ch25 - Chapter 25 SECURED TRANSACTIONS Practice Test Notice...

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Chapter 25 SECURED TRANSACTIONS Practice Test Notice Concerning Article 9 Revision: The following cases and problems were decided under the former Article 9. In each instance, the outcome would be the same under the revised code, although the relevant sections of Article 9 have been renumbered and probably rewritten. 1. CPA QUESTION Under the UCC Secured Transactions Article, which of the following actions will best perfect a security interest in a negotiable instrument against any other party? (a) Filing a security agreement (b) Taking possession of the instrument (c) Perfecting by attachment (d) Obtaining a duly executed financing statement (b). CPA Examination, May 1994, #50. 3. Eugene Ables ran an excavation company. He borrowed $500,000 from the Highland Park State Bank. Ables signed a note promising to repay the money and an agreement giving Highland a security interest in all of his equipment, including after-acquired equipment. Several years later, Ables agreed with Patricia Myers to purchase a Bantam Backhoe from her for $16,000, which he would repay at the rate of $100 per month, while he used the machine. Ables later defaulted on his note to Highland, and the bank attempted to take the backhoe. Myers and Ables contended that the bank had no right to take the backhoe. Was the backhoe covered by Highland’s security interest? Did Ables have sufficient rights in the backhoe for the bank’s security interest to attach? Yes to both questions. The bank had a valid security interest in all of Able's equipment, including after-acquired equipment. After-acquired clauses are valid. The only question is whether the bank's security interest could attach to the backhoe. Attachment requires that the debtor has rights in the collateral. But this does not mean that the debtor must own the goods. Here, Ables had the lawful use
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ch25 - Chapter 25 SECURED TRANSACTIONS Practice Test Notice...

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