Secured Transactions Flashcards

A lender files a financing statement against a debtor before any security agreement is signed and before any loan is made. Two months later the debtor signs the agreement and receives funds. When is the security interest perfected?

Answer: Upon attachment, because the earlier filing becomes effective the moment the interest attaches

A financing statement may be filed before attachment under UCC 9-502(d), and perfection occurs when the interest attaches, though priority dates from the earlier filing.

A debtor grants a security interest in "all accounts." The debtor later wins a $50,000 judgment in a tort suit for property damage to its warehouse. Is the tort claim covered as an account?

Answer: No, a commercial tort claim is a distinct collateral type that must be described more specifically

Under UCC 9-108(e)(1), a description by type alone is insufficient for commercial tort claims, which require greater specificity.

A guitar shop sells a guitar to a consumer who gives the shop a PMSI, automatically perfected. The consumer later sells the guitar to a neighbor for personal use; the neighbor pays value and has no knowledge of the interest. Who prevails?

Answer: The neighbor, under the garage-sale exception, because no financing statement was filed

Under UCC 9-320(b), a consumer buying consumer goods from another consumer takes free of an automatically perfected PMSI unless a financing statement was filed.

A debtor files for bankruptcy. A creditor attached a security interest in the debtor's equipment 60 days before the petition but never perfected it. What is the likely fate of the security interest?

Answer: The trustee can avoid it using strong-arm powers as a hypothetical lien creditor

Under Bankruptcy Code section 544(a), the trustee's status as a hypothetical judicial lien creditor defeats unperfected security interests.

A winery grants Bank A a perfected security interest in its grape crop (farm products). The winery sells grapes to a wholesale juice producer in the ordinary course of business. Absent statutory notice compliance, does the buyer take free of Bank A's interest under the UCC's buyer-in-ordinary-course rule?

Answer: No, the UCC's buyer-in-ordinary-course protection expressly excludes persons buying farm products from a farmer

UCC 9-320(a) excludes buyers of farm products from a person engaged in farming operations, leaving that area to the federal Food Security Act's notice regime.

A secured party's collateral is a debtor's accounts. After default, the secured party wants payments made directly to it. What may the secured party do under Article 9?

Answer: Notify the account debtors to pay the secured party directly

Under UCC 9-607, after default a secured party may notify account debtors to make payment directly to it and collect the accounts.

A creditor holds a security interest in equipment securing a $100,000 loan, and the security agreement contains a future-advances clause. The creditor later advances another $40,000. What is the status of the second advance?

Answer: It is secured by the same collateral with priority generally dating from the original filing

Under UCC 9-204(c) and 9-323, future advances made under an existing agreement are secured, and priority generally relates back to the original filing.