In this case also, the ownership and the security lie with the company. Therefore, when this is passed to the bank then it becomes a good collateral. A limousine which the President of Massive Dynamics uses to escort potential clients around its facilities. The car may be the personal property of the President. If this is a personal property, it cannot be collateral for the loan. If the car is the property of the company, it can be termed as collateral. In the case of the personal property, the security lies with the President. The loan is taken in the name of the company and therefore, the bank can never claim the collateral.
(Nowka, 2009) Question Two Gloria owned and operated a new and used office furniture business in New York called Gloria’s Depot. She bought her new inventory from manufacturers and her used inventory from the general public. On January 2, 2010 Gloria borrowed USD $25,000 for working capital from Octopus National Bank (ONB) and signed a security agreement giving ONB a security interest in all of her current and after acquired inventory. On January 3, 2010, ONB filed a financing statement in correct form with the proper office which described the collateral as “all the inventory of Gloria’s Depot.
” Sara, a customer, purchased a table for her law office for USD $900 cash from Gloria on January 13, 2010. A month later, Sara closed her office so she could move to Australia. Sara asked Gloria to put the table in Gloria’s store to see if any of Gloria’s customers would be interested in buying it from Sara for USD $1,000. Gloria agreed and Sara placed the table in Gloria’s showroom. Sara agreed to pay Gloria 10% of the sales price if Gloria sells the table. On February 15, 2010 Gloria purchased an oriental rug from Tom on credit for USD $3,000.
Gloria intended to use the rug in her showroom to help display a new line of oak desks. Gloria signed a security agreement giving Tom a security interest in the oriental rug and in all the rest of her office equipment and furnishings, which included an autographed portrait of Davy Crockett. On February 20, 2010, Gloria sold Maude, a customer, an antique roll top desk she had in inventory. On February 22, 2010, Willy had the sheriff levy upon all of the assets of Gloria’s business to satisfy a USD $50,000 judgment he had obtained against Gloria after Gloria did not repay an unsecured loan.
On March 1, 2010, Tom filed a financing statement in the proper office which covered the oriental rug, the office equipment and furnishings, and the portrait of Davy Crockett. Gloria opened a furniture business with the help of a loan from the ONB. She gave the security interest of all the inventory of the business to the bank. In addition to this, the company has taken a rug from Tom and gave him the security interest of the furnishings and the equipments of the store. In this course a customer purchased a table and then gave it back to Gloria to sell it again to a third party.
He demanded a commission of 10% on the sale. The situation throws up various possibilities on the possession of the goods. This can be discussed as follows: The office table: Gloria had entered into a contract with the bank that all the inventories after the contract will be the property of the bank. In this case, the table is a form of inventory of the shop and the security lies with the bank. The oriental rug: The oriental rug is a part of the office furniture. The office furniture is the possession of Tom as per the contract.
It is not the inventory of the business and thus cannot be the property of the bank. In addition to this, the rug has been the property of Tom earlier. The security lies with Tom. The portrait of Davy Crockett: The portrait will be the security of Tom as it is not an inventory. It is a furnishing item and a contract has been made regarding it with Tom. The antique roll top desk: This may be a furnishing item or an inventory. If this is a furnishing item the security lies with Tom while the bank will have the security in the case of an inventory. (UCC: Uniform Commercial Code, n. d. )