Priorities Flashcards
Secured Party vs. Secured Party
where there are conflicting perfected interests in the same collateral, priority goes to whichever was the first to either file or perfect (whatever’s earlier) provided that there is no period thereafter when there is neither filing nor perfection
Priority Between Unperfected Secured Parties
First to attach has priority
Unperfected vs. Perfected
Perfected interest generally prevails
PMSI Superpriority
PMSI enjoys superpriority - they’re superior to prior perfected security interests in the same collateral if certain conditions are met
PMSI in Goods other than Livestock and Inventory
Has priority over other conflicting interests in the same goods or proceeds if the interest is perfected before or within 20 days after the debtor receives possession of the goods
PMSI in livestock and inventory
Priority over conflicting interests if:
1. perfected at the time the debtor gets possession of the inventory (filing must take place before the inventory is delivered to the debtor);
2. any secured party who has filed their interest in the same inventory receives authenticated notification of the PMSI before the debtor receives possession of the inventory and notification says that the PMSI has or expects to take a PMSI in inventory of the debtor described by kind of type. Notification is effective for deliveries of the same type for 5 years.
consigner PMSI in inventory
under article 9, a consignor’s interest in the consigned goods is considered to be a PMSI in inventory. Thus, they can acquire superpriority in consigned goods if they comply with the above requirements.
conflicting PMSIs
if one more party has PMSI superpriority, the following rules apply:
* a secured party with PMSI in colleteral as a seller has priority over a secured party with PMSI in the same collateral as a lender
* otherwise, the first secured party to file or perfect prevails
rules of PMSI
Remember:
1. a PMSI in consumer goods is automatically perfected
2. a PMSI in equipment can be perfected (usually by filing) any time within 20 days after the debtor gets possession of the collateral
3. a PMSI in inventory must be perfected (usually by filing) by the time the debtor gets possession of the collateral - there is no 20 days grace period - and others with a previously filed security interest in the inventory must be given notice.
special priority rules for conflicting security interests in investment property
a security interest perfected by control has priority over a security interest perfected by any other method.
for conflicting security interests perfected by control, they rank according to the time obtaining control.
in all other cases, the first to file or perfect rule governs.
special priority rules for conflicting security interests in deposit accounts
a security interest in a deposit account that is perfected by control has priority over a conflicting security interest perfected by another measure.
if both interests are perfected by control, they rank according to the time of obtaining control, subject to the following exceptions:
1. a secured party who has obtained control by putting the deposit account in the their name has priority over all other secured parties with control; and
2. a bank that has control because it maintains the deposit account has priority over all secured parties with control, other than the party who has obtained control by putting the account in their name.
Note: if a debtor transfers money or deposit account funds to a person, that person takes free of any security interest in the money, unless the transferee acts in collusion with the debtor in violating the rights of the secured party.
Purchasers of Chattel Paper and Instruments
Article 9 contains special rules for purchasers chattel paper and instruments, which includes parties who take a security interest.
if a purchaser of chattel paper in good faith gives new value and takes possession of the chattel paper in the ordinary course of business, the purchaser has priority over:
- a security interest in chattel paper that arises merely as proceeds of inventory, as long as the chattel paper doesn’t indicate that it has been assigned to anhyone other than the purchaser; and
- any other security interest in the chattel paper, as long as the paper purchaser acquired their interest without knolwedge that its purchase violated the rights of the secured party.
