Priorities

Question 1

The general rule regarding priority

Answer 1

first in time, first in right

Question 2

If there are two unperfected security interests, who has priority?

Answer 2

First to attach

Question 3

If one party is perfected and the other is unperfected, who has priority?

Answer 3

Perfected party

Question 4

If both parties are perfected security interests, who has priority?
(2)

Answer 4

The first to

1. file; or,
2. perfect

Question 5

A perfected Purchase Money Security Interest will prevail over a conflicting security interest if
(2)

Answer 5

Super-priority if

1. PMSI is perfected when receives collateral; or,
2. Perfected 20 days after receiving collateral

Question 6

when the collateral is inventory, the purchase-money secured party has to do what to receive priority
(2)

Answer 6

1. Must notify earlier party that has a security interest in inventory that they intend to take PMSI in the batch of inventory they are financing; and,
2. Must be perfected at time the debtor receives possession of the inventory

Question 7

Production money security interest has priority if

Answer 7

Loan to produce a crop gets super priority if

1. lender must file at time of giving the loan or before;
2. notice must be sent to others that also have security interest in crops (10-30days in advance of loan)

Question 8

Who wins in lien creditor v. secured party?

Answer 8

First in time, first in right

Question 9

What is a possessory lien?

Answer 9

Someone gets the right to hold onto your property until they get paid

Question 10

Who wins in possessory lien v. secured party?

Answer 10

Possessory lien

Question 11

Who is a lien creditor?

Answer 11

Visa, Mastercard, or any unsecured creditor that follows the procedures to get a judgement against property of debtor

Question 12

Who wins in PMSI v. lien creditor

Answer 12

If PMSI files at time debtor takes possession or within 20 days, they get priority over earlier lien creditors

Question 13

Buyers of collateral versus Secured Parties

Answer 13

Secured party unless

• buyer is a buyer in the ordinary course of business
• consumer to consumer transactions

Question 14

The buyer in the ordinary course of business rule is

Answer 14

1. a person who buys good in good faith;
2. without knowledge that it violates the rights of others
3. buys form a person who normally sells that good

Question 15

Consumer-to-consumer or “garage sale” exception is

4

Answer 15

This exception applies when

1. a person buys goods for personal, family, or household use
2. from someone who used the goods for that purpose,
3. without knowledge of the security interest, and
4. before a financing statement is filed.

Question 16

For fixtures, the only way that the secured creditor can obtain priority over the mortgagee is by

Answer 16

(1) filing a fixture filing in the real estate county deed records –> then first in time first and right
(2) if the security interest in the fixture is a PMSI, then if filed in the real estate records at time it is attached or within 20 days, have priority over anything
- Construction mortgage supersedes everything