Info-Tech Ltd Is a Distributor of Computers

question 69

Multiple Choice

Info-Tech Ltd is a distributor of computers.Info-Tech borrowed $500 000 from the Bank of Montreal in 2008.In its written agreement, Info-Tech agreed pay back the loan over four years.As security for the loan, it gave the bank a security interest in all of its present and future assets.The bank never filed a financing statement to perfect its interest.In September 2009, Info-Tech still owed $400 000 to the bank.It also owed $40 000 to Computer Sales Inc, its primary supplier.Info-Tech defaults on its loan payments and its payments to Computer Sales.Computer Sales sues Info-Tech and gets a judgment for $40 000.It then takes possession of Info-Tech's inventory and starts selling it off.The bank finds out and claims that its security interest prevails over Computer Sales.Which of the following best describes the legal position of the parties?

• A)The bank is entitled to the inventory because its interest attached before the judgement in favour of Computer Sales.
• B)Computer Sales is entitled to the inventory because, as a supplier it has a purchase money security interest.
• C)Computer Sales is entitled to the inventory because, as a judgment creditor in possession of the inventory, it prevails over the bank's unperfected security interest.
• D)The bank is entitled to the inventory because it has a security interest in the inventory and Computer Sales does not.
• E)The bank is entitled to the inventory because it is owed much more than Computer Sales.

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