Here's a good question to practice
Larkin is a wholesaler of computers. Larkin sold 40 computers to Elk Appliance for $80,000. Elk paid $20,000 down and signed a promissory note for the balance. Elk also executed a security agreement giving Larkin a security interest in Elk's inventory, including the computers. Larkin perfected its security interest by properly filing a financing statement in the state of Whiteacre. Six months later, Elk moved its business to the state of Blackacre, taking the computers. On arriving in Blackacre, Elk secured a loan from Quarry Bank and signed a security agreement putting up all inventory (including the computers) as collateral. Quarry perfected its security interest by properly filing a financing statement in the state of Blackacre. Two months after arriving in Blackacre, Elk went into default on both debts. Which of the following statements is correct?
A.
Quarry's security interest is superior because Larkin's time to file a financing statement in Blackacre had expired prior to Quarry's filing.
B.
Quarry's security interest is superior because Quarry had no actual notice of Larkin's security interest.
C.
Larkin's security interest is superior even though at the time of Elk's default Larkin had not perfected its security interest in the state of Blackacre.
D.
Larkin's security interest is superior provided it repossesses the computers before Quarry does.
Explanation
When a debtor moves collateral subject to a perfected security interest to another jurisdiction, the original creditor retains the status of a perfected creditor for up to four months after the collateral is moved.
It tripped me up because of the six month thing, made me think it had already been in the other state for that long. Gotta read these carefully, sometimes I read the business law ones so quickly and end up making a minor assumption which comes back to bite me. I also hate secured transactions & bankruptcy, I feel pretty comfortable with the rest of law though.
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