Exam 23: Secured Transactions

Gisele operates an outdoor equipment store in premises rented from Orca Real Property Inc. Before she moved to these premises, she had borrowed $10 000 from Imperial Bank for her business and given Imperial a security interest in her present and future inventory and accounts receivable. Gisele defaults on her obligations to the Bank and to Orca. Orca is entitled to seize Gisele's assets located in the space rented from Orca.

Baton Trucks Inc sold trucks in Alberta. Baton bought its trucks from Cold Automotive Inc. Under the terms of its agreement with Cold, Baton had agreed to give Cold a security interest in all of the trucks it acquired from Cold until they were paid for. Baton sold two trucks to Del's Flowers Inc in July. Del's paid for them but did not pick them up right away. Del's was run by Wendel, a friend of the president of Baton and knew about the security agreement that Baton had with Cold, though not its specific terms. Baton defaulted on its agreement with Cold, and Cold seized all of the trucks on Baton's lot including the two that had been sold to Del's. Who is entitled to the two trucks bought by Del's?

Francesca carries on an investment business in Ontario. She borrowed $50 000 from Barry. Francesca gave Barry a security interest in all her present and future personal property. Barry never filed a financing statement to register his interest under the Ontario Personal Property Security Act. Subsequently, she borrowed $20 000 from Toronto Bank to invest in the shares of Argus Corp. The Bank took a security interest in the shares and required Francesca to deposit the share certificates with the Bank. Subsequently, Francesca defaulted on her obligations to Barry and to the Bank. Who is entitled to the shares?

The process of perfection

Oneal carries on a wholesale toy distribution business. He sells to his customers on credit, giving them 30 days to pay. Oneal is negotiating for an operating line of credit and his bank has asked him to assign his receivables to them as security for his obligations under the line of credit. Assuming that Oneal agrees to the assignment, which of the following is TRUE?

Info- Tech Ltd is a distributor of computers. Info- Tech borrowed $500 000 from the Bank of Montreal in 2008. In its written agreement, Info- Tech agreed pay back the loan over four years. As security for the loan, it gave the Bank a security interest in all of its present and future assets. The Bank never filed a financing statement to perfect its interest. In September 2009, Info- Tech still owed $400 000 to the Bank. It also owed $40 000 to Computer Sales Inc, its primary supplier. Info- Tech defaults on its loan payments and its payments to Computer Sales. Computer Sales sues Info- Tech and gets a judgement for $40 000. It then takes possession of Info- Tech's inventory and starts selling it off. The Bank finds out and claims that its security interest prevails over Computer Sales. Which of the following best describes the legal position of the parties?

Under a conditional sales contract, the buyer gets neither title nor possession of the goods subject of the contract until the full amount of the purchase price is paid.

Which of the following is TRUE? A bank will be more likely to lend money to a borrower if the borrower grants the bank a security interest in its assets because

Gluco Inc is a large producer of pharmaceuticals. It enters into an agreement to supply Discount Drugs Inc, which operates a chain of drug stores in British Columbia, with its products. In its agreement with Discount, Discount gives Gluco a security interest in the drugs supplied until they are paid for. On July 1, 2010, Gluco filed a financing statement to register this interest under the British Columbia Personal Property Security Act. Previously, on May 1, 2010, Discount had given a security interest in all of its present and after- acquired property to Baker Bank, including inventory. The Bank filed a financing statement to register its interest under the British Columbia Personal Property Security Act on May 1, 2010. Gluco's security interest has priority over the Bank's because it is a purchase money security interest.

Marissa bought some used computers from Jordan Human Resources Services where she worked. She does not have to worry about there being any security interests in the computers because a security interest is only enforceable against a purchaser of collateral if they were aware of the interest at the time they purchased the collateral and Marissa is not aware of any security interests in the computers she bought from Jordan.