Business Law – Secured Transaction William purchases on credit an expensive stereo system from Ace Stereo. Ace Stereo executes a security agreement (where the stereo is vaguely described) and a purchase money security interest (again where the stereo is vaguely described) and files the PMSI in their (Aces) files. William is laid off from his job and decides to sell the stereo to his friend Andy. Andy pays for the stereo by check. The check is returned to William for insufficient funds. William and his friends go over to Andys house to retrieve the stereo.
Andy is not home, but his girlfriend is home and refuses to allow William admittance to the home to retrieve the stereo. William forces himself into the home and Andys girlfriend is injured. The major issues while discussing attachment are value given, debtor having rights in the collateral, and authenticated security documents. What concerns attachment and perfection of security interests in this situation, Ace Stereo has a security interest in Williams stereo system. William sells his stereo system without Ace Stereos consent. Ace Stereo has a security interest in the stereo system and in the money received by William from the sale of the stereo system.
In other words, a security interest continues in the collateral as far as the secured party wasn’t expressly or impliedly authorized the dealing, and extends to proceeds. In case two creditors have disagreements and are battling over “who wins” and in case they are both attached and perfected, it is important to look who was first to file and perfect. However, what concerns the perfection and priority between Ace Stereo and William, Ace Stereo has a priority, as the party who gets the stuff when a debtor defaults on his payments. William should also be liable for the injury he had done to Andys girlfriend, because he had no right to retrieve the stereo system from Andys girlfriend, while Andy was not at home. William may also be liable for forcing into Andy’s home during his absence..
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