Question

Your client, Winston, sold a large number of freezers to Rita on credit. This occurred on May 1, 2017. Winston had purchased these freezers from Manny on March 1, 2017. Manny had purchased the components from Supplier on November 1, 2016. Assume that each transaction is a credit sale and that every creditor timely filed a UCC-1 such that they are secured parties.

B. Now assume that Cindy bought a freezer for her house from Rita on May 15, 2018. Rita filed the UCC-1 on July 1, 2018. Cindy sold that freezer to her friend, Cool Girl, on January 5, 2019. Cool Girl was paying Rita for the debt in Cindy's name until Cool Girl lost her job on March 1, 2019. Cool Girl has not made a payment since but he has not told Cindy about this either. What are Rita's rights as to this freezer? Would that change if Rita did not file a UCC-1? Why or why not?

C. Assume that Supplier never filed when it sold to Manny. Manny files for Chapter 7 bankruptcy on January 5, 2018 and Manny had not paid Supplier at that time. What are Supplier's rights and remedies? What is the likely result for Supplier in this Chapter 7 bankruptcy since Supplier never filed?

Answer 1

(b) Since Rita is filing UCC -1 therefore she is secured creditor and has all the rights to recover its amount from the debtor. In the given case cool girl is making payment on behalf of cindy's therefore on ineligibilty of making payment Pita can recover the same from Cindy because she has made sale to him therefore cindy is legally bounded to make payment to Rita if cool girl fails but this is possible only when rita has filed UCC -1.

But in case Rita does not file UCC-1 then she will have to bear rhe loss of payment if cool girl fails to make payment and she can't recover the same from Cindt because there is no legal boundation on cindy to make payment when cool girls fails.

(c) Since supplier does not filed the UCC-1 therefore if the debtor become bankrupt and he has not received payment from mannny he will not be able to recover the same as he is not secured for his losses. He will receive payment like other creditors and in same order as given in bankruptcy act.