MI Bar Secured Transactions 5

Question 1

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?

Accepted Answer

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

Answer

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.

Question 2

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?

Accepted Answer

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

Answer

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

Question 3

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?

Accepted Answer

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

Answer

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.

Question 4

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?

Accepted Answer

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

Answer

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

Question 5

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?

Accepted Answer

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

Answer

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.

(MI Bar) Michigan Bar Exam Practice Test

(MI Bar) Michigan Bar Exam Practice Test

MI Bar Secured Transactions 5