Answer Key to Secured Transactions Exam--Example

QUESTIONS RELATED TO NEVADA, INC.

Question A1: 6 Points
- At issue here is perfection in a bank account = deposit account ( 9-102(a)(29)) 1
- The only permissible means of perfection for a deposit account
is to take control filing a F/S is NOT effective for perfection 9-312(b)(2) 3
- State Bank has control (and thus is perfected) because it is the bank where the
account is maintained ( 9-104). Perfected S/I has priority over unperfected S/I 3
Question A2: 6 Points
- Rule: Must file at the location of the debtor; location of a registered
organization is the state of registration 2
- Here: Compco filed in Delaware for the Compco Wilmington Computer and
Nevada is incorporated in Maryland; thus, Compco is NOT perfected 2
- Megabank properly filed in Maryland and has an after-acquired property
clause; thus, it is perfected and prevails over Compco 2
Question A3: 7 Points
- Rule: Compco has a PMSI = retained interest on credit sale 2
- Computer is non-inventory (equipment): Used by Nevada in its operations 1
- PMSI in non-inventory goods has priority over competing claims if perfected
within 20 days of Debtor acquiring possession of collateral 3
Compco filed within 14 days and thus has priority over Megabank 1

QUESTIONS RELATED TO DOME ASSOCIATES

Question A4: 5 Points
- For an unregistered organization with more than one place of business,
the location of the debtor is its chief executive office 9-307 2
- Chief executive office is the place from which the debtor manages the main
part of its operations (nerve center) 1
- Here: All of Domes important business decisions where made in the DC
office and Megabank filed there and thus is perfected 2
Question A5: 7 Points
- Dome relocated by moving its chief executive office from DC to Maryland 1
- For a change in location, S/P has four months within which to perfect
in the new jurisdiction, which Megabank did not do 2
- After the four months, Megabank became unperfected, but is only
deemed never to have been perfected as against a purchaser for value 2
- The landlord is only a lien creditor, and thus is NOT a purchaser (by
voluntary transaction) 1-201(32), (33) 2

QUESTIONS RELATED TO XENON CORP (FORMERLY SCALE)

Question A6: 5 Points
- Rule: 9-517: The failure of the filing office to index a record
correctly does not affect the effectiveness of a filed F/S 3
- Here, the error was by the filing office, and thus Megabanks F/S was
effective (= perfection) even though it is seriously misleading under 9-506 2

Question A7: 7 Points

- Rule: If Debtor changes its name but only in a way that a filed F/S
is not seriously misleading, the F/S remains effective 2
- But even if the F/S became seriously misleading, it remains effective for
collateral already owned or that is bought within four months; Xenon bought
the June Machine less than four months after the name change 3
- Thus, as to that machine Megabank remains perfected, and because it perfected
before Credit Corp., it has the highest priority claim under the first to file or perfect rule 2

Question A8: 6 Points

- From above, Megabank has priority over Credit Corp. 1
- Rule: A repossession and disposal of collateral terminates only that lien
and junior liens; does not terminate any senior liens 3
- Because Megabanks lien is senior to Credit Corp.s, the lien would remain
and Megabank would have the right to repossess 1
- And: BOC cannot apply to a foreclosure sale 1

Question A9: 6 Points

- Rule: From Above: 9-507: In the event of a Debtor name changes that renders
a filed F/S seriously misleading, the F/S ceases to be effective for goods
acquired by the debtor after four months unless the S/P files a new F/S 1
- Rule: 9-506: A F/S is seriously misleading if a search using the filing
offices search logic would not turn up the debtors new name. 2
- Under none of the search logics in use would Xenon turn up in a search
under Scale, Inc. Thus, the name change is seriously misleading and because
the September Machine was bought more than four months after the name change
Thus, Megabank is NOT perfected and thus loses to Credit Banks perfected S/I 3