Exam 37: Secured Transactions and Suretyship

A security interest in consumer goods,except motor vehicles,is automatically perfected upon attachment.

Jack and Karin are cosureties on a debt owed by Lyle to Mike.If Lyle's debt becomes due and he and Karin both refuse to pay it,Jack may bring an action in equity against Karin to obtain an order requiring her to pay her share of the debt.

Upon the surety's payment of the principal debtor's entire obligation,the surety obtains all of the rights the creditor has against or through the principal debtor.The term for the surety's "stepping into the shoes" of the creditor is known as:

Diane,who is seventeen years old,purchased an auto from Elvira on credit.Florence agreed to act as surety and signed a written surety agreement.At the time of purchase,Diane specifically asked Elvira about the condition of the car's motor and was told that it had just been replaced with a new one and was in fine condition.This was blatantly untrue,because Elvira knew it was in terrible shape and would only last a short time.The auto has now stopped running and Diane refuses to make any more payments.Elvira is now proceeding against Diane and Florence.What defenses,if any are available to (a)Diane and (b)Florence?

A security agreement may include only presently owned inventory,accounts,or equipment of the debtor,not property that is subsequently acquired.

A ____ bond is provided on behalf of a party to a proceeding to cover losses caused by delay or deprivation of the use of property resulting from the institution of the action.