Loan and Security Agreement - Secured Transactions - Past Paper, Exams of Law

Download Loan and Security Agreement - Secured Transactions - Past Paper and more Exams Law in PDF only on Docsity! Final Examination -- Secured Transactions Professor Karen M. Gebbia -- Fall 2011 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: 150 points, 90 minutes Q2B: 50 points, 30 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 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 5 PAGES OF QUESTIONS. PLEASE MAKE SURE THAT YOU HAVE ALL OF THEM. INSTRUCTIONS: PAGE TWO Question Two (200 points) Suggested Time: 120 minutes MakesIt Corporation: MakesIt Corporation is a California corporation, incorporated on October 1, 1985. At all times relevant to this question, MakesIt was in the business of designing and manufacturing computers and other electronic devices. BANK A Assume that Bank A has a properly attached and perfected security interest in the following property owned by MakesIt to secure all past obligations and future advances: existing and after-acquired inventory and equipment. Bank A filed its financing statement on December 1, 2002 and made its first advance on December 15, 2002. The parties signed the security agreement on December 15, 2002. Bank A timely filed all necessary continuation statements. As of today, December 4, 2011, MakesIt owes Bank A $590 million. Bank A’s security agreement stated: “MakesIt may sell inventory in the ordinary course of business, proceeds to be deposited with Bank A” SellsIt Corporation SellsIt Corporation is a California corporation, incorporated on October 1, 1992. At all times relevant to this question, SellsIt was in the business of marketing and selling computers and other electronic devices. BANK B Assume that Bank B has a properly attached and perfected security interest in the following property owned by SellsIt to secure all past obligations and future advances: existing and after-acquired inventory and equipment. Bank B filed its financing statement on December 1, 2000 and made its first advance on December 15, 2000. The parties signed the security agreement on December 15, 2000. Bank B timely filed all necessary continuation statements. As of today, December 4, 2011, SellsIt owes Bank B $125 million. Bank B’s security agreement stated: “SellsIt may sell inventory in the ordinary course of business free and clear of Bank B’s security interest provided that all proceeds of inventory sales are deposited immediately with Bank B” Due to decreasing sales, SellsIt decided to close one of its three retail locations (Store #3). On November 18, 2011, SellsIt held a “one day only” sale at Store #3. It offered discounted prices on inventory at Store #3 only. It also offered for sale all of the Store #3 furniture, fixtures and equipment. After the sale, SellsIt moved the remaining inventory from Store #3 to its other two stores. It donated the few remaining items of furniture, fixtures and equipment to charity. EXAM QUESTIONS -- PAGE 3 OF 5 BUYER On November 18, 2011, Bobby Buyer bought the following items from SellsIt at Store #3 for use in his dental practice: 4 new MakesIt brand computers, 2 new MakesIt brand printers, 2 used desks, 2 used chairs. Yesterday, November 29, 2011, Bobby received a letter from Bank B demanding that Bobby turn over to Bank B each of the 10 items of “Bank B’s collateral” that Bobby had purchased from SellsIt. Today, November 30, 2011, Bobby received a letter from Bank A demanding that Bobby turn over to Bank A each of the 10 items of “Bank A’s collateral” that Bobby had purchased from SellsIt. QUESTION 2: Q2A: 150 points, 90 minutes Considering only Bank A, Bank B, and Bobby, discuss who gets what and why. Be sure to: *consider who might assert a property interest in each of the 10 items *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. *to the extent that more than one entity holds a valid interest in any item of property you have identified, discuss whose property interest has priority and why. Be specific. Q2B: 50 points, 30 minutes YOUR ADVICE: Please discuss (i) what, if anything, you would advise Bobby to do now, (ii) what, if anything, you would advise Bobby to have done differently or to do differently in the future, and (iii) answer Booby’s question: “If I have to give any of this to Bank A or Bank B, do they have to pay me back what I paid for it?” EXAM QUESTIONS -- PAGE 4 OF 5 Question Three (25 POINTS) Suggested Time: 15 minutes ASSUME: (1) California law applies (2) no “mechanic’s lien” or other statutory lien in favor of a bailee applies FACTS: The creditor: Robotics, Inc. The debtor: Cranking Gear, Inc. The deal: On September 1, 2011, Robotics sold a Robotic Arm Ball Bearing Infusion Tester (RABBIT) to Cranking Gear. Payment was due in full on November 1, 2011. Cranking and Robotics agreed orally that Robotics could take the RABBIT back if Cranking didn’t pay in full on time. On November 25, 2011, Cranking sent the RABBIT to Robotics for routine adjustments. It is now November 30, 2011. Cranking hasn’t paid. Robotics still has the RABBIT. Robotics wants to keep the RABBIT. Cranking wants it back. QUESTION: Advise Robotics. Explain your reasoning. Be specific. EXAM QUESTIONS -- PAGE 5 OF 5 END OF EXAM