Priorities Flashcards
What is the general rule regarding priority under Article 9?
First in time, first in right
Who prevails between two perfected security interests?
the first security interest to file or perfect prevails
Regarding priority, what if the collateral is an instrument or chattel paper?
the secured party who perfects by taking possession has priority over the secured party who perfects by filing
When does a perfected PMSI prevail over a conflicting security interest?
If the PMSI is perfected when the debtor receives possession of the collateral or within 20 days thereafter (this gives the holder of the PMSI “second in time, first in right” priority)
When the collateral is inventory, what additional steps must the PMSI secured party take to get priority over the first in time secured party?
(1) PMSI must be perfected at or before the time the debtor receives possession of the inventory AND
(2) notice must be given to the first secured party that the PMSI holder expects to obtain a PMSI in the debtor’s collateral
Who has priority between a PMSI secured party and a lien creditor?
If the PMSI is perfected within 20 days after the debtor gets the collateral, the PMSI takes priority over a lien creditor whose interest arose in the intervening period
What is an accession?
goods that are physically united with other goods in such a manner that the identity of the original goods is not lost
What’s the rule for priority if a security interest in an accession?
a security interest in an accession is second to a security interest in the whole that is perfected
What are commingled goods?
goods that are physically united with other goods in such a manner that their identity is lost
What if there are multiple security interests in commingled goods?
perfected interests will rank equally in proportion to the value of the collateral at the time it became commingled goods
What are the exceptions to the rule that a security interest survives the sale of a collateral?
(1) buyer in the ordinary course of business
(2) sale is a consumer-to-consumer “garage sale”
(3) buyer of chattel paper has priority over a security interest in proceeds of inventory subject to a security interest if BFP in the ordinary course of business
What is a buyer in the ordinary course of business?
(1) buyer purchased in good faith without knowledge that the sale violates the rights of another person;
(2) purchased the good in the ordinary course of business of selling goods of that kind
Regarding fixtures, how can a secured creditor obtain priority over the mortgagee?
by filing a fixture filing before the mortgage is recorded
