108 Pbm #2 part 2 winter 09

108 Pbm #2 part 2 winter 09 - BUSINESS LAW-MGMT 108 GROUP...

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BUSINESS LAW-MGMT 108 GROUP PROBLEM #2 -WINTER 2009 Instructions : Written responses to questions 1,2 & 4-6 are due at the beginning of class on February 25th and written responses to questions 3 & 7-12 ( provided later) are due at the beginning of class on March 4. Please provide a complete explanation to each question. Each set of responses should be no more than a total of 2 typed pages, 11 point font, 1 inch margins. You may only discuss the answers to these questions with the members of your group. In addition to submitting your paper to me before class on the due dates, please also email your paper to [email protected] Points will be deducted for not following these directions. Please be prepared to discuss questions 13-18 in class. Shady characters, Inc. is a wholesaler in masks and magic supplies. Shady borrowed $100,000 from Regional bank on June 1 to be used as working capital. Shady duly executed and delivered to Regional bank a promissory note and security agreement covering Shady's present inventory, proceeds and after-acquired inventory as well as Shady's equipment, both current and after-acquired. Regional bank immediately properly filed a UCC-1 Financing Statement covering the transaction on June 2, 2004 In an effort to generate more working capital, Shady borrowed $50,000 from Downtown bank, using its accounts receivable as collateral to secure the loan. Shady executed a promissory note and security agreement covering the accounts receivable. Downtown bank properly filed a UCC-1 Financing Statement on July 1, 2004. On August 17, 2004 Sam, the owner of Shady, then approached City Office Supply and purchased $10,000 worth of office equipment on credit giving City a security interest in Shady’s equipment to secure payment of the purchase price. City delivered the equipment on August 18 and filed a financing statement covering the transaction on September 5. On May 15, 2005 Shady was filed a petition under Chapter 7 of the Bankruptcy Code. Assume Regional bank's claim remains totally unpaid. Regional bank asserts a security interest in all inventory and equipment on hand as well as the accounts receivable being used to secure the loan with Downtown bank. Each question is worth 6 points. 1a. As between Regional bank and Downtown bank, who is entitled to the accounts receivable? 1b. As between Regional bank and City Office Supply, who has priority in the equipment? Robert executed a valid promissory note and security agreement with First Time Bank covering Robert's new purchase of machinery and equipment for his new factory. However, First Time Bank failed to perfect its security interest in the equipment and machinery. Six months later, Robert defaults on the loan with First Time Bank. Robert did not sell the machinery or use it as collateral for another loan.
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