Exceptions to first in time principle

Question 1

4 kinds of PMSIs

Answer 1

• “super priority”
• PMSI in consumer goods
• PMSI in equipment
• PMSI in fixtures, and
• PMSI in inventory

Question 2

PMSI in consumer goods

Answer 2

• perfection is automatic

- priority over everyone but BIOCB and consumer to consumer transactions

Question 3

PMSI in equipment and fixtures

Answer 3

-perfection requires a filing within 20 days of either the debtor receiving the goods or the goods becoming fixtures

Question 4

inventory

Answer 4

perfection require that a filing must be made prior to the debtor receiving possession

Question 5

PMSI- perfected

Answer 5

as long as PMSI is perfected, it will generally have priority over all other SI subject to some exceptions

Question 6

PMSI v PMSI

Answer 6

-the first to file or perfect rule applies EXCEPT a seller’s PMSI takes priority over a lender’s PMSI

Question 7

PMSI in fixtures v other interests in real prop

Answer 7

• PMSI in fixtures has priority over a prior interest in the RP with which the fixtures are associated if:
  1) the debtor has an interest of record in the RP (eg owner) or is in possession of the RP (lessee) and
  2) SI is perfected by a fixture filing before the goods become fixtures or within 20 days thereafter

Question 8

construction mortgage

Answer 8

• a construction mortgage (secures the construction of a building, including the cost of acquiring the land, and that indicate it is a construction prop in RP records) has priority over a subsequent PMSI in a fixture if
  1) the construction mortgage is recorded before the goods become fixtures and
  2) only covers goods that become fixtures before the completion of construction

Question 9

PMSI in non-consumer, non-inventory, non-fixutre goods

Answer 9

• priority over- everyone but BIOCB

- perfection: file within 20 days of debtor receiving collateral

Question 10

PMSI in inventory

Answer 10

• perfection: filing prior to debtor receiving possession and sending proper notice to conflicting SI
• priority over: everyone but BIOCB

Question 11

PMSI in fixtures

Answer 11

• perfection: filing a fixture prior to or w/in 20 days of goods becoming fixtures
• priority over: everyone but a construction mortgage

Question 12

purchasers: buyer v. unperfected

Answer 12

• a buyer takes free and clear of any unperfected SI provided:
  1) buyer gives value;
  2) receives delivery of the collateral; and
  3) buys w/o knowledge of pre-existing SI

Question 13

purchasers: buyer v. perfected

Answer 13

-generally a buyer of goods takes subject to a perfected SI unless the SI holder authorizes the sale.

Question 14

exception: buyer v. perfected

Answer 14

BIOCB takes free of a SI created by the buyer’s seller, even if the SI is perfected and the buyer knows of its existence if:

1) buys goods (not farm products)
2) from a merchant who is in the business of selling goods of that kind and
3) in GF and without actual knowledge that the sale violates the rights of another in the same goods

Question 15

consumer buyer v. secured

Answer 15

Garage sale rule- a buyer of CG takes free of a SI even if perfected unless prior to the purchase, the secured party has filed a financing statement covering the goods.

• consumer must:
  1) buy goods for value
  2) for his own personal, family, or household use
  3) from a consumer seller and
  4) without knowledge of the security interest to qualify under this rule
• PMSI with automatic perfection would not be protected under garage sale rule*

Question 16

purchaser v. future advances

Answer 16

• purchaser who does not qualify as a BIOCB may still take free of a SI to the extent that it secures an advance made after the earlier of:
  1) the time the secured party acquires knowledge of the buyer’s purchase or
  2) 45 days after the purchase