Exam 27: Secured Transactions and Electronic Filing

Northern Drilling is an oil-drilling company that has defaulted on several of its loans.Petrogiant Oil Refining is owed $230,000 on a loan that is secured by some of Northern Drilling's equipment.This equipment is worth around $180,000.Petrogiant has repossessed the equipment pursuant to its security agreement and has notified Northern that it proposes to keep the equipment rather than sell it.Northern does not want Petrogiant to keep the equipment and wants it to be sold.Discuss the legal issues in this situation.

Which of the following is true about security agreements and financing statements?

A security interest can attach to the property prior to the debtor having an interest in the property.

A secured party may cure a default by taking possession of the debtor's collateral.

Unless otherwise agreed,a security agreement automatically gives the creditor rights in the proceeds of the collateral.

A perfected security interest will take priority over an unperfected security interest even if the unperfected security interest attached first.

The parties are free to define the term "default" in their security agreement.

A secondhand buyer of consumer goods that were subject to a purchase money security interest in the hands of the original buyer takes those goods free of the purchase money security interest:

A "buyer in the ordinary course of business" who purchases goods from a merchant takes those goods free of any perfected or unperfected security interest in that merchant's inventory.

Which of the following persons can defeat a perfected security interest?

Ajax Corporation borrowed $50,000 from National Bank,giving National a security interest in its factory equipment.The agreement stated that the equipment would be security for this $50,000 loan and any future loans that National made to Ajax.National filed a valid financing statement.Over the next several months,Ajax borrowed another $100,000 from National.No additional financing statements were filed.Ajax has not made any payments on its loans from National.Ajax defaults on these loans.National wants to foreclose on the collateral.Assuming this security agreement is valid and perfected,how much of National's debt is secured?

What is the purpose of an after-acquired property clause? In what circumstances could it be used abusively by creditors toward debtors?

Ownership or possessory rights to property have no bearing on the security interest being given.

If one party's security interest attached in March,but has not been perfected,and another creditor's security interest attached and perfected in April,which of the following is true as of the following December?

Which of the following is not personal property?

Kraco is a retailer of televisions and related products.Kraco buys its inventory from DEF,the manufacturer,on credit,giving DEF a security interest in this inventory.Beth buys a television from Kraco,paying cash.Beth also knows of DEF's security interest in this television.Sometime later,Kraco defaults on its debt to DEF,and DEF wants to foreclose on its collateral,including the television purchased by Beth.Does DEF have a security interest in Beth's television? Discuss your reasoning.

Which of the following statements is false?

Betty owns a home electronics store.Betty borrowed $100,000 a couple of years ago from Thirdbank,and Betty granted a security interest to Thirdbank on "present and after-acquired inventory." Betty is a generous store owner.Each employee is able to select electronics and place them in his or her office.Most employees have put elaborate stereo systems in their offices,and some have even installed home theater systems.One manager often brings his family in late in the evening to watch rented movies.The understanding was that these systems would be sold as demonstrator units after a few months,but that has happened only once.Most of the systems have been in the offices since shortly after the store opened 2 years ago.Betty has also supplied several of her relatives with stereo systems at no charge,also with the understanding that she can take them back and sell them at any time,although she has not taken any of these back.Betty defaults on the debt to Thirdbank.Will Thirdbank be able to recover the electronic components in employee offices and homes,as well as in Betty's relatives' homes?