 Archway computers?
The issue is which creditors have an interest in the computers and which one has priority. Both creditors have a perfected security interest and the collateral. Between two perfected creditors, the first creditor who either files or perfect prevails. First to file, first to perfect rule applies. Although one creditor has a PMSI (the items purchased are being used as the collateral for a loan) and it perfected before delivering the collateral. PMSI priority for inventory requires that PMSI creditor gave notice to other creditors about its transaction prior to delivering the collateral. Because PMSI creditor did not provide this notice, it cannot obtain PMSI super priority.
07/10 # 2:G sells computers and electronic equipment. Last January, G financed inventory with Bank giving s/i in current and after-acquired property. Bank properly filed f/s with Tx Sec of State.Feb 1: G ordered 5 computers from Archway, agreeing to pay for them in 60 days. G signed s/a giving Archway a s/i in the 5 computers. Archway filed f/s with Tx Sec of State prior to delivery to G on Feb 7.G sold one Archway computer to W on Feb 10. W paid for the computer with $2k check. Feb 25: G hasn’t deposited the check.Who among Bank, Archway, W and G has the superior interest ans of Feb 25 in the following:Archway computer sold to W?
Whether buyer can qualify as a buyer in the ordinary course of business (BIOC) and thus prevail over creditors who have perfected security interests. Buyer must prove that 1) he purchased the computer in good faith, 2) he did not know that the sale violated any terms of the creditors security agreements, 3) he purchased nonfarm products from a person in the business of selling goods of the kind, 4) the competing interests were created by the seller, and 5) a competing creditor was not perfected by possession.