Priority in Foreclosure and Debt Collection Self-Quiz

 

 

 

 

 

 

 

 

 

Stella held a security interest in Stew’s stereo, for money that she loaned him to purchase his car. Stew was 18 months behind on his payment, was constantly refusing to take Stella’s calls and would not come to the door when she went to his house to collect the stereo. On one such trip to Stew’s house, Stella knocked on the door and got no response. She then went around the back of the house and saw that the back door was completely open. Seeing no one inside, Stella walked into the house, found the stereo, disconnected it from the wall and took it. Stella:
Choice 1 has appropriately exercised the creditors right of self-help.
Choice 2 has breached the peace.
Choice 3 has committed theft.
Choice 4 has acted according to the rule of the law, but would have been more justified had she first sought a court order.
NewCo, Inc. and OldCo, Inc. have entered into a transaction where OldCo. has taken a security interest in NewCo’s operating machinery. However, unbeknownst to OldCo, another company – OtherCo – already had a perfected security interest in the machinery. In a foreclosure proceeding, who will take the asset?
Choice 1 OldCo.
Choice 2 NewCo.
Choice 3 OtherCo.
Choice 4 NewCos bank.
Gladys buys a dress from DressItUp, Inc. She purchased the dress off the rack, not knowing that ClothersCo had an inventory-based security interest, with an “after acquired” clause in all the clothing on DressItUp’s retail floor. If ClothersCo subsequently forecloses on its note to DressItUp, Gladys will have to:
Choice 1 do nothing.
Choice 2 return the dress and get a refund for what she paid.
Choice 3 return the dress and get a refund for the amount she paid minus what DressItUp was entitled to.
Choice 4 become a general, unsecured creditor of DressItUp for the amount she paid for the dress.

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