1. 1 Secured Transactions Assignment 36 Buyers against Secured Creditors

2. 2 Secured Party Seller Debtor Security Interest Item Buyer Item

3. 3 Secured Party BuyerSeller Debtor Item Assignment 35Assignment 36 Security Interest

4. 4 Main Rule: Security Interests Survive Sale of Collateral

5. 5 §9-201. A security agreement is effective according to its terms... against purchasers of the collateral.... Main Rule: Security Interests Survive Sale of Collateral

6. 6 §9-201. A security agreement is effective according to its terms... against purchasers of the collateral.... §9-315(a)(1). A security interest... continues in collateral notwithstanding sale... Main Rule: Security Interests Survive Sale of Collateral

7. 7 §9-201. A security agreement is effective according to its terms... against purchasers of the collateral.... §9-315(a)(1). A security interest... continues in collateral notwithstanding sale... unless the secured party authorizes the disposition free of the security interest.... Exception 1 Main Rule: Security Interests Survive Sale of Collateral

8. 8 Exception 2: Buyer in Ordinary Course Secured Party Buyer Debtor Collateral Security Interest §9-320(a). A buyer in ordinary course of business...

9. 9 Exception 2: Buyer in Ordinary Course Secured Party Buyer Debtor Collateral Security Interest §9-320(a). A buyer in ordinary course of business...

10. 10 Exception 2: Buyer in Ordinary Course Secured Party Buyer Debtor Collateral Security Interest §9-320(a). A buyer in ordinary course of business... takes free of a security interest...

11. 11 Exception 2: Buyer in Ordinary Course Secured Party Buyer Debtor Collateral Security Interest §9-320(a). A buyer in ordinary course of business... takes free of a security interest created by the buyer’s seller...

12. 12 Exception 2: Buyer in Ordinary Course Secured Party Buyer Debtor Collateral Security Interest §9-320(a). A buyer in ordinary course of business... takes free of a security interest created by the buyer’s seller...

13. 13 Exception 2: Buyer in Ordinary Course Secured Party Buyer Debtor Collateral Security Interest §9-320(a). A buyer in ordinary course of business... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.

14. 14 Exception 2: Buyer in Ordinary Course §9-320(a). A buyer in ordinary course of business... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Secured Party Buyer Debtor Collateral Security Interest But not if the buyer “has knowledge that the sale violates the rights of another person in the goods.” §1-201(b)(9)

15. 15 Exception to 9-320(a) exception: Possession

16. 16 §9-320(e). Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under Section 9-313. Exception to 9-320(a) exception: Possession

17. 17 Exception to 9-320(a) exception: Possession §9-320(e). Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under Section 9-313. Deering Possession Mill Fabrics Security Interest Tanbro case, 1976

18. 18 §9-320(e). Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under Section 9-313. Deering Possession Tanbro BIOC Mill Fabrics Sale Security Interest Tanbro case, 1976 Exception to 9-320(a) exception: Possession

19. 19 §9-320(e). Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under Section 9-313. Deering Possession Tanbro BIOC Mill Fabrics Sale Security Interest Tanbro case, 1976 Exception to 9-320(a) exception: Possession

20. 20 §9-320(e). Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under Section 9-313. Deering Possession Tanbro BIOC Mill Fabrics Sale Security Interest Tanbro case, 1976 Revised Article 9, 2001 Exception to 9-320(a) exception: Possession

21. 21 §9-320(e). Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under Section 9-313. Deering Possession Tanbro BIOC Mill Fabrics Sale Security Interest Tanbro case, 1976 Revised Article 9, 2001 Would you buy and pay for something that seller doesn’t have in its possession? Exception to 9-320(a) exception: Possession

22. 22 §9-320(e). Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under Section 9-313. Deering Possession Tanbro BIOC Mill Fabrics Sale Security Interest Tanbro case, 1976 Revised Article 9, 2001 Would you buy and pay for something that seller doesn’t have in its possession? Ebay Exception to 9-320(a) exception: Possession

23. 23 Exception 3: Consumer to Consumer §9-320(b). A buyer of goods Secured Buyer Debtor Collateral Security Interest

24. 24 Exception 3: Consumer to Consumer §9-320(b). A buyer of goods Secured Buyer Debtor Collateral Security Interest

25. 25 Exception 3: Consumer to Consumer §9-320(b). A buyer of goods from a person who used or bought the goods for use primarily for personal, family, or household purposes... Secured Buyer Debtor Collateral Security Interest

26. 26 Exception 3: Consumer to Consumer §9-320(b). A buyer of goods from a person who used or bought the goods for use primarily for personal, family, or household purposes... Secured Buyer Consumer Collateral Security Interest

27. 27 Exception 3: Consumer to Consumer §9-320(b). A buyer of goods from a person who used or bought the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, Secured Buyer Consumer Collateral Security Interest

28. 28 Exception 3: Consumer to Consumer §9-320(b). A buyer of goods from a person who used or bought the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys: (1) without knowledge of the security interest; Secured Buyer Consumer Collateral Security Interest

29. 29 Exception 3: Consumer to Consumer §9-320(b). A buyer of goods from a person who used or bought the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys: (1) without knowledge of the security interest; (2) for value; Secured Buyer Consumer Collateral Security Interest

30. 30 Exception 3: Consumer to Consumer §9-320(b). A buyer of goods from a person who used or bought the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys: (1) without knowledge of the security interest; (2) for value; (3) primarily for the buyer’s personal, family, or household purposes Secured Consumer Collateral Security Interest

31. 31 Exception 3: Consumer to Consumer §9-320(b). A buyer of goods from a person who used or bought the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys: (1) without knowledge of the security interest; (2) for value; (3) primarily for the buyer’s personal, family, or household purposes; and (4) before the filing of a financing statement covering the goods. Secured Consumer Collateral Security Interest

32. 32 Exception 3: Consumer to Consumer Postponed

33. 33 Exception 4: Unperfected Security Interest §9-317(b). A buyer... takes free of a security interest... if the buyer gives value and receives delivery of the collateral without knowledge of the security interest... and before it is perfected.

34. 34 Exception 4: Unperfected Security Interest §9-317(b). A buyer... takes free of a security interest... if the buyer gives value and receives delivery of the collateral without knowledge of the security interest... and before it is perfected.

35. 35 SI Exception 4: Unperfected Security Interest §9-317(b). A buyer... takes free of a security interest... if the buyer gives value and receives delivery of the collateral without knowledge of the security interest... and before it is perfected. Notice: A secured creditor with knowledge has priority over an unperfected secured creditor Secured Secured with knowledge Debtor Unperfected SI §9-322(a)

36. 36 SI Exception 4: Unperfected Security Interest §9-317(b). A buyer... takes free of a security interest... if the buyer gives value and receives delivery of the collateral without knowledge of the security interest... and before it is perfected. Notice: A secured creditor with knowledge has priority over an unperfected secured creditor But a buyer with knowledge doesn’t have priority over an unperfected secured creditor Secured Secured with knowledge Debtor Unperfected SI Sale Secured Buyer with knowledge Debtor Unperfected SI §9-322(a)§9-317(b)

37. 37 Exception 5: Future Advances §9-323(d). A buyer of goods other than a buyer in the ordinary course of business...

38. 38 Exception 5: Future Advances §9-323(d). A buyer of goods other than a buyer in the ordinary course of business takes free of a security interest to the extent that it secures [future] advances....

39. 39 Exception 5: Future Advances §9-323(d). A buyer of goods other than a buyer in the ordinary course of business takes free of a security interest to the extent that it secures [future] advances made after the earlier of (1) the secured party acquires knowledge of the buyer’s purchase; or (2) 45 days after the purchase.

40. 40 Exception 5: Future Advances §9-323(d). A buyer of goods other than a buyer in the ordinary course of business takes free of a security interest to the extent that it secures [future] advances made after the earlier of (1) the secured party acquires knowledge of the buyer’s purchase; or (2) 45 days after the purchase. Sale 45 days Subject to these advances Subject to if S without knowledge

41. 41 Exception 5: Future Advances §9-323(d). A buyer of goods other than a buyer in the ordinary course of business takes free of a security interest to the extent that it secures [future] advances made after the earlier of (1) the secured party acquires knowledge of the buyer’s purchase; or (2) 45 days after the purchase. (e)Subsection (d) does not apply if the advance is made pursuant to a commitment entered into without knowledge of the buyer’s purchase and before the expiration of the 45- day period. Sale 45 days Subject to these advances Subject to if S without knowledge

42. Subject to if S committed without knowledge before 46 th day Exception 5: Future Advances §9-323(d). A buyer of goods other than a buyer in the ordinary course of business takes free of a security interest to the extent that it secures [future] advances made after the earlier of (1) the secured party acquires knowledge of the buyer’s purchase; or (2) 45 days after the purchase. (e)Subsection (d) does not apply if the advance is made pursuant to a commitment entered into without knowledge of the buyer’s purchase and before the expiration of the 45- day period. Sale 45 days Subject to these advances Subject to if S without knowledge

43. 43 Exception 5: Future Advances §9-323(d). A buyer of goods other than a buyer in the ordinary course of business takes free of a security interest to the extent that it secures [future] advances made after the earlier of (1) the secured party acquires knowledge of the buyer’s purchase; or (2) 45 days after the purchase. (e)Subsection (d) does not apply if the advance is made pursuant to a commitment entered into without knowledge of the buyer’s purchase and before the expiration of the 45- day period. Sale 45 days Subject to these advances Subject to if S without knowledge Example: Buyer at an execution sale Subject to if S committed without knowledge before 46 th day

44. 44 Security Interest Problem 36.1.a, page 613 All Sea- sons RV Eddy Eddy gives SI to All Seasons, sale prohibited $17K

45. 45 Security Interest Problem 36.1.a, page 613 All Sea- sons RV Sunrise RVEddy Eddy gives SI to All Seasons, sale prohibited Eddy sells to Sunrise in violation of SA RV Lindy $17K

46. 46 Security Interest Problem 36.1.a, page 613 All Sea- sons RV Sunrise RVEddy Eddy gives SI to All Seasons, sale prohibited Eddy sells to Sunrise in violation of SA Sunrise sells to Card in ordinary course Card $23K Lindy RV Lindy $17K

47. 47 Security Interest Problem 36.1.a, page 613 a.Card sues All Seasons to remove lien. How good is her case? Card loses. In re Sunrise RV, 105 B.R. 587 (1989) §9-320(a). A buyer in ordinary course of business... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. All Sea- sons RV Sunrise RVEddy Eddy gives SI to All Seasons, sale prohibited Eddy sells to Sunrise in violation of SA Sunrise sells to Card in ordinary course Card $23K Lindy RV Lindy $17K

48. 48 Security Interest Problem 36.1.a, page 613 a.Card sues All Seasons to remove lien. How good is her case? Card loses. In re Sunrise RV, 105 B.R. 587 (1989) §9-320(a). A buyer in ordinary course of business... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. All Sea- sons RV Sunrise RVEddy Eddy gives SI to All Seasons, sale prohibited Eddy sells to Sunrise in violation of SA Sunrise sells to Card in ordinary course Card $23K Lindy RV Lindy $17K

49. 49 Security Interest Problem 36.1.a, page 613 a.Card sues All Seasons to remove lien. How good is her case? Card loses. In re Sunrise RV, 105 B.R. 587 (1989) §9-320(a). A buyer in ordinary course of business... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. All Sea- sons RV Sunrise RVEddy Eddy gives SI to All Seasons, sale prohibited Eddy sells to Sunrise in violation of SA Sunrise sells to Card in ordinary course Card $23K Lindy RV Lindy $17K

50. 50 Security Interest Problem 36.1.b, page 613 b.What if Card had demanded certificate of title? Sunrise has certificate showing Eddy as owner, All Seasons as secured. Back shows signature from Eddy; no place for All Seasons to sign. Sunrise: “We discharge the lien, you get clear title by mail in two weeks.” All Sea- sons RV Sunrise RVEddy Eddy gives SI to All Seasons, sale prohibited Eddy sells to Sunrise in violation of SA Sunrise sells to Card in ordinary course Card $23K Lindy RV Lindy $17K

51. 51 Security Interest Problem 36.1.b, page 613 b.What if Card had demanded certificate of title? Who has it? Sunrise: “We discharge the lien, you get clear title by mail in two weeks.” All Sea- sons RV Sunrise RVEddy Eddy gives SI to All Seasons, sale prohibited Eddy sells to Sunrise in violation of SA Sunrise sells to Card in ordinary course Card $23K Lindy RV Lindy $17K

52. 52 Security Interest Problem 36.1.b, page 613 b.What if Card had demanded certificate of title? Who has it? Maybe All Seasons. Maybe Sunrise. Eddy has transferred ownership, but All Seasons has not released lien, page 424. Sunrise: “We discharge the lien, you get clear title by mail in two weeks.” All Sea- sons RV Sunrise RVEddy Eddy gives SI to All Seasons, sale prohibited Eddy sells to Sunrise in violation of SA Sunrise sells to Card in ordinary course Card $23K Lindy RV Lindy $17K

53. 53 Security Interest Problem 36.1.b, page 613 b.What if Card had demanded certificate of title? Who has it? Maybe All Seasons. Maybe Sunrise. Eddy has transferred ownership, but All Seasons has not released lien, page 424. Sunrise: “We discharge the lien, you get clear title by mail in two weeks.” All Sea- sons RV Sunrise RVEddy Eddy gives SI to All Seasons, sale prohibited Eddy sells to Sunrise in violation of SA Sunrise sells to Card in ordinary course Card $23K Lindy RV Lindy $17K

54. 54 Problem 36.2.a, page 613 Mall Store a. Card is buying a reconditioned piano from a store in the Mall. She wants you to represent her at the closing. Is there anything to her fears? Same as with the Lindy. Card $10K

55. 55 Problem 36.2.a, page 613 Mall Store a. Card is buying a reconditioned piano from a store in the Mall. She wants you to represent her at the closing. Is there anything to her fears? Card $10K

56. 56 Security Interest Problem 36.2.a, page 613 §9-320(a). A buyer in ordinary course of business... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. b. Can we deal with problem by a thorough UCC search? No. Filing would be against Eddy. §507(a). All Sea- sons RV Mall StoreEddy a. Card is buying a reconditioned piano from a store in the Mall. She wants you to represent her at the closing. Is there anything to her fears? Same as with the Lindy. Card $10K

57. 57 Security Interest Problem 36.2.a, page 613 §9-320(a). A buyer in ordinary course of business... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. b. Can we deal with problem by a thorough UCC search? No. Filing would be against Eddy. §507(a). All Sea- sons RV Mall StoreEddy a. Card is buying a reconditioned piano from a store in the Mall. She wants you to represent her at the closing. Is there anything to her fears? Same as with the Lindy. Card $10K

58. 58 Security Interest Problem 36.2.b, page 613 §9-320(a). A buyer in ordinary course of business... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. b. Can we deal with problem by a thorough UCC search? No. Filing would be against Eddy. §507(a). All Sea- sons RV Mall StoreEddy a. Card is buying a reconditioned piano from a store in the Mall. She wants you to represent her at the closing. Is there anything to her fears? Same as with the Lindy. Card $10K

59. 59 Security Interest Problem 36.2.b, page 613 §9-320(a). A buyer in ordinary course of business... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. b. Can we deal with problem by a thorough UCC search? Difficult. Filing would be against Eddy. §9-507(a). Could be automatic perfection. §9-309(1). All Sea- sons RV Mall StoreEddy a. Card is buying a reconditioned piano from a store in the Mall. She wants you to represent her at the closing. Is there anything to her fears? Same as with the Lindy. Card $10K

60. 60 Security Interest Problem 36.2.c, page 613 c.What should we do? Tell her fears are irrational? Like an Airline crash victim. Send her to a shrink?Take her money, so some investigation. But what if a guardian is appointed? All Sea- sons RV Mall StoreEddy §9-320(a). A buyer in ordinary course of busi- ness... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Card $10K

61. 61 Security Interest Problem 36.2.c, page 613 c.What should we do? Tell her fears are irrational? Like an Airline crash victim. Send her to a shrink?Take her money, so some investigation. But what if a guardian is appointed? All Sea- sons RV Mall StoreEddy §9-320(a). A buyer in ordinary course of busi- ness... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Card $10K

62. 62 Security Interest Problem 36.2.c, page 613 c.What should we do? Tell her fears are irrational? Like an Airline crash victim. Send her to a shrink?Take her money, so some investigation. But what if a guardian is appointed? All Sea- sons RV Mall StoreEddy §9-320(a). A buyer in ordinary course of busi- ness... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Card $10K

63. 63 Security Interest Problem 36.2.c, page 613 c.What should we do? Tell her fears are irrational? Like an Airline crash victim. Send her to a shrink?Take her money, so some investigation. But what if a guardian is appointed? All Sea- sons RV Mall StoreEddy §9-320(a). A buyer in ordinary course of busi- ness... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Card $10K

64. 64 Security Interest Problem 36.2.c, page 613 c.What should we do? Tell her fears are irrational? Like an Airline crash victim. Send her to a shrink? Weyrauch: She won’t go. Take her money, so some investigation. But what if a guardian is appointed? All Sea- sons RV Mall StoreEddy §9-320(a). A buyer in ordinary course of busi- ness... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Card $10K

65. 65 Security Interest Problem 36.2.c, page 613 c.What should we do? Tell her fears are irrational? Like an Airline crash victim. Send her to a shrink? Weyrauch: She won’t go. Take her money, do some investigation? But what if a guardian is appointed? All Sea- sons RV Mall StoreEddy §9-320(a). A buyer in ordinary course of busi- ness... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Card $10K

66. 66 Security Interest Problem 36.2.c, page 613 c.What should we do? Tell her fears are irrational? Like an Airline crash victim. Send her to a shrink? Weyrauch: She won’t go. Take her money, do some investigation? But what if a guardian is appointed? All Sea- sons RV Mall StoreEddy §9-320(a). A buyer in ordinary course of busi- ness... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Card $10K

67. 67 Security Interest Problem 36.2.d, page 613 d.Could this problem occur with new goods? Yes. Dealer sells encumbered inventory in bulk. What is the policy for “created by the buyer’s seller” exception? Wrongfully sold collateral is like stolen goods. Don’t make a market for it. Void title rule. Inventory lender Mall store 2Mall store 1 §9-320(a). A buyer in ordinary course of busi- ness... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Card $10K

68. 68 Security Interest Problem 36.2.d, page 613 d.Could this problem occur with new goods? Yes. Dealer sells encumbered inventory in bulk. What is the policy for “created by the buyer’s seller” exception? Wrongfully sold collateral is like stolen goods. Don’t make a market for it. Void title rule. Inventory lender Mall store 2Mall store 1 §9-320(a). A buyer in ordinary course of busi- ness... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Card $10K Bulk sale

69. 69 Security Interest Problem 36.2.d, page 613 d.Could this problem occur with new goods? Yes. Dealer sells encumbered inventory in bulk. What is the policy for “created by the buyer’s seller” exception? Wrongfully sold collateral is like stolen goods. Don’t make a market for it. Void title rule. Inventory lender Mall store 2Mall store 1 §9-320(a). A buyer in ordinary course of busi- ness... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Card $10K Bulk sale

70. 70 Security Interest Problem 36.2.d, page 613 d.Could this problem occur with new goods? Yes. Dealer sells encumbered inventory in bulk. What is the policy for “created by the buyer’s seller” exception? Wrongfully sold collateral is like stolen goods. Don’t make a market for it. Void title rule. “Secureds need certainty.” Inventory lender Mall store 2Mall store 1 §9-320(a). A buyer in ordinary course of busi- ness... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Card $10K Bulk sale

71. 71 Security Interest Problem 36.2.d, page 613 d.Could this problem occur with new goods? Yes. Dealer sells encumbered inventory in bulk. What is the policy for “created by the buyer’s seller” exception? Wrongfully sold collateral is like stolen goods. Don’t make a market for it. Void title rule. “Secureds need certainty.” Truth in Lending Act §170 chargeback is a partial solution. Inventory lender Mall store 2Mall store 1 §9-320(a). A buyer in ordinary course of busi- ness... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Card $10K Bulk sale

72. 72 Truth in Lending Act §170 a.Subject to... (b), a card issuer [bank]... shall be subject to all claims... arising out of any transaction in which the credit card is used as a method of payment... if

73. 73 Truth in Lending Act §170 a.Subject to... (b), a card issuer [bank]... shall be subject to all claims... arising out of any transaction in which the credit card is used as a method of payment... if (3) The place where the initial transaction occurred was in the same State as the mailing address previously provided by the cardholder or was within 100 miles from such address....

74. 74 Truth in Lending Act §170 a.Subject to... (b), a card issuer [bank]... shall be subject to all claims... arising out of any transaction in which the credit card is used as a method of payment... if (3) The place where the initial transaction occurred was in the same State as the mailing address previously provided by the cardholder or was within 100 miles from such address.... b. The amount of claims... asserted by the cardholder may not exceed the amount of credit outstanding with respect to such transaction at the time the cardholder first notifies the card issuer... of such claim.

75. 75 Truth in Lending Act §170 a.Subject to... (b), a card issuer [bank]... shall be subject to all claims... arising out of any transaction in which the credit card is used as a method of payment... if (3) The place where the initial transaction occurred was in the same State as the mailing address previously provided by the cardholder or was within 100 miles from such address.... b. The amount of claims... asserted by the cardholder may not exceed the amount of credit outstanding with respect to such transaction at the time the cardholder first notifies the card issuer... of such claim. Scenario: Alecia buys piano. Alecia pays her entire credit card balance. Inventory lender finds Alecia and claims. It is too late for Alecia to claim against the credit card issuer.

76. 76 Problem 36.5, page 614 Davis Dept Store Beavis TV Davis sells TV to Beavis

77. 77 Security Interest Problem 36.5, page 614 Davis Dept Store Beavis FS Filed Davis sells TV to Beavis; takes PMSI and files financing statement.

78. 78 Security Interest Problem 36.5, page 614 Davis Dept Store ButtheadBeavis TV, etc. $960 FS Filed Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value.

79. 79 Security Interest Problem 36.5, page 614 Can Davis repossess the TV from Butthead? Davis Dept Store ButtheadBeavis TV, etc. $960 FS Filed Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value.

80. 80 Security Interest Problem 36.5, page 614 Can Davis repossess the TV from Butthead? Yes, §9-201 and §9-315(a)(1). Davis Dept Store ButtheadBeavis TV, etc. $960 FS Filed Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value.

81. 81 Security Interest Problem 36.5, page 614 Can Davis repossess the TV from Butthead? Yes, §9-201 and §9-315(a)(1). Does Consumer to Consumer exception save Butthead? §9- 320(b). Davis Dept Store ButtheadBeavis TV, etc. $960 FS Filed Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value.

82. 82 Security Interest Problem 36.5, page 614 Can Davis repossess the TV from Butthead? Yes, §9-201 and §9-315(a)(1). Does Consumer to Consumer exception save Butthead? §9- 320(b). No, because Davis filed a financing statement. Davis Dept Store ButtheadBeavis TV, etc. $960 FS Filed Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value.

83. 83 Security Interest Problem 36.5, page 614 Can Davis repossess the TV from Butthead? Yes, §9-201 and §9-315(a)(1). Does Consumer to Consumer exception save Butthead? §9- 320(b). No, because Davis filed a financing statement. Must Davis give Butthead his money back? Davis Dept Store ButtheadBeavis TV, etc. $960 FS Filed Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value.

84. 84 Security Interest Problem 36.5, page 614 Can Davis repossess the TV from Butthead? Yes, §9-201 and §9-315(a)(1). Does Consumer to Consumer exception save Butthead? §9- 320(b). No, because Davis filed a financing statement. Must Davis give Butthead his money back? No. Davis didn’t get the money. The money is collateral, §9-315(a)(2). Davis Dept Store ButtheadBeavis TV, etc. $960 FS Filed Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value.

85. 85 Security Interest Problem 36.5, page 614 Can Davis repossess the TV from Butthead? Yes, §9-201 and §9-315(a)(1). Does Consumer to Consumer exception save Butthead? §9- 320(b). No, because Davis filed a financing statement. Must Davis give Butthead his money back? No. Davis didn’t get the money. The money is collateral, §9-315(a)(2). Davis Dept Store ButtheadBeavis TV, etc. $960 FS Filed Davis sells TV to Beavis; takes PMSI and files financing statement. Beavis sells TV to Butthead, who is a bona fide purchaser for value. Moral: Never give your name at a garage sale

86. 86 Problem 36.8, page 615 Foster Marketing Mall Store BIOC Inventory Lender Security Interest $150K 100% financed

87. 87 Security Interest Problem 36.8, page 615 Deutsche Credit Foster Marketing Foster Manufacturing Mall Store BIOC Inventory Lender Security Interest $150K Deal: Foster Marketing takes subject to Deutsche’s SI. §1- 302(a). “Subject to SI” 100% financed

88. 88 Security Interest Problem 36.8, page 615 §9-320(a). A buyer in ordinary course of business (Mall Store)... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Deutsche Credit Foster Marketing Foster Manufacturing Mall Store BIOC Inventory Lender Security Interest $150K Deal: Foster Marketing takes subject to Deutsche’s SI. §1- 302(a). 100% financed “Subject to SI”

89. 89 Security Interest Problem 36.8, page 615 §9-320(a). A buyer in ordinary course of business (Mall Store)... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Will this work to defeat the Inventory Lender? Deutsche Credit Foster Marketing Foster Manufacturing Mall Store BIOC Inventory Lender Security Interest $150K Deal: Foster Marketing takes subject to Deutsche’s SI. §1- 302(a). 100% financed “Subject to SI”

90. 90 Security Interest Problem 36.8, page 615 Deutsche Credit All Quip RSS, Inc. Case Power RSS, Inc. and All Quip have identical officers and directors. Case Power was a BFP. 100% financed Equipment “Subject to SI”

91. 91 Security Interest Problem 36.8, page 615 §9-320(a). A buyer in ordinary course of business [Case Power]... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Deutsche Credit All Quip RSS, Inc. Case Power RSS, Inc. and All Quip have identical officers and directors. Case Power was a BFP. 100% financed Equipment “Subject to SI”

92. 92 Security Interest Problem 36.8, page 615 §9-320(a). A buyer in ordinary course of business [Case Power]... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Will this work to defeat the Inventory Lender? Deutsche Credit All Quip RSS, Inc. Case Power RSS, Inc. and All Quip have identical officers and directors. Case Power was a BFP. 100% financed Equipment “Subject to SI”

93. 93 Security Interest Problem 36.8, page 615 §9-320(a). A buyer in ordinary course of business [Case Power]... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Will this work to defeat the Inventory Lender? Deutsche Credit v. Case Power & Equipment, 876 P.2d 1190 (Ariz. App. 1994). Deutsche Credit All Quip RSS, Inc. Case Power RSS, Inc. and All Quip have identical officers and directors. Case Power was a BFP. Court held for Deutsche. 100% financed Equipment “Subject to SI”

94. 94 Security Interest Problem 36.8, page 615 Deutsche Credit All Quip RSS, Inc. Case Power RSS, Inc. and All Quip have identical officers and directors. Case Power was a BFP. Court held for Deutsche. 100% financed Court: “We do not wish our holding here to be read as giving parties a license to engage in practices similar to those employed by RSS and All Quip. In our opinion, such title transfers between closely held corporations with common ownership will, upon scrutiny, often reveal a pattern of abuse of the corporate form sufficient to justify piercing the corporate veil.” Equipment “Subject to SI”

95. 95 Security Interest Problem 36.8, page 615 §9-320(a). A buyer in ordinary course of business (Mall Store)... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Ethical problem here? Paolella, 587. “Unless the creditor has become the alter ego of the debtor, he will not be held to an ethical duty in excess of the morals of the marketplace.” Deutsche Credit Foster Marketing Foster Manufacturing Mall Store BIOC Inventory Lender Security Interest $150K Deal: Foster Marketing takes subject to Deutsche’s SI 100% financed “Subject to SI”

96. 96 Security Interest Problem 36.8, page 615 §9-320(a). A buyer in ordinary course of business (Mall Store)... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Ethical problem here? Paolella, 587. “Unless the creditor has become the alter ego of the debtor, he will not be held to an ethical duty in excess of the morals of the marketplace.” Deutsche Credit Foster Marketing Foster Manufacturing Mall Store BIOC Inventory Lender Security Interest $150K Deal: Foster Marketing takes subject to Deutsche’s SI 100% financed “Subject to SI”

97. 97 Security Interest Problem 36.8, page 615 §9-320(a). A buyer in ordinary course of business (Mall Store)... takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. Ethical problem here? Paolella, 580. “Unless the creditor has become the alter ego of the debtor, he will not be held to an ethical duty in excess of the morals of the marketplace.” Deutsche Credit Foster Marketing Foster Manufacturing Mall Store BIOC Inventory Lender Security Interest $150K Deal: Foster Marketing takes subject to Deutsche’s SI 100% financed “Subject to SI”