Secured Transactions Flashcards

A debtor uses a tractor 90% of the time on the family farm and 10% for personal errands. For Article 9 classification purposes, the tractor is best classified as what type of collateral?

Answer: Equipment

Goods used primarily in a business or farming operation are equipment, and classification depends on the debtor's principal use of the collateral.

A lender files a financing statement on June 1 but the security agreement is signed and value is given on August 1. A second lender attaches and perfects by filing on July 1. Who has priority in the collateral?

Answer: The first lender, because priority dates from its earlier filing

Under UCC 9-322(a)(1), priority goes to the first to file or perfect, so the first lender's June 1 filing gives it priority even though attachment came later.

A consumer buys a refrigerator on credit from an appliance store, which retains a PMSI. The store never files a financing statement. The consumer later sells the refrigerator to a neighbor for personal use, who pays value and has no knowledge of the security interest. Who prevails?

Answer: The neighbor, under the garage-sale (consumer-to-consumer) exception since no financing statement was filed

Under UCC 9-320(b), a buyer of consumer goods for personal use who pays value without knowledge takes free of an automatically perfected PMSI unless a financing statement was filed.

A secured party with a perfected security interest in a debtor's inventory claims the cash the debtor received from selling that inventory. For how long is the security interest in the identifiable cash proceeds perfected?

Answer: It remains continuously perfected because the proceeds are identifiable cash proceeds

Under UCC 9-315(d)(2), a security interest in identifiable cash proceeds remains perfected beyond the 20-day period without further action.

A debtor corporation is incorporated in Delaware but has its chief executive office and all collateral in Pennsylvania. Where must a creditor file a financing statement to perfect a security interest in the debtor's accounts?

Answer: Delaware, the state of incorporation

A registered organization is located in its state of organization under UCC 9-307(e), so filing must occur in Delaware regardless of where offices or collateral sit.

A judgment creditor becomes a lien creditor by levying on a debtor's equipment on March 1. A secured lender had filed a financing statement on February 1 and gave value, but the security agreement was not authenticated until March 15. Who has priority?

Answer: The lien creditor, because the security interest was unperfected at the time of the levy and the 9-317(a)(2) filing-plus-agreement condition was not met

Under UCC 9-317(a)(2), a lien creditor defeats a security interest unless before the levy the interest was perfected or a financing statement was filed and the debtor had authenticated a security agreement, and here the agreement came too late.

After default, a debtor wishes to redeem the collateral before the secured party sells it. What must the debtor tender to redeem?

Answer: Fulfillment of all obligations secured by the collateral plus the secured party's reasonable expenses, including repossession costs

Under UCC 9-623, redemption requires tender of all obligations secured by the collateral plus reasonable expenses and attorney's fees, not merely past-due installments (unless the debt was not accelerated).