Busisness law Hometown Bank v. Efrem Efrem owns Fans & Players, a retail sportin
ID: 458695 • Letter: B
Question
Busisness law
Hometown Bank v. Efrem
Efrem owns Fans & Players, a retail sporting goods shop. When Great Hill Lodge, a new ski resort, is built in the area, Efrem decided to expand his business and borrowed a large sum from Hometown Bank. The bank took a security interest in Efrem’s present inventory and any after-acquired inventory as collateral for this loan. The bank properly perfected the security interest in the inventory by filing a financing statement. As he anticipated, Efrem’s business was very profitable, and he soon doubled the amount of his original inventory. However, one year later, an avalanche destroyed the ski slope and lodge. With fewer visitors to the area, Efrem’s business suffered a severe downturn, and eventually he defaulted on his debt to the bank. Hometown Bank then sought possession of his store’s entire inventory - even though the inventory today is twice as large as it was when the loan was made. Efrem disputes the bank’s right to all of his inventory, and claims that the bank has rights to only half of his inventory. Is Efrem correct? Why or why not? Discuss and explain your answer in detail.
Efrem owns Fans & Players, a retail sporting goods shop. When Great Hill Lodge, a new ski resort, is built in the area, Efrem decided to expand his business and borrowed a large sum from Hometown Bank. The bank took a security interest in Efrem’s present inventory and any after-acquired inventory as collateral for this loan. The bank properly perfected the security interest in the inventory by filing a financing statement. As he anticipated, Efrem’s business was very profitable, and he soon doubled the amount of his original inventory. However, one year later, an avalanche destroyed the ski slope and lodge. With fewer visitors to the area, Efrem’s business suffered a severe downturn, and eventually he defaulted on his debt to the bank. Hometown Bank then sought possession of his store’s entire inventory - even though the inventory today is twice as large as it was when the loan was made. Efrem disputes the bank’s right to all of his inventory, and claims that the bank has rights to only half of his inventory. Is Efrem correct? Why or why not? Discuss and explain your answer in detail.
Explanation / Answer
Efrem is not correct and the Bank’s rights will prevail. As stated in the problem, the bank took a security interest in Efrem’s present inventory and any after-acquired inventory as collateral for this loan. The bank properly perfected the security interest in the inventory by filing a financing statement. So the bank is holding a properly perfected security interest in Efrem’s inventory, irrespective of whether is it twice as large now. So bank has the rights to seek possession of his entire inventory.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.