4. Priority

Question 1

Can parties agree to subordinate priority?

Answer 1

Yes

Question 2

How may Buyer/Lessee take priority over unperfected creditor?

Answer 2

1) No knowledge re security interest
2) Gives value
3) Receives collateral

Question 3

How may PMSI take priority over Buyer/Lessee?

Answer 3

1) PMSI attached before Buyer receives collateral

2) PMSI files within 20 days after Debtor receives collateral

Question 4

How may Buyer/Lessee take priority over perfected creditor?

Answer 4

Perfected creditor consents

Buyer purchases from buyer

1) Consumer goods + PMSI
2) NO knowledge re security interest

Ordinary course of business + NO knowledge re security interest

Question 5

How may Holder in Due Course take priority over secured party?

Answer 5

1) Accepts negotiable instrument
- Promissory note (promise to pay certain amount)

2) In good faith

Question 6

How may Deposit Money Transferee take priority over perfected creditor?

Answer 6

1) Debtor transfers funds to Transferee

2) NO collusion with Debtor to violate security interest

Question 7

How may Possessory Lien Holder take priority over perfected creditor?

Answer 7

1) Ordinary course of business
2) Retained collateral
3) Artisan/Materialman’s lien (for debt not paid)

Question 8

How may Article 2 Claimant take priority over perfected creditor?

Answer 8

1) Buyer/Seller of goods (Article 2)

2) Retained collateral

Question 9

How may PMSI take priority over perfected creditor?

Answer 9

Inventory

1) PMSI perfected at time of Debtor’s possession
2) Creditor receives written notice re PMSI before Debtor’s possession

Consumer Goods/Equipment/Fixtures/Proceeds

• PMSI perfected before Debtor’s possession
• PMSI perfected within 20 days after Debtor’s possession

Question 10

How may PMSI take priority over PMSI?

Answer 10

Seller priority over Lender

First to file/perfect

Question 11

How may Fixture Holder take priority over Whole Holder?

Answer 11

First to file/record

Remove fixture + reimburse Owner (not Debtor) for repairs/physical injury caused

Question 12

How may Whole Holder take priority over Accession Holder?

Answer 12

Notation on certificate of title

Question 13

How may Judgment Lien Holder take priority over perfected creditor?

Answer 13

First to levy judgment before perfection

Question 14

How may unperfected creditor take priority over Judgment Lien Holder?

Answer 14

1) PMSI attachment

2) Within 20 days after Debtor’s possession

Question 15

How may perfected creditor take priority over perfected creditor?

Answer 15

First to;

1) Control
2) File (without attachment)
3) Perfect

Question 16

How may unperfected creditor take priority?

Answer 16

Donee

Buyer not in ordinary course of business

Unsecured creditor

Question 17

When are future advances dated?

Answer 17

Obligated future advances

• Creditor has NO discretion over making advances
• Relates back to perfection date

Optional future advances

• Creditor has discretion over making advances
• Remains on date future advancement was made