Priorities

Question 1

Perfected Security Interest v. Perfected Security Interest

Answer 1

First in time to file or perfect takes priority

Question 2

Perfected Security Interest v. Unperfected Security Interest

Answer 2

Perfected Security Interest Takes Priority

Question 3

Unperfected Security Interest v. Unperfected Security Interest

Answer 3

1st to attach or become effective

Question 4

Perfected Security Interest v. Lien Creditor

Answer 4

Perfected security interest takes priority over a lien creditor

Question 5

Unperfected security interest v. lien creditor

Answer 5

• Lien creditor takes priority unless the security interest would be perfected but for the lack of transfer of value.

Question 6

Statutory Lien Holder v. Perfected Security Interest

Answer 6

Statutory Lien Holder as long as:

1) The effectiveness of the lien depends on the lien holders possession of the goods
2) the lien secures payment or performance of an obligation for services or materials in the ordinary course or business (ie mechanics lien)

Question 7

Future Advance v. Future Advance

Answer 7

The 1st to file, even if they have knowledge of the other lien

Question 8

Future Advance v. Lien Creditor

Answer 8

• if the secured party’s future advance is made w/in 45 days of the lien arising, the secured party has priority
• advances made more than 45 days from the lien arising are subordinate to the lien creditor unless (i) the lien is made w/o knowledge of the lien or (ii) the advance is made pursuant to a commitment entered into w/o knowledge of the lien.

Question 9

Buyer of Collateral v. Previously existing perfected security interest

Answer 9

• buyer takes subject to the security interest unless the secured party authorizes the sale

Question 10

What are the exceptions to the rule of Buyer of Collateral v. Previously Perfected Security Interest

Answer 10

1) Buyer in the ordinary course of business. Buyer isn’t a purchaser in the ordinary course of business if they know that the item is subject to the rights of others.
2) Garage sale exception. consumer-consumer sale. Unless the secured party filed a financing statement covering the goods before the purchase occurred.

Question 11

Buyer of Collateral v. Unperfected Security Interest

Answer 11

Buyer of Collateral takes subject to the security interest unless:

1) secured party authorizes
2) no knowledge

Question 12

Buyer of Collateral v. Future Advances

Answer 12

Buyer takes free of future advance if the secured party had knowledge of the purchase when it made the future advance
- if the future advance is made more than 45 days since the purchase.

Question 13

What is the general rule for PMSIs?

Answer 13

PMSIs are automatically perfected in consumer goods so long as the goods aren’t subject to a certificate of title law.

Question 14

PMSI v. Lien Creditor

Answer 14

PMSI takes priority + has 20 day grace period starting when the debtor receives possession of the collateral to perfect.

Question 15

PMSI for Goods other than inventory v. Regular Security Interest

Answer 15

A PMSI takes priority if its perfected w/in 20 days of debtor receiving the goods

Question 16

PMSI in Inventory v. Regular Security Interest

Answer 16

PMSI in inventory will have priority if perfected before inventory is delivered to debtor and sent an authenticated notification of the PMSI to the other parties

Question 17

Seller PMSI v. Lender PMSI

Answer 17

Seller PMSI wins.

Question 18

Fixture Secured Party v. Interest in Real Property

Answer 18

• if fixture filing occurred b4 real property recorded then fixture filing

Question 19

PMSI in Fixtures v. Real Property Interest

Answer 19

PMSI has priority if:
(i) security interest is perfected by a fixture filing before the goods become fixtures or w/in 20 days after the goods became fixtures. except if there is a construction mortgage in which case it has priority over a PMSI

Question 20

Buyer in the Ordinary Course of Business Elements

Answer 20

1) Buys goods
2) In the ordinary course of business
3) from a merchant who is in the business of selling goods of that kind
4) In good faith
5) without knowledge that the sale violates the rights of another.