SECURED TRANSACTIONS
Fall 2015
PROBLEM SET 9
Temporary Perfection
Perfection as to Proceeds of Collateral
Carefully read the following:
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§§ 8.01 and 8.02 of UNDERSTANDING SECURED TRANSACTIONS
§§ 9-312, 9-315, 9-320
1.
Remember back to Problem Set 7, in which Neighborly Finance made a credit card debt
consolidation loan to Douglas Abrams, and took a security interest in six paintings that he owned
that were on display at the New England Sports Museum. Assume that New England Sports
Museum had agreed to hold possession of the paintings on behalf of Neighborly Finance,
consistent with UCC § 9-313(c).
Last week, Larry Smith, a hedge fund manager, offered Abrams $100,000 for one of the
paintings (an amount in excess of the painting’s appraised value). Abrams asked Neighborly
Finance for permission to allow the painting to be sold free and clear of its security interest.
Neighborly Finance granted its consent, and the New England Sports Museum released the
painting to Abrams so that Abrams could deliver the painting to Smith. Before Abrams could
deliver the painting to Smith, however, the sheriff seized the painting from Abrams at the request
of Dennis Crouch, who held a $100,000 judgment against Abrams. Thus, the proposed sale to
Smith fell through. At the time of the sheriff’s levy, was Neighborly Finance’s security interest
in the painting perfected? Why or why not?
2.
You have a client, First Bank, that made a loan last year to Dave’s Appliance and took a
security interest in all of Dave’s Appliance’s inventory, including after acquired. At the time,
First Bank filed a financing statement covering “inventory.”
Earlier today, Dave’s Appliance undertook the following transactions:
a)
Dave’s Appliance sold a refrigerator to Wells, who signed an installment contract
in which she agreed to pay for the refrigerator in 24 monthly installments and in
which she granted Dave’s Appliance a security interest in the refrigerator to
secure her obligation to pay those installments.
b)
Dave’s Appliance took a dishwasher from its inventory and traded it to Farm
Power Lawn & Leisure in exchange for a riding lawn mower which it planned to
use to mow the lawn surrounding the store.
c)
Dave’s Appliance took a walk-in freezer from its inventory and traded it to Sue’s
Auto in exchange for a used delivery van to be used in making customer
deliveries.
d)
Dave’s Appliance sold a new grill/oven/stove to Smith for $3,000 cash. Dave’s
Appliance then took the $3,000 cash and used it to buy new furniture for the
employee break room.
Does First Bank have a security interest in the installment contract? The riding lawn mower?
The delivery van? The furniture? If so, are those security interests perfected? What, if
anything, must First Bank do to perfect its interests or maintain the perfection of its interests?