This is a three-hour examination. It consists of three questions. The first question will count for twenty percent of the final grade; the other two questions will each count forty percent of the final grade. Allocate your time accordingly.

This is an open book examination. During the examination you may consult any written materials except materials checked out of the law library.

Assume that the 1995 official text of the Uniform Commercial Code is in force in all relevant jurisdictions unless you are otherwise expressly directed. Where the text sets out alternate provisions (e.g., Sec. 9-401(1)), assume that the second alternative is in force.

Read each question carefully. Organize your answer before you begin to write and emphasize those points you think are most significant. If you find an ambiguity or if you need more facts, make reasonable assumptions and state these clearly in your answer. Be concise. Be clear. Good luck!

You are an attorney for a farm equipment dealer in Amarillo, Texas. Your client asks you for advice on the following four cases. You may assume in each of the following cases that your client, acting on your advice, has had his customers sign a written security agreement with an accurate description of the collateral. Advise your client.

(A) Your client has sold a small "lawn tractor" to a local businessman, who plans to use the tractor to mow the one-half-acre lawn around his house. The businessman granted your client a security interest in the tractor to secure payment of the $3,000 purchase price. What, if anything, must your client do to have maximum possible protection against claims of third parties to the tractor?

(B) Your client has sold a square baler to a resident of Oklahoma. During harvesting seasons, the buyer plans to travel with the baler to harvest crops in Colorado, Oklahoma, and Texas. Approximately sixty percent (60%) of this work will take place in Colorado. To secure payment of the purchase price, the buyer granted your client a security interest in the baler. What, if anything, must your client do to have maximum possible protection against claims of third parties to the baler?

(C) Your client has leased a tractor to a local rancher. The rancher has no option to terminate the lease during the term of the lease, no option to renew the lease, and no option to purchase the tractor at any time. The lease is for three years. The tractor has a projected useful life of six years. What, if anything, must your client do to have maximum possible protection against claims of third parties to the tractor?

(D) Your client has sold a cotton ginning machine to a local cotton farmer. As part of the sales contract, your client has agreed to install the machine on a cement "footer" (i.e., a foundation) in the buyer's ginning shed. To secure payment of the purchase price, the buyer granted your client a security interest in the ginning machine. What, if anything, must your client do to have maximum possible protection against claims of third parties to the ginning machine?

For many years National Bank has provided financing for Huge Manufacturing Company ("HMC"). Although credit terms were very favorable, National Bank insisted on having HMC sign a written security agreement granting the bank a security interest in "all personal property, including goods, inventory, equipment, fixtures, accounts, chattel paper, documents, instruments, and general intangibles, whether now owned or hereafter acquired." HMC also executed a financing statement providing the names and addresses of the parties as well as describing the collateral in the same language used in the security agreement. National Bank filed the financing statement with the Secretary of State and has filed appropriate continuation statements at the proper time.

In 1995 HMC obtained a loan of $120,000,000 from State Bank to build a new factory. To secure repayment of the loan, HMC executed a real estate mortgage granting State Bank a mortgage in the land, factory building, and all appurtenances and fixtures then owned and subsequently acquired. The parties recorded the mortgage in the proper local real estate filing office but made no effort to file a financing statement in the personal property files or to make a fixture filing. State Bank did not notify National Bank about this financing arrangement or the recording of the mortgage. Construction of the factory was completed in 1996.

In 1997 HMC purchased on credit a hydraulic press from American Business Corporation ("ABC") to be placed in the new factory. To secure the $10,000,000 purchase price, HMC signed a promissory note payable to ABC for this amount and a written security agreement granting a security interest in the press to ABC. HMC also signed a financing statement setting out the names and addresses of the parties and describing the collateral as "HMC hydraulic press." ABC is an out-of-state manufacturer and it delivered the press to HMC's factory from out of state. ABC filed the financing statement with the Secretary of State in HMC's state on the same day that HMC executed these documents. ABC did not file a financing statement with any office in the state where ABC is located.

Also on the same day that these documents were executed, ABC assigned the note and security agreement to Finance Company, a wholly-owned subsidiary that handled the financing of ABC credit sales. ABC promptly delivered the paperwork to Finance Company and that company credited ABC with the face amount of the promissory note minus the agreed discount. Finance Company did not file a financing statement or amend the financing statement filed by ABC.

ABC delivered the press to the HMC factory two months after all the documents were assigned.

In 1998 HMC filed a petition to open a Chapter 7 proceeding under the Bankruptcy Code. The trustee in bankruptcy in this proceeding asks you to evaluate the status of the claims of the different parties to the hydraulic press. Advise the trustee.

In 1994 Steady State Bank lent Samuel Clemens, doing business as "Apex Printing," a $10,000 working capital loan and made a commitment to make future advances over the following five years up to a maximum of $100,000. To secure the obligation to repay the loan and advances, Mr. Clemens signed a written security agreement granting the Bank a security interest in its "All equipment, inventory, accounts, instruments, chattel paper, general intangibles, and fixtures in which debtor has rights at present or in the future and which are used or acquired in connection with the printing and stationery business he operates together with all additions, accessions and substitutions." At the same time Mr. Clemens signed a financing statement setting out the names and addresses of the parties and describing the collateral in the same language found in the security agreement. On the next day the Bank filed the financing statement with the Secretary of State.

In 1995 Mr. Clemens agreed with Dallas Finance Company that he would sell to the finance company all the accounts and chattel paper generated by the "Apex Printing" business. At Finance Company's request, Mr. Clemens signed a written security agreement granting Finance Company a security interest in its "All present and future accounts receivable and chattel paper." At the same time Mr. Clemens signed a financing statement setting out the names and addresses of the parties and describing the collateral in the same language found in the security agreement. On the next day Finance Company filed the financing statement with the Secretary of State and mailed a notice to Steady State Bank informing the bank of Finance Company's financing agreement with Mr. Clemens. Steady State Bank did not reply.

In 1996 Mr. Clemens expanded the operations of "Apex Printing" to include the sale of computer equipment. To carry out this expansion, Mr. Clemens agreed with American Business Machines to purchase on credit a line of ink-jet and laser printers for resale. ABM agreed to supply over the following three years as many of these printers as Mr. Clemens would order. To secure its obligation to pay ABM the purchase price of these printers, Mr. Clemens signed a written security agreement granting ABM a security interest in "ink-jet and laser printers to be purchased from ABM for inventory." At the same time Mr. Clemens signed a financing statement setting out the names and addresses of the parties and describing the collateral in the same language found in the security agreement. On the next day ABM filed the financing statement with the Secretary of State and mailed a notice to Steady State Bank informing the bank that ABM expected to supply on secured credit ink-jet and laser printers to Mr. Clemens for the next three years. Steady State Bank did not reply.

In 1997 Mr. Clemens sold a laser printer on credit to Louise Le Tour, a novelist. At the time of the purchase Ms Le Tour, to the knowledge of Mr. Clemens, had a contract with a publisher for the sale of the novel the novelist was working on at that time. To secure the purchase price of the laser printer, Ms Le Tour signed a written conditional sales contract granting Mr. Clemens a security interest in the printer. Ms Le Tour did not sign a financing statement and Mr. Clemens made no effort to file a financing statement. As was the practice Mr. Clemens had developed with Dallas Finance Company, Mr. Clemens delivered the contract documents to Finance Company at the end of the month and Finance Company paid Mr. Clemens ninety percent (90%) of the face amount of the payments Ms Le Tour was to make under the contract.

In 1998 Ms Le Tour failed to meet the deadline to turn in her manuscript. When she refused to return the advance given to her by her publisher, the publisher sued her for the amount of the advance. The publisher recovered a default judgment against Ms Le Tour. On learning of the judgment, Mr. Clemens repossessed the printer. At the time he repossessed the printer, he and Ms Le Tour agreed orally that he would try to sell the used printer as part of his inventory. He was unable to sell the repossessed printer for six weeks and on April 14, he notified Ms Le Tour he was going to donate the printer to the S.M.U. School of Law so that he and Ms Le Tour could take the appropriate tax deduction from their respective federal income tax returns. Mr. Clemens promptly delivered the printer to the law school, where the sheriff executing the publisher's judgment against Ms Le Tour seized it.

During a routine review of Mr. Clemens' file, the bank officer at Steady State Bank has learned of the repossessed printer. She asks you to advise the bank on whether the bank continued to have a security interest in the printer and, if so, its relative priority to the printer on the assumption that Finance Company and ABM also have claims to the printer. Advise the bank.