Question

Molly wanted to start her own dry cleaning business. She borrowed $50,000 from ABC Bank. She used her car as the collateral and also gave ABC Bank an interest in any property she acquired after the security interest was made. The bank perfected its interest. Molly purchased a new computer from XYZ Electronics to use in her business. XYZ obtained a purchase money security interest on the computer and filed a financing statement. Molly was having problems with cash flow and failed to make payments to XYZ Electronics on the new computer. The electronics store sought to repossess the computer, but the bank opposed that. Molly's business picked up and she was able to completely repay her loan to the bank. She requested that the bank discontinue its security interest, but the bank did not do so as requested by Molly, and still had not done so 45 days after Molly had paid off the loan and requested that the bank terminate its interest. Which of the following is true regarding priority to the computer?

		The bank had priority because the computer was considered after-acquired property properly covered by the initial security interest.
		XYZ Electronics had priority only if XYZ Electronics perfected its security interest within 10 days of the purchase.
		XYZ Electronics had priority only if XYZ Electronics perfected its security interest within 20 days of the purchase.
		The bank had a security interest in the computer because it perfected its security interest before XYZ Electronics did so.

Answer 1

C) XYZ Electronics had priority only if XYZ Electronics perfected its security interest within 20 days of the purchase.

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