Question 1

[Pottery Store] A&B Bank loaned money to Potter's Pottery Store to finance the purchase of several kilns, a delivery van, and pottery wheels. In return, Potter's granted a security interest to A&B Bank for "all equipment of Potter's". The kiln manufacturer also wants to place a security interest on the kilns and the delivery van for Potter's Pottery.
-If the bank wants to have priority in its loan to the pottery store, how should the bank perfect its interest?

Accepted Answer

A)   The interest is perfected automatically because the collateral are goods.
B)   The bank would have to file a financing statement for all items.
C)   The bank would have to make a notation on the certificate of title for the van and would have to file a financing statement on the other items.
D)   The bank could make a notation on the certificate of title for the van and on the ownership documents of the other items because they are goods used to conduct business.
E)   The bank would have to make a notation on the certificate of title for the van, but the other items would be perfected automatically.F) C) and D)
G) B) and E)

Question 2

The property that is subject to a security interest is called vested.

Accepted Answer

A) True 
 B)False

Question 3

A pledge is the transfer of ________ to a secured party for the purposes of perfection.

Accepted Answer

A)   accounts
B)   collateral
C)   documents
D)   allonge
E)   rightsF) B) and E)
G) A) and B)

Question 4

[Favi's Furniture] Favi took out a loan from First Bank and executed a security agreement which gave First Bank rights to any after-acquired property as collateral. A year later, Favi took out a loan with Second Bank and executed a security agreement with Second Bank using his new delivery truck as collateral. Favi eventually defaulted on both loans.
-If both First Bank and Second Bank had properly perfected their security interest, which creditor's interest would take priority?

Accepted Answer

A)   First Bank, because in a dispute between a secured perfected creditor and a secured unperfected creditor, the secured perfected creditor takes priority.
B)   First Bank, because in a dispute between two secured and perfected creditors, the party who perfected first takes priority.
C)   First Bank, because in a dispute between two secured but unperfected creditors, the party who attached first takes priority.
D)   The two banks will have equal rights to the property.
E)   Second Bank, because "after-acquired property" is not specific enough to grant attachment right to First Bank, and, thus, the secured agreement of Second Bank takes priority.F) A) and D)
G) B) and D)

Question 5

________ is a writing that indicates both a monetary obligation and a security interest in specific goods.

Accepted Answer

A)   Chattel paper
B)   Control paper
C)   Transactional paper
D)   Secured paper
E)   Bank paperF) A) and E)
G) All of the above

Question 6

An interest in personal property or fixtures that secures payment or performance of an obligation is ________.

Accepted Answer

A)   An approved interest.
B)   A secured interest.
C)   A secured transaction.
D)   A debt transaction.
E)   A security agreement.F) D) and E)
G) C) and E)

Question 7

How long does a secured party's interest in proceeds lasts after the debtor receives the proceeds, under the UCC?

Accepted Answer

A)   5 Days
B)   10 Days
C)   30 days
D)   6 months
E)   1 yearF) B) and D)
G) B) and C)

Question 8

[Repo] Meredith sells used cars and trucks. She sold a used pick-up truck to Jill and a used convertible to Caleb. She properly obtained a security interest in both vehicles. Both Jill and Caleb defaulted on payments owed to Meredith for the vehicles. Meredith was under the belief that her only option was to take possession of the collateral. She decided to repossess Jill's pick-up at Jill's house. Meredith slipped into Jill's driveway after midnight and started the truck's engine. Jill immediately ran out and confronted Meredith. Meredith shoved Jill away and drove off in the pick-up truck. Meredith was able to repossess Caleb's convertible in a public parking lot with no altercation with him.
-Which statement is correct regarding Meredith's repossession of the pick-up truck?

Accepted Answer

A)   Meredith breached the peace in recovering the collateral.
B)   Meredith did not breach the peace in recovering the collateral unless Jill can establish the existence of actual injuries.
C)   Meredith did not breach the peace because she was entitled to repossess the vehicle and any injury sustained by Jill was her own fault.
D)   Meredith breached the peace, but only because she did not provide Jill with prior notification that she was coming to repossess the collateral.
E)   Meredith breached the peace, but only because she acted to repossess the collateral after 10:00 p.m. at night.F) A) and B)
G) None of the above

Question 9

The creditor must perfect a security interest in the collateral of the debtor in order to become a secured party.

Accepted Answer

A) True 
 B)False

Question 10

A buyer in the ordinary course of business can take goods free of any security interest created by the seller of the goods unless the security interest is perfected, under the UCC.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following under the UCC is a good used or bought for use primarily for personal, family, or household purposes?

Accepted Answer

A)   A retail good.
B)   A consumer good.
C)   A pledged good.
D)   A financed good.
E)   An approved good.F) None of the above
G) A) and B)

Question 12

Which of the following was the result in Bayer CropScience, LLC v. Stearns Bank Nat'l Ass'n., the case in the text in which the court assessed proceeds after a lawsuit involving Bayer CropScience and the introduction of genetically altered rice that damaged equipment?

Accepted Answer

A)   The court ruled that some portion of the proceeds were attributable to damage to Texana's equipment which was subject to Stearns' security interest.
B)   The court ruled that Bayer CropScience had perfected their interest with another bank and did not have an obligation to share proceeds with Stearns.
C)   The court ruled that the case be remanded to the lower court to settle the issues of who perfected their interest first.
D)   The court ruled that the creditor was entitled to the full settlement proceeds, without consideration of the amount of the debt, on the basis that it had a secured interest.
E)   The court ruled that Stearn had not properly perfected their security interest and therefore had no rights to any of the proceeds.F) None of the above
G) B) and E)

Question 13

Which statement is correct regarding any compensation that Morgan is entitled to from the bank because the bank did not timely file notice that it had no interest in her goods?

Accepted Answer

A)   She may recover $100 from the bank.
B)   She may recover $200 from the bank.
C)   She may recover $500 from the bank.
D)   She may recover $1,000 from the bank.
E)   She may not recover anything unless she incurred damages; and, in that event, she may recover the amount of her compensatory damages.F) B) and C)
G) A) and B)

Question 14

The buyer can obtain the good involved free of any security interest, if a buyer purchases chattel paper in the ordinary course of business and without notice of any prior security interest.

Accepted Answer

A) True 
 B)False

Question 15

Assuming Constantine files a financing statement with the correct agency, how long is a financing statement valid under the UCC?

Accepted Answer

A)   30 days
B)   90 days
C)   1 year
D)   5 years
E)   10 yearsF) B) and C)
G) A) and C)

Question 16

[Favi's Furniture] Favi took out a loan from First Bank and executed a security agreement which gave First Bank rights to any after-acquired property as collateral. A year later, Favi took out a loan with Second Bank and executed a security agreement with Second Bank using his new delivery truck as collateral. Favi eventually defaulted on both loans.
-Which creditor has rights to Favi's delivery truck as collateral?

Accepted Answer

A)   First Bank, because in a dispute between two secured but unperfected creditors, the party who attached first takes priority.
B)   First Bank, because in a dispute between two secured and perfected creditors, the party who perfected first takes priority.
C)   First Bank, because in a dispute between a secured perfected creditor and a secured unperfected creditor, the secured perfected creditor takes priority.
D)   The two banks will have equal rights to the property.
E)   Second Bank, because "after-acquired property" is not specific enough to grant attachment right to First Bank, and, thus, the secured agreement of Second Bank takes priority.F) B) and C)
G) A) and C)

Question 17

Trevor goes to the AutoShop and purchases a new truck on credit for his business. He signs an agreement with AutoShop under which the truck is the collateral for AutoShop's loan to him. Trevor then goes to First Bank and signs an agreement for a loan so that he can buy supplies for his business. Do either of these agreements involve a purchase-money security interest?

Accepted Answer

A)   The agreement with AutoShop is a purchase-money security interest.
B)   The agreement with First Bank is a purchase-money security interest.
C)   Both agreements are a purchase-money security interest.
D)   Neither of the agreements involved a purchase-money security interest.
E)   The agreement with AutoShop is a primary purchase-money security interest and the agreement with First Bank is a secondary purchase-money security interest.F) All of the above
G) B) and C)

Question 18

Which of the following methods of perfection should a bank use if it wishes to ensure it will not have to expend efforts in repossession?

Accepted Answer

A)   Perfection by possession.
B)   Perfection by filing.
C)   Perfection by implication.
D)   Perfection by collateral in interest.
E)   A bank cannot ensure it will not have to repossess the collateral.F) A) and E)
G) B) and E)

Question 19

Which of the following is false regarding a creditor's rights to collateral upon a debtor's default?

Accepted Answer

A)   If a debtor defaults on a loan, the secured party can take possession of the collateral so long as the secured party does not breach the peace.
B)   Under the UCC, the secured party can sell, lease, or transfer the collateral in any commercially reasonable method.
C)   Regardless of where the collateral is sold, the secured party must strive to receive the best price for the collateral.
D)   Instead of disposing of the collateral, the secured party may choose to keep the collateral in full or partial satisfaction of the debt.
E)   A debtor in default has no rights in regard to whether collateral is retained by the secured party or sold.F) A) and E)
G) None of the above

Question 20

A purchase-money security interest is formed ________

Accepted Answer

A)   when a debtor uses a credit card to buy collateral
B)   when a bank attaches a debtor's account to the collateral
C)   when a second debtor buys the collateral
D)   when a debtor uses borrowed money from the secured party to buy the collateral.
E)   when parties stipulate in a contract that they want a purchase-money security interestF) C) and D)
G) None of the above

Exam 30: Secured Transactions

Which statement is correct regarding any compensation that Morgan is entitled to from the bank because the bank did not timely file notice that it had no interest in her goods?

Correct Answer
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The buyer can obtain the good involved free of any security interest, if a buyer purchases chattel paper in the ordinary course of business and without notice of any prior security interest.

Correct Answer
verified

A buyer in the ordinary course of business can take goods free of any security interest created by the seller of the goods unless the security interest is perfected, under the UCC.

Correct Answer
verified

Correct Answer
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An interest in personal property or fixtures that secures payment or performance of an obligation is ________.

Correct Answer
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Correct Answer
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________ is a writing that indicates both a monetary obligation and a security interest in specific goods.

Correct Answer
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A purchase-money security interest is formed ________

Correct Answer
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Which of the following methods of perfection should a bank use if it wishes to ensure it will not have to expend efforts in repossession?

Correct Answer
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Which of the following under the UCC is a good used or bought for use primarily for personal, family, or household purposes?

Correct Answer
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Correct Answer
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Correct Answer
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How long does a secured party's interest in proceeds lasts after the debtor receives the proceeds, under the UCC?

Correct Answer
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Correct Answer
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Which of the following was the result in Bayer CropScience, LLC v. Stearns Bank Nat'l Ass'n., the case in the text in which the court assessed proceeds after a lawsuit involving Bayer CropScience and the introduction of genetically altered rice that damaged equipment?

Correct Answer
verified

The creditor must perfect a security interest in the collateral of the debtor in order to become a secured party.

Correct Answer
verified

Assuming Constantine files a financing statement with the correct agency, how long is a financing statement valid under the UCC?

Correct Answer
verified

A pledge is the transfer of ________ to a secured party for the purposes of perfection.

Correct Answer
verified

Which of the following is false regarding a creditor's rights to collateral upon a debtor's default?

Correct Answer
verified

The property that is subject to a security interest is called vested.

Correct Answer
verified

Exam 30: Secured Transactions

Which statement is correct regarding any compensation that Morgan is entitled to from the bank because the bank did not timely file notice that it had no interest in her goods?

Correct AnswerverifiedShow Answer

The buyer can obtain the good involved free of any security interest, if a buyer purchases chattel paper in the ordinary course of business and without notice of any prior security interest.

Correct AnswerverifiedShow Answer

A buyer in the ordinary course of business can take goods free of any security interest created by the seller of the goods unless the security interest is perfected, under the UCC.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An interest in personal property or fixtures that secures payment or performance of an obligation is ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

________ is a writing that indicates both a monetary obligation and a security interest in specific goods.

Correct AnswerverifiedShow Answer

A purchase-money security interest is formed ________

Correct AnswerverifiedShow Answer

Which of the following methods of perfection should a bank use if it wishes to ensure it will not have to expend efforts in repossession?

Correct AnswerverifiedShow Answer

Which of the following under the UCC is a good used or bought for use primarily for personal, family, or household purposes?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

How long does a secured party's interest in proceeds lasts after the debtor receives the proceeds, under the UCC?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following was the result in Bayer CropScience, LLC v. Stearns Bank Nat'l Ass'n., the case in the text in which the court assessed proceeds after a lawsuit involving Bayer CropScience and the introduction of genetically altered rice that damaged equipment?

Correct AnswerverifiedShow Answer

The creditor must perfect a security interest in the collateral of the debtor in order to become a secured party.

Correct AnswerverifiedShow Answer

Assuming Constantine files a financing statement with the correct agency, how long is a financing statement valid under the UCC?

Correct AnswerverifiedShow Answer

A pledge is the transfer of ________ to a secured party for the purposes of perfection.

Correct AnswerverifiedShow Answer

Which of the following is false regarding a creditor's rights to collateral upon a debtor's default?

Correct AnswerverifiedShow Answer

The property that is subject to a security interest is called vested.

Correct AnswerverifiedShow Answer

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