INTRODUCTION TO PRIORITY AND THE BASIC RULES OF PRIORITY & SPECIAL PRIORITY FOR THE PMSI Flashcards
Priority – Three rules
Introduction to Priority and the Basic Rules of Priority & Special Priority for the PMSI
(1) Conflicting perfected security interests rank according to priority in time of filing or perfection. Priority dates from the earlier of the time a filing covering the collateral is first made or the security interest is first perfected, if there is no period thereafter when there is neither filing nor perfection;
(2) A perfected security interest has priority over a conflicting unperfected security interest;
(3) The first security interest or agricultural lien to attach or become effective has priority if conflicting security interests and agricultural liens are unperfected
Lien Creditor Definition
Introduction to Priority and the Basic Rules of Priority & Special Priority for the PMSI
“Lien creditor” means: (A) a creditor that has acquired a lien on the property involved by attachment, levy, or the like; (B) an assignee for benefit of creditors from the time of assignment; (C) a trustee in bankruptcy from the date of the filing of the petition; or (D) a receiver in equity from the time of appointment.
When a lien creditor has priority
Introduction to Priority and the Basic Rules of Priority & Special Priority for the PMSI
A lien creditor has priority when that person becomes a lien creditor before the earlier of the time: (A) the security interest or agricultural lien is perfected; or (B) one of the following conditions is met (with a financing statement covering the collateral is filed):
The debtor has authenticated a security agreement
The collateral is not a certificated security and is in the possession of the secured party pursuant to the debtor’s security agreement
The collateral is a certificated security in registered form and the security certificate has been delivered to the secured party pursuant to the debtor’s security agreement; or
The collateral is deposit accounts, electronic chattel paper, investment property, or letter-of-credit rights, and the secured party has control pursuant to the debtor’s security agreement
Special rules for PMSI perfection
Introduction to Priority and the Basic Rules of Priority & Special Priority for the PMSI
Except as otherwise provided in subsection (g), a perfected purchase-money security interest in goods other than inventory or livestock has priority over a conflicting security interest in the same goods, and, except as otherwise provided in §9-327, a perfected security interest in its identifiable proceeds also has priority, if the purchase-money security interest is perfected when the debtor receives possession of the collateral or within 20 days thereafter.
Filing statement with PMSI perfection
Introduction to Priority and the Basic Rules of Priority & Special Priority for the PMSI
if a person files a financing statement with respect to a purchase-money security interest before or within 20 days after the debtor receives delivery of the collateral, the security interest takes priority over the rights of a buyer, lessee, or lien creditor which arise between the time the security interest attaches and the time of filing
Factors for when a PMSI in inventory has priority
Introduction to Priority and the Basic Rules of Priority & Special Priority for the PMSI
A perfected purchase-money security interest in inventory has priority over a conflicting security interest in the same inventory if:
The purchase-money security interest is perfected when the debtor receives possession of the inventory;
The purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;
The holder of the conflicting security interest receives the notification within five years before the debtor receives possession of the inventory; and
The notification states that the person sending the notification has or expects to acquire a purchase-money security interest in inventory of the debtor and describes the inventory
