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Chapter 27
Secured Transactions
VI. Answers to Critical Legal Thinking Cases
27.1 Financing Statement
No. The bankruptcy court held that creditor PSC Metals, Inc.’s filing of the financing statement under the
debtor’s trade name “Keystone Steel & Wire Co.” rather than under its corporate name “Keystone
Consolidated Industries, Inc.” was a defective filing. It is undisputed that under Revised Article 9, PSC’s
financing statement would be insufficient as a matter of law. Revised Article 9 requires that a financing
statement contain the name of a corporate debtor as indicated on the public record of the debtor’s
27.2 Financing Statement
No, S&D does not have a security interest in the Mack truck. A lender can take a security interest in the
property of a debtor to serve as collateral when credit is being extended. One way to create such a security
interest is for the creditor to file a financing statement. The purpose of the financing statement is to notify
others who are contemplating extending credit to the debtor that certain property of the debtor is already
subject to a security interest. The financing statement must contain such information as the names and
addresses of the parties involved in the transaction and the type of collateral secured. In order to perfect,
i.e., make valid the security agreement, the financing statement must be filed with the proper government
27.3 Floating Lien
Columbus Junction State Bank wins the case. The Bank is a secured creditor of Joseph Jones based upon
a properly filed security agreement. Once filed, a perfected security interest is valid for five years. The
creditor may continue his perfected interest for another five years by filing a continuation statement. A
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filed a valid continuation statement six weeks prior to the expiration of the perfected security interest.
27.4 Purchase Money Security Interest
Yes, International Harvester’s (IH) security interest in the tractor takes priority over the Bank of
California’s security interest in the same collateral. This is because IH had a purchase money security
interest in the tractor that takes priority over any general security interest in the same property. A
security interest in the tractor within ten days of the Prior Brothers accepting the tractor. The court held
that such acceptance acts as the starting point for the ten-day deadline for perfecting the interest in a sale
27.5 Buyer in the Ordinary Course of Business
because buyers would be reluctant to purchase goods from merchants if the merchants’ creditors could
recover the goods from the buyer when the merchant defaulted on loans owed to second creditors. In this
case, the court held that the two officers who financed the cars were not buyers in the ordinary course of
business. However, both men worked for the merchant offering the goods for sale, Heritage Ford, and
VII. Answers to Ethics Cases
27.6 Ethics Case
takes the vehicle free of ICE’s perfected security interest in the vehicle. In this case, Chrisman was a
buyer in the ordinary course of business when she purchased the vehicle from Top Quality because Top
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27.7 Ethics Case
The Vos Brothers win since IHCC’s financing statement was not properly filed by Harder. Many states,
including Michigan, require that an Article 9 financing statement be filed locally with the County Clerk of
the county of residence of the debtor. The UCC specifically requires that financing statements for farm