Priorities

Question 1

Secured party vs. Secured Party

Answer 1

When there are two parties with security interest in the same collateral, priority goes to the party first to file or first to perfect.

Question 2

When does a PMSI for consumer goods perfect?

Answer 2

Automatically.

Question 3

How does automatic perfection affect the Secured Party vs. Secured party scenario?

Answer 3

A PMSI automatically perfects, and therefore will generally have priority over other secured parties, even if they did not file.

Question 4

How does a PMSI for goods other than consumer goods, inventory, or livestock, perfect?

Answer 4

By filing a financing statement within 20 days of debtor taking possession.

Note: do not confuse taking possession with date of purchase.

Question 5

PMSI Super priority in inventory or livestock?

Answer 5

PMSI in inventory collateral will have priority over a conflicting security interest in the same inventory or proceeds of the inventory that are chattel paper, instruments, or cash IF:

1. It is perfected at the time debtor gets possession (meaning they filed financing statement prior to delivery), AND
2. any secured party who has filed their security interest in the same inventory, receives an authenticated notification of the PMSI prior to delivery and the notfication states that the purchase money party has or expects to take a PMSI.

Question 6

Do consignors have a super priority PMSI?

Answer 6

Yes, if they follow the same steps as inventory.

1. Perfected by filing prior to delivery
2. Notice to other secured creditors prior to delivery + notify that they expect to retain a PMSI.

Question 7

What if there conflicting PMSI’s?

Answer 7

Generally, a seller PMSI will have priority over a lending PMSI.

BUT - you must first identify the type of good, because consumer goods perfect automatically, equipment protects if filing within 20 days, and inventory perfects with filing + notification prior to delivery.

Question 8

Special Priority for Conflicting Security Interest in Investment Property

Answer 8

Perfection by Control has priority over security interest perfected by any other method (filing or automatic).

If there is multiple creditors in control, priority is based on when/time control was take.

Otherwise, first to file or perfect applies.

Question 9

Special Priority for conflicting interests in Deposit Accounts

Answer 9

Perfection by control will take priority over other perfected interests (namely proceeds placed into account). If control is exercised by multiple parties, it will be based on when control is taken, or the following:

Secured Party exercising control by putting account in secured parties name is first.

Bank who has control because they maintain the account, is second.