Question 1

The payment of Lewellyn's debt to Miklos is guaranteed by Lewellyn's personal property.Miklos is most likely to perfect his interest by

Accepted Answer

Filing a financing statement with the appropriate authority is the best way for Miklos to perfect his interest in Lewellyn's personal property. This will ensure that Miklos has a security interest in the property that will be recognized by other potential creditors or buyers of the property. Insuring the property or calculating the precise amount of Lewellyn's debt does not necessarily protect Miklos' interest in the property. Correcting grammatical errors in the written agreement may be important for clarity and enforceability, but it does not directly affect Miklos' interest in the property.

Question 2

Fact Pattern 29-1B 
Call's Farm & Ranch Supply,Inc. ,uses its inventory as collat?eral for a loan from Deland County Bank.The bank files a financing statement with the secretary of state in the state in which Call's was chartered.One year later,Call's changes its name to Big C's,Inc.
-Refer to Fact Pattern 29-1B.Deland County Bank's perfection will remain effec?tive for

Accepted Answer

The perfection of a security interest remains effective for four months after the debtor changes its name, according to the Uniform Commercial Code (UCC).

Question 3

Fact Pattern 29-2B 
General Leasing Company (GLC)buys equipment for use as inventory,borrow?ing $1 million from Helpful Finance Corporation for a security in?terest in the equipment.The next day,GLC borrows $500,000 from Interstate Bank,also for a security interest in the equipment.GLC defaults on both loans.
-Refer to Fact Pattern 29-2B.Suppose that Helpful perfects its se?curity in?ter?est when GLC takes possession of the equipment.In that cir?cum?stance,the party with pri?ority to the collateral on GLC's default would be

Accepted Answer

Helpful Finance Corporation would have priority over Interstate Bank because it perfected its security interest when GLC took possession of the equipment. Under the first-to-file or first-to-perfect rule, the first creditor to perfect its security interest in collateral generally has priority over later creditors. Therefore, Helpful would have priority to the collateral on GLC's default. Interstate would only have a secondary claim to any remaining assets after Helpful's claim had been satisfied.

Question 4

Darling is the secured party in a secured transaction with Elmo.In this transaction,Darling

Accepted Answer

As the secured party, Darling has a security interest in the collateral owned by Elmo. This means that Darling has the right to repossess or sell the collateral if Elmo fails to repay the debt or meet certain obligations as outlined in the security agreement. Darling does not owe payment or performance to Elmo, nor does Darling own the collateral.

Question 5

Kettlecorn Investments,Inc. ,and Lone Tree Bank are secured parties with security interests in property owned by Metal Fabrication Corporation.Priority between these security interests is generally determined by

Accepted Answer

Priority between two or more competing security interests is generally determined by the time of perfection or attachment. The first secured party to perfect or attach their security interest will have priority over subsequent secured parties with security interests in the same collateral.

Question 6

The payment of Eden's debt to Flem is guaranteed by Eden's personal property.This property is

Accepted Answer

Eden's personal property is serving as collateral to guarantee payment of the debt to Flem.

Question 7

Reliable Bank's financing statement in collateral owned by Sunsource Energy Corporation will expire in less than a year.With the filing of subsequent continuation statements,the effectiveness of the bank's statement can be continued

Accepted Answer

A continuation statement can be filed every five years to extend the effectiveness of the original financing statement indefinitely, as long as it is filed within six months before the expiration of the current statement.

Question 8

Fact Pattern 29-2B 
General Leasing Company (GLC)buys equipment for use as inventory,borrow?ing $1 million from Helpful Finance Corporation for a security in?terest in the equipment.The next day,GLC borrows $500,000 from Interstate Bank,also for a security interest in the equipment.GLC defaults on both loans.
-Refer to Fact Pattern 29-2B.Suppose that two weeks after GLC takes possession of the equipment,Helpful and Interstate file financing statements,with Interstate fil?ing first.In that cir?cum?stance,the party with priority to the equipment is

Accepted Answer

Interstate has priority because they filed first. Under the first-to-file rule, the party who files their financing statement first generally has priority over all other parties.

Question 9

Sterling Bank wants to perfect its security interest in timber owned by Ridgeline Lumber,Inc.Most likely,a financing statement should be filed with

Accepted Answer

The answer of Sterling Bank wants to perfect its security...

Question 10

Olaf is the creditor in a transaction with Phil.Once certain requirements are met,Olaf's rights will attach,which means that Olaf will have

Accepted Answer

Olaf will have an enforceable security interest in Phil's property once certain requirements are met. This means that Olaf will have the right to seize and sell the property to satisfy the debt if Phil does not fulfill his obligations.

Question 11

Rollo's Super Store sells goods to consumers and businesses in a rural county in the Midwest.Most of the goods are sold on credit.Rollo's often takes a security interest with the goods as collateral.Classification of the collateral determines

Accepted Answer

The classification of collateral determines when or how to perfect a security interest, meaning how to legally establish a creditor's claim to the collateral in case of default or bankruptcy. This determines the priority of the creditor's claim over other creditors and affects the effective time duration of credit, but not the terms of a sale, which depend on negotiations between the parties.

Question 12

Khalil holds a security interest in inventory owned by Luc.Khalil assigns his interest in the inventory to Mal.Mal becomes the secured party of record

Accepted Answer

The answer of Khalil holds a security interest in inventory...

Question 13

Rich Financial,Inc. ,files a financing statement regarding a transaction with Supreme Business Company.To be valid,the financing statement must contain all of the following except

Accepted Answer

A financing statement is a document that is filed by a creditor to give notice of its security interest in a debtor's collateral. The financing statement must contain certain information in order to be valid, including a description of the collateral, Rich's name (as the creditor), and Standard's name (as the debtor). However, a statement of the purpose for the transaction is not required to be included in a financing statement.

Question 14

Gravel & Sand,Inc. ,buys a backhoe on credit from Heavy Equipment Corporation,but does not make a payment on the loan for sev?eral months.Heavy repossesses the backhoe by towing it from a pub?lic street.Green sues Heavy for breach of the peace.Gravel & Sand will probably

Accepted Answer

In most states, as long as the repossession company does not breach the peace during the repossession (such as by using physical force or causing a disturbance), they have the legal right to repossess the property. In this case, since the backhoe was parked on a public street, Heavy likely had the right to repossess it without a court order. Therefore, Gravel & Sand is unlikely to prevail in a breach of peace claim.

Question 15

Quantum Financial Corporation is a secured party with a security interest in property owned by Revolving Sales Company.Perfection of this security in?ter?est may not protect Quantum against the claim of

Accepted Answer

A buyer in the ordinary course of business generally takes goods free of a security interest created by the seller, even if the security interest is perfected.

Question 16

Everyday Loans,Inc. ,issues a line of credit in Glade Electronics Corporation under a security agreement.Later,Glade buys new HD TVs to add to its inventory.Everyday has a security interest in the new inventory

Accepted Answer

An after-acquired property clause in a security agreement allows the creditor to have a security interest in any property acquired by the debtor after the agreement was signed. Therefore, if the security agreement between Everyday Loans, Inc. and Glade Electronics Corporation had an after-acquired property clause, Everyday would have a security interest in the new HD TVs added to Glade's inventory.

Question 17

Comfort Furniture Store sells household consumer goods.To create a pur?chase-money security interest,Comfort Furniture must

Accepted Answer

A purchase-money security interest is created when a seller extends credit to the buyer for part or all of the purchase price of the goods.

Question 18

Roni,a debtor,wants to confirm the amount of her outstanding secured debt with Swifty Loan Corpora?tion.Roni can ask Swifty to confirm her view of the debt,without charge,every

Accepted Answer

The answer of Roni,a debtor,wants to confirm the amount of...

Question 19

The payment of Dylan's debt to Ezra is guaranteed by Dylan's personal property.This is governed by

Accepted Answer

The Uniform Commercial Code governs commercial transactions, including security interests in personal property. In this case, Dylan's personal property is being used as collateral to guarantee payment of the debt, making it subject to UCC regulations. The other options, including the FTC, commerce clause, and Chamber of Commerce, are not applicable in this situation.

Question 20

Fact Pattern 29-1B 
Call's Farm & Ranch Supply,Inc. ,uses its inventory as collat?eral for a loan from Deland County Bank.The bank files a financing statement with the secretary of state in the state in which Call's was chartered.One year later,Call's changes its name to Big C's,Inc.
-Refer to Fact Pattern 29-1B.To continue the effectiveness of its perfected interest,Deland County Bank must file

Accepted Answer

The bank must file an amendment to the financing statement to reflect the debtor's name change to maintain the effectiveness of its perfected security interest.

Quiz 29: A: Secured Transactions