Ch 11-14 Priority

Question 1

List of potential claimants to the collateral

Answer 1

• secured creditors
• unsecured creditors
• lien creditors
• purchases of Chattel Paper, Promissory Note, Accounts, Payment Intangibles
• buyers or transferees of other collateral

Question 2

Perfected SI v. Perfected SI
(NO PMSI)

Answer 2

first in time to file OR perfect takes priority

Question 3

Perfected SI v. Unperfected SI

Answer 3

perfected SI > an unperfected SI

Question 4

Unperfected SI v. Unperfected SI

Answer 4

First to attach

Question 5

Perfected SI v. Judicial Lien Creditors

Answer 5

Perfected SI > Lien Creditor

Question 6

Unperfected SI v. Judicial Lien Credits

Answer 6

Lien Creditor > Unperfected SI

*Exception: a “filed but unattached” SI > Lien creditor
- if no attachment b/c no value, even though there’s SA and Rights

Question 7

SI v. Statutory Lien

Answer 7

Statutory Lien > SI IF:

The lien secures payment for goods or services furnished in the ordinary course of the person’s business (i.e. a mechanic’s lien, when a mechanic is working on a car)

Question 8

Secured Party v. Secured Party
(over future advances)

Answer 8

first party to file OR perfect wins
(regardless of having knowledge of the competing SI)

Question 9

Secured Party v. Lien Creditor
(over future advances)

Answer 9

If SP’s advance is made within 45 days of the lien creditor’s lien arising -> SP > LC

If advance made more than 45 days after the person becomes a lien creditor-> still, SP>LC
AS LONG AS:
advance made w/o knowledge of the lien

Question 10

If dispute b/t SP and a buyer.. ask this question:

Answer 10

did the buyer take the collateral “free of” SI or “subject to” a perfected SI?

Question 11

Buyer v. Perfected SI
( any exceptions?)

Answer 11

generally, buyer takes “subject to” a perfected SI unless SP says sale is “free and clear”

***Exception

1) BIOCB (Buyer In the Ordinary Course of Business)
-> buyer takes “free of” a SI if:

1. buyer buys goods from a merchant
2. in the ordinary course of the merchant’s business
3. buyer acts in good faith and w/o knowledge that the sale violates the rights of other secured parties in the same goods
4. the seller engaged in the business of selling goods of this kind, and seller is not a pawnbroker

2) The “Garage Sale Exception” (consumer to consumer exception)
A buyer will take “free of” SI if:
- the buyer buys consumer goods for value
- for their own personal, family, or household use
- from a consumer seller
- without knowledge of the SI
- unless the SP has filed a financing statement covering the goods before the purchase occurred

Question 12

Buyer v. Unperfected SI

Answer 12

generally, buyer takes “subject to” a perfected SI unless SP says sale is “free and clear”

*Exception: buyer will take “free of” SI if buyer:
- gives value, receives delivery of the collateral, w/o knowledge of the preexisting interest

*BIOCB, consumer-consumer exception applies as well

Question 13

buyer & future advances

Answer 13

if buyer takes “subject to” and SP makes a future advance to the debtor/seller after the sale:

buyer will take “free of” that future advance if:
- SP had knowledge of the B’s purchase when it made the advance
OR
- the future advance is made 45 days or more after the purchase

Question 14

Purchasers of chattel paper and instruments v. other SP

Answer 14

whoever takes possession w/o knowledge of other competing SI wins

Question 15

PMSI v. judicial Lien Creditor

Answer 15

PMSI wins if PMSI is perfected within 20 days of the debtor receiving the collateral

Question 16

PMSI (for goods other than inventory) v. Security Interest

Answer 16

PMSI for goods other than inventory > all other SI if:
- SP perfects within 20 days of the debtor receiving the goods.

(PMSI in consumer goods is auto perfected, so will always meet this req.)

If PMSI fails to perfect w/I 20 days, apply sp. v. sp

Question 17

PMSI in Proceeds

Answer 17

PMSI’s priority will extend to the proceeds of the collateral

Question 18

PMSI v. PMSI

Answer 18

seller PMSI > lender PMSI

Question 19

Fixtures v. Real Property Interest

Answer 19

SI in Fixtures > RP if: “fixture filing BEFORE real property is recorded

“fixture filing”: filing financing statement in the local RP records

Question 20

PMSI in fixtures v. real property interest

Answer 20

SI in fixture > RP interest (where fixture is associated) if:
- SI in fixtures is perfected by fixture filing before the real property interest is recorded

Question 21

SI in future advances v. judicial lien creditor

Answer 21

if advance is made more than 45 days after the person becomes a lien creditor…
lien creditor > SI in future advances

Question 22

statutory lien creditor v. any SI

Answer 22

possessory (statutory) lien > any SI if the lien secures payment for goods or services furnished in the ordinary course of business, unless a statute provides different priority rule

Question 23

Transferee v. secured party w/ a SI

Answer 23

SI continues unless SP authorized transfer free of SI

Question 24

does Buyer of negotiable instrument or document take “subject to “ or “free of” SI?

Answer 24

B takes “free of” SI

Question 25

Buyer NOT in the OCOB
(future advances)
Takes free of if:
Takes subject to if:

Answer 25

generally, takes “free of” any SI that:

secures an advance made after the earlier of (1) the time the secured party acquires knowledge of purchase of (2) 45 days after the purchase

take “subject to” the SI if:
- the advance is made pursuant to a commitment entered into wi/o knowledge of the buyer’s purchases and before the expiration of the 45 day period

Question 26

Transferee of money or funds takes “subject to” or “free of” Any exceptions?

Answer 26

takes “free of” an SI in money or funds

UNLESS: they act in collusion w/ the debtor to violate the rights of the SP

Question 27

Article 2 SI v. Article 9 SI

Answer 27

2 > 9

Question 28

buyer w/ no knowledge of prior SI that’s NOT noted on the title

Answer 28

takes “free of” SI

Question 29

PMSI v. non PMSI

Answer 29

PMSI > non-PMSI

Question 30

PMSI in inventory or livestock v. any SI

Answer 30

PMSI in inventory or livestock > any SI if:
- perfected before inventory is delivered to the debtor, and the PMSI party sends an authenticated notice of the PMSI to the other SPs

Question 31

perfected PMSI v. perfected PMSI

Answer 31

first to file or prefect wins
*Except: seller PMSI > buyer PMSI

Question 32

Perfected SI in fixtures v. subsequent judicial lien

Answer 32

perfected SI wins

Question 33

PMSI in fixtures v. prior RP interest

Answer 33

PMIS in fixtures > if:
- if debtor has interest in the record in the RP, OR in possession of RP; AND
- perfected by a fixture filing before the goods become fixtures or within 20 days thereafter

Question 34

SI in fixtures v. prior construction mortgage

Answer 34

prior construction mortgage > SI in fixtures if:
- recorded before the goods become fixtures

Question 35

SI in fixture v. Interest in RP

Answer 35

SI in fixture > Interest in RP, if:
- SP files fixture filing before the the RP interest is recorded