Priorities - Part 2

Question 1

Judicial Lien Creditor

Answer 1

• person who has acquired a lien on the collateral through judicial attachment, levy or the like, or a bankruptcy trustee
• creditor who has own judgment in ct becomes judicial lien creditor at t of levy (seizure of collateral by sheriff)
  -> relevant b/c look to see when sheriff levies on collateral + when security interest is perfected (if at all) to determine who has priority

Question 2

Secured Party vs. Judicial Lien Creditor

Answer 2

• judicial lien creditor prevails over the holder of a security interest in collateral if lien creditor becomes such before the security interest is perfected
  -> on the other hand, prior perfected security interest has priority over judicial lien

Question 3

What happens if interest filed before judicial lien arose?

Answer 3

• secured party has priority if secured party obtained security agreement = filed a financing statement (but didn’t attach + perfect) before judicial lien arose, as long as secured party eventually attaches + perfects

Question 4

Secured Party vs. Judicial Lien Creditor - PMSI Grace Period Exception

Answer 4

• if secured party files financing statement wrt PMSI w/in 20 days after debtor receives the collateral, secured party will have priority over a judicial lien arising between the time the security interest attaches + the time of filing

Question 5

Secured Party vs. Judicial Lien Creditor - Exception Re Future Advances

Answer 5

• for a perfected future advance to gain priority over subsequent judicial lien, future advance must be made:
  1) w/o knowledge of the lien
  2) w/in 45 days of the lien arising OR
  30 pursuant to a commitment entered into w/o knowledge of the lien

Question 6

Secured Party vs. Possessory (Statutory) Lien Holder

Answer 6

• possessory lien imposed by other (non-Code) state law in favor of those who supply goods or services (ex: artisan’s lien or a materialman’s lien) has priority over security interest (even if perfected) as long as the goods or services were provided in the ordinary course of business + the collateral remains in the lien holder’s possession

Question 7

Secured Party vs. Article 2 Claimant

Answer 7

• if Article 2 grants a buyer or seller a possessory security interest in goods (ex: if the buyer rightfully revokes acceptance of goods), the Article 2 claimant has priority over an Article 9 secured party as long as the Article 2 claimant retains possession of the goods

Question 8

Priorities in a Nutshell - Overall List

Answer 8

1) buyer in ordinary course of business, if security interest is created by buyer’s seller
2) holder in due course + like of a negotiable instrument
3) transferee of money or funds from deposit accounts
4) certain purchasers of chattel paper or instruments who have possession or control
5) possessory lienholder
6) Article 2 claimant w/ possession of goods
7) PMSI (except consumer purchaser from a consumer - such as a neighbor buying from a neighbor - has priority over an automatically perfected PMSI in consumer goods)
8) perfected security interests + judicial liens that have attached to the collateral
9) as between perfected security interests in the same collateral, the first to file or perfect has priority
10) as between a perfected security interest + an attached lien, the attached lien generally has priority if it attached before the security interest was perfected (otherwise the security interest has priority)
11) purchaser of collateral who buys for value and receives delivery w/o notice of any unperfected security interest
- unperfected security interests (rank in priority according to order of attachment)
- debtor

• above excludes investment property + nonconsumer deposit accounts