CREIGHTON UNIVERSITY SCHOOL OF LAW. Professor Anderson Wednesday, December 6, PART I Page 1 of 5

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1 CREIGHTON UNIVERSITY SCHOOL OF LAW SECURED TRANSACTIONS Page 1 of 5 INSTRUCTIONS: THIS PART CONSISTS OF FIVE (5) ESSAY QUESTIONS. YOU MAY HAVE YOUR COPY OF THE U.C.C. WITH YOU IN THE EXAM ROOM, BUT NO OTHER BOOKS OR MATERIALS. YOU MAY ASSUME THE REVISED ARTICLE 9 IS APPLICABLE TO ALL QUESTIONS. PLACE THE LAST THREE DIGITS OF YOUR EXAM NUMBER, SECTION, PROFESSOR'S NAME AND COURSE TITLE ON EACH ANSWER BOOK. IF YOU WRITE MORE THAN ONE BOOK, NUMBER THE BOOKS, e.g., 1 of 2, 2 of 2.

YOU MAY ASSUME THE REVISED ARTICLE 9 IS APPLICABLE TO ALL QUESTIONS.

2 Page 2 of 5 QUESTION NO. 1: (Suggested Time: 5 Minutes) Debtor gave Creditor a security interest in equipment Debtor used and maintained at her Omaha, Nebraska, business to secure a loan of $50,000. Creditor filed a proper financing statement in Nebraska in June of In October of 1999, Debtor sold the equipment to Buyer, an Iowa resident, for use in Buyer's Des Moines plant. The equipment was shipped to Buyer in October of In August of 2000, Leo Lean, a lien creditor of Buyer, levies on the equipment in Des Moines. Creditor claims first priority in the equipment. Leo Lean claims he has first priority. Who is correct? QUESTION NO. 2: (Suggested Time: 15 Minutes) Debtor borrowed $20,000 from Firstbank in July of 2000, giving Firstbank a security interest in all Debtor's "presently owned and after-acquired" inventory. The security agreement signed by Debtor stated the security interest secured Debtor's obligation under "promissory note H-2461, in the face amount of $20,000." Firstbank filed a proper financing statement on July 10, On August 14, 2000, Debtor borrowed $15,000 from Secondbank, giving Secondbank a security interest in all Debtor's inventory, including after-acquired inventory. On August 17, 2000, Firstbank advanced $10,000 to Debtor, who signed a promissory note in that amount. Firstbank filed a financing statement describing the collateral as "inventory" on August 18, On August 20, 2000, Secondbank filed a financing statement describing the collateral as "inventory." On August 28, 2000, Debtor purchased additional inventory. On September 10, 2000, Debtor defaulted on both loans to Firstbank and the loan to Secondbank. At the time of default, Debtor owed Firstbank $30,000 and Secondbank $15,000. Debtor's only remaining assets are the inventory items received on August 28, That inventory has a value of $30,000. Who has priority in that inventory, and for what amount?

The equipment was shipped to Buyer in October of 1999. In August of 2000, Leo Lean, a lien creditor of Buyer, levies on the equipment in Des Moines. Creditor claims first priority in the equipment.

3 Page 3 of 5 QUESTION NO. 3: (Suggested Time: 20 Minutes) Grace Jones purchased a car in Omaha, Nebraska, using funds advanced by Firstbank. Jones gave Firstbank a security interest in the car, and Firstbank noted its security interest on the Nebraska Certificate of Title issued by the Nebraska Department of Motor Vehicles. In April of 2000, Jones moved to Kansas. In May, she obtained a "clean" certificate of title from the Kansas Department of Motor Vehicles, which did not disclose Firstbank's security interest. On June 1, Jones borrowed $5, from Secondbank, giving Secondbank a security interest in the car to secure the loan. Secondbank took possession of the certificate of title and caused its security interest to be noted on the certificate. On June 10, Jones sold the car to Acme Used Cars, Inc., telling Acme she, Jones, had lost the Kansas certificate. On June 15, while Jones was in default on her loan to Firstbank, Firstbank lawfully repossessed the car from Acme's lot. A. Firstbank, Secondbank, and Acme all claim first priority to the car. Who wins? B. Would your answer change if on June 13, before Firstbank could repossess the car, Acme sold the car to Carl Consumer, who knew nothing about the above events? Why or why not?

In April of 2000, Jones moved to Kansas. In May, she obtained a "clean" certificate of title from the Kansas Department of Motor Vehicles, which did not disclose Firstbank's security interest.

4 Page 4 of 5 QUESTION NO. 4: (Suggested Time: 30 Minutes) Koft Sporting Goods, Inc., a wholesale sporting goods seller, borrowed $150,000 from Firstbank in 1999, giving Firstbank a security interest in all "presently owned and after-acquired inventory." Firstbank promptly filed a financing statement describing the collateral as "inventory." Koft's biggest customer was Line Drive Sports, a retailer of sporting goods with several branch locations. It was Line Drive's practice to purchase goods from Koft on both secured and unsecured credit, depending upon how long the debt would be carried by Koft. When goods were sold on secured credit, Koft required Line Drive to sign a security agreement and a promissory note, both of which appeared on the same document. For an unsecured credit sale, Line Drive did not sign a note. In March of 2000, Koft purchased $30,000 worth of baseball shoes from Abibas. Koft borrowed $15,000 from Secondbank towards purchase of the shoes, giving Secondbank a security interest in the shoes as well as in a deposit account maintained by Koft at Secondbank. The balance of the purchase price Koft secured by giving Abibas a security interest in the shoes. Both Secondbank and Abibas filed proper financing statements before the shoes were delivered to Koft, and informed Firstbank of their security interests before the shoes were delivered. In May of 2000, Koft sold $20,000 worth of the Abibas baseball shoes to Line Drive. Fifteen thousand dollars of those purchases were secured sales, and $5,000 unsecured. In early June, Koft sold $10,000 of the Line Drive secured debt to Thirdbank by transferring Line Drive's promissory note and security agreement to Thirdbank. Thirdbank regularly purchased Koft's secured debt. In July, Koft defaulted on all its obligations to Firstbank, Secondbank, and Abibas. At the time of that default, Koft owned or had possession of the following property: shoes; (a) (b) (c) (d) (e) (f) (g) $5,000 worth of Abibas shoes; $5,000 in cash and checks at Koft's office, representing payment by buyers of Abibas $5,000 in remaining Line Drive secured debt documents; $3,000 in Line Drive unsecured debt; $2,000 in cash received from Line Drive as payment on its unsecured debt held on deposit in Koft's account at Secondbank; $4,000, representing payments made by Line Drive to Koft, which served as collecting agent for Thirdbank, on the Line Drive secured debt transferred to Thirdbank; $6,000 in shoes returned by Line Drive to Koft because Line Drive rightfully rejected the shoes. These shoes were covered by the secured debt documents transferred to Thirdbank. Firstbank, Secondbank, Abibas and Thirdbank all claim priority in (a) through (g). Who prevails as to each of those items?

" Firstbank promptly filed a financing statement describing the collateral as "inventory." Koft's biggest customer was Line Drive Sports, a retailer of sporting goods with several branch locations.

5 Page 5 of 5 QUESTION NO. 5: (Suggested Time: 20 Minutes) Hatfield Sales Corporation, Inc., and McCoy Sales, Inc., were competitors in the sale of small gasoline engines. Hatfield did its inventory financing through Firstbank, granting Firstbank a security interest in all Hatfield's "present and after-acquired inventory." Firstbank filed a proper financing statement in November of McCoy used Secondbank for its inventory financing, giving Secondbank a security interest in December of 1999 in all McCoy's "presently owned and after-acquired inventory." Secondbank filed in January of In March of 2000, Hatfield and McCoy agreed to merge their operations, with McCoy purchasing all Hatfield's assets and assuming its obligations. This merger worked well for a time, mainly because in August of 2000, McCoy's president loaned $50,000 to McCoy to purchase a shipment of leafblower engines. Unfortunately, in October of 2000, McCoy defaulted on all obligations to Firstbank and Secondbank. On that date, McCoy owned the following property: (1) the leaf blowers, worth $50,000; (2) $25,000 worth of chain saw engines transferred by Hatfield to McCoy in the merger; (3) $20,000 worth of gas-driven generators owned by McCoy prior to the merger. Firstbank is owed $100,000, and claims priority in all of the above. Secondbank is also owed $100,000 and claim priority in all of the above. Who wins?

" Firstbank filed a proper financing statement in November of 1999.

Chapter 32. 32-1 What Is a Secured Credit Transaction? 32-2 How Are Security Interests Perfected and Terminated?

Chapter 32. 32-1 What Is a Secured Credit Transaction? 32-2 How Are Security Interests Perfected and Terminated? Secured and Unsecured Credit Transactions 32-1 What Is a Secured Credit Transaction? 32-2 How Are Security Interests Perfected and Terminated? South-Western, a part of Cengage Learning Slide 1 32-1 What