KY Bar Secured Transactions 3

Question 1

A supplier sells restaurant ovens to a diner on credit, retaining a security interest, and files a financing statement 15 days after the diner receives the ovens. A bank had a prior perfected security interest in the diner's after-acquired equipment. Who has priority in the ovens?

Accepted Answer

The supplier, because a PMSI in equipment filed within 20 days of delivery has superpriority

Answer

Under UCC § 9-324(a), a PMSI in equipment takes priority over conflicting interests if perfected within 20 days after the debtor receives possession of the collateral.

Question 2

A lender wants to perfect a security interest in a debtor's checking account maintained at Third National Bank as original collateral. What is the only method of perfection?

Accepted Answer

Control, such as becoming the bank's customer or obtaining a control agreement

Answer

Under UCC § 9-312(b)(1) and § 9-104, a security interest in a deposit account as original collateral can be perfected only by control.

Question 3

A Kentucky farm-supply store buys a used combine from a dealer whose inventory is subject to a perfected security interest held by a finance company. The store buys in the ordinary course of the dealer's business without knowledge that the sale violates the security agreement. Does the store take free of the security interest?

Accepted Answer

Yes, because a buyer in ordinary course of business takes free of a security interest created by its seller

Answer

Under UCC § 9-320(a), a buyer in ordinary course of business takes free of a security interest created by its seller even if perfected and even if the buyer knows the interest exists.

Question 4

A debtor's security agreement describes the collateral as "all of the debtor's assets." Is this description sufficient for attachment?

Accepted Answer

No, because a supergeneric description is insufficient in a security agreement, though it works in a financing statement

Answer

Under UCC § 9-108(c), "all assets" is not a sufficient collateral description in a security agreement, although § 9-504 permits it in a financing statement.

Question 5

A creditor holds a perfected security interest in a debtor's equipment. The debtor moves from Kentucky to Tennessee and, as an individual debtor, changes his principal residence. How long does the Kentucky filing remain effective for perfection?

Accepted Answer

Four months after the change in the debtor's location

Answer

Under UCC § 9-316(a)(2), a security interest perfected in the debtor's former location remains perfected for four months after the debtor's location changes, after which the creditor must perfect in the new state.

(KY Bar) Kentucky Bar Exam Practice Test

(KY Bar) Kentucky Bar Exam Practice Test

KY Bar Secured Transactions 3