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A Question of Ethics-The IDDR Approach and Priorities. Roger Rand loaned funds to Frank Welte to buy farm equipment. Security agreements were executed for the loans, and under these agreements, Welte could not transfer the equipment without Rand's consent. Rand perfected his security interest in the collateral by filing a financing statement with the office of the Iowa secretary of state. Welte later sold two tractors bought with the funds to his son Matthew for about 2020 percent of the tractors' market value. Rand died several years later. On behalf of his estate, the Security National Bank of Sioux City, Iowa, filed a petition in an Iowa state court to obtain possession of the equipment that secured the loan to Welte. Regarding the tractors in Matthew's possession, Welte argued that his son had acquired them free of Rand's interest under an implied course of dealing with the lender that allowed Welte to sell equipment in which Rand had a security interest without Rand's permission.

(a) Use the IDDR approach to evaluate the ethics behind Welte's argument that his "course of dealing" with Rand allowed him to sell collateral for much less than its market value.

(b) Suppose that First State Bank had loaned Matthew the funds to buy the tractors in exchange for a purchasemoney security interest. Could Welte successfully assert that this interest was superior to any interest Rand might have in the tractors? Explain.


Answered 1 year ago
Answered 1 year ago
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In this exercise, we are asked to determine the following:

  • To evaluate the ethical act of Welte's using the IDDR approach; and

  • To know whether Welte can successfully assert his interest is superior to that of Rand.

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