Secured Transactions Exam: Disputes over Debtor's Assets and Bank Liens, Exams of Law

Download Secured Transactions Exam: Disputes over Debtor's Assets and Bank Liens and more Exams Law in PDF only on Docsity! EXAM#____________ Gebbia: Secured Transactions, Final, F10 Final Examination -- Secured Transactions Professor Karen M. Gebbia -- Fall 2010 1. You have three (3) hours to complete this exam. 2. This is an open book exam. You may bring to the exam any written materials you wish except commercial outlines and hornbooks. You may not consult any person or website during the exam. 3. This exam consists of three essay questions with 300 total possible points. Time allocations are merely suggestions. Question One: 75 points; 45 minutes Question Two: Q2A: 25 points, 15 minutes Q2B: 100 points, 60 minutes Q2C: 50 points, 30 minutes Q2D: 25 points, 15 minutes Question 2 Total: 200 points, 120 minutes Question Three: 25 points; 15 minutes 4. Please write your exam number on your exam envelope, each page of instruction, each page of questions, each page of your answer, and each blue book. If you are not recording your answer in bluebooks, you must write your exam number and the words “answer page” on the top of each answer page. Pages that do not indicate “answer page” will be considered scratch paper and not part of your answer. Do not use your name, student ID number or Social Security Number on any exam materials. 5. Please write your response in the blue books provided or type and print answer pages. If using bluebooks, please write clearly, on every other line, and every other page. You may use a laptop computer protected by Examsoft. 6. At the conclusion of the exam, return all test materials, including blue books, answer pages, scratch paper, and this exam packet to the envelope and submit it to the proctor. DO NOT seal the envelope. Students who do not return all exam materials at the end of the exam may not be graded. INSTRUCTIONS: PAGE ONE EXAM#____________ Gebbia: Secured Transactions, Final, F10 7. Guidelines: Read the entire exam before you begin to write your answer. This exam is designed to test the materials we have covered in the course. If your analysis sends you significantly beyond those materials, you may be on the wrong track – back track and focus on the materials we read and studied in class. If you feel stuck, go back to the basics. If you still feel stuck, move on and come back to the challenging question later. I will not wish you “good luck” because you have worked hard this semester and will not need to rely on luck. Have a great break. See you next semester. THIS EXAM CONSISTS OF 2 PAGES OF INSTRUCTION AND 6 PAGES OF QUESTIONS. PLEASE MAKE SURE THAT YOU HAVE ALL OF THEM. INSTRUCTIONS: PAGE TWO EXAM#____________ Gebbia: Secured Transactions, Final, F10 Question Two (200 points) Suggested Time: 120 minutes EDM: The debtor is a California corporation, incorporated on October 21, 1991. At all times relevant to this question, the debtor was in the business of selling emergency vehicles in the state of California. The name of the debtor, as it appears on the public record of the California Secretary of State’s office, is “EDM Corporation.” The records of the Secretary of State’s office contain no records registering a trade name for EDM Corporation. BANK A On December 15, 2005, Bank A and EDM, through their authorized representatives, executed a “loan and security agreement,” promissory note in the amount of $5 million, and UCC-1 financing statement. The loan and security agreement includes the following information: Collateral: accounts, inventory, contract rights, equipment, fixtures, whether now existing or hereafter acquired Debtor: EDM Corporation D/B/A EDM Equipment Debt: all obligations of any type or nature, whether now owing or owing at any time in the future Bank A’s UCC-1 Financing Statement, which Bank A filed with the California Secretary of State’s Office on December 15, 2005, includes the following information: Collateral: accounts, inventory, contract rights, equipment, fixtures Name of Debtor: EDM Corporation D/B/A/ EDM Equipment On November 20, 2010, Bank A signed and filed with the California Secretary of State’s office a UCC “continuation statement” which includes the following information: Collateral: accounts, inventory, contract rights, equipment, fixtures Name of Debtor: EDM Corporation The financing statement and continuation statement include the correct name and address for Bank A and the correct address for EDM. On December 30, 2005, Bank A loaned $5 million to EDM. From time to time in the ensuing years, EDM made payments to Bank A, and Bank A made additional loans to EDM under the loan and security agreement. As of today, December 1, 2010, EDM owes Bank A $3.75 million. QUESTIONS: PAGE THREE EXAM#____________ Gebbia: Secured Transactions, Final, F10 BANK B On November 1, 2010, Bank B received the results of a UCC search conducted in the Secretary of State’s Office of California in the name of “EDM Corporation” The search did not reveal Bank A’s 2005 financing statement. On November 2, 2010, EDM and Bank B, through their authorized representatives, executed a “loan and security agreement: line of credit,” promissory note in the amount of $500,000, and UCC-1 Financing Statement. The Loan and Security Agreement includes the following information: Collateral: inventory, equipment, general intangibles, payment intangibles, commercial tort claims, accounts, deposit accounts, whether now existing or hereafter acquired Debtor: EDM Corporation Debt: all obligations of any type or nature, whether now owing or owing at any time in the future Bank B’s UCC-1 Financing Statement, which has not been filed, contains the following information: Collateral: inventory, equipment, general intangibles, payment intangibles, commercial tort claims, accounts, deposit accounts Name of Debtor: EDM Corporation The financing statement includes the correct name and address for Bank B and the correct address for EDM. On November 23, 2010, Bank B advanced $250,000 directly to Manufacturer, the manufacturer of a Horton Demo 533-3 Ambulance VIN # 1FDEX457 (the “Ambulance”). Upon receipt of the funds from Bank B, Manufacturer shipped the Ambulance to EDM. EDM received the Ambulance on November 25, 2010. On November 26, 2010, EDM’s president drove the Ambulance to a nearby emergency medical service provider who was considering buying a new ambulance. The accident While the president and the Ambulance were away from EDM’s office / showroom, a gas explosion destroyed EDM’s office / showroom and surrounding businesses. The Bankruptcy Filing EDM filed chapter 7 liquidation bankruptcy this morning, December 1, 2010. The only remaining tangible assets are the Ambulance and two items that were stored off-site: a high- powered specialty washing system designed for emergency vehicles, and a FireTruck that was on display at a trade show. QUESTIONS: PAGE FOUR EXAM#____________ Gebbia: Secured Transactions, Final, F10 QUESTIONS: Q2A: 25 points, 15 minutes Identify with specificity the property owned by EDM that is subject to article 9. If you believe that any property is not within the scope of article 9, please identify it and explain why article 9 does not apply. Q2B: 100 points, 60 minutes Considering only Bank A, Bank B, and the trustee, discuss: *who might assert a property interest in each item of property you have identified *identify the nature and extent of all such interests *explain the basis upon which each entity may assert such interests *explain which if any of such interests are valid, and explain why or why not. Q2C: 50 points, 30 minutes To the extent that more than one entity holds a valid interest in any item of property you have identified, please discuss whose property interest has priority and why. Be specific. Q2D: 25 points, 15 minutes YOUR ADVICE: Please discuss (i) what, if anything, you would advise Bank A or Bank B to do now to improve its position; and (ii) what, if anything, you would advise Bank A or Bank B to have done differently or to do differently in the future to better protect its interests. QUESTIONS: PAGE FIVE