Priority

Question 1

Priority

Answer 1

Must be in the same collateral

General rule: time of filing or perfection whichever happens first

Question 2

Priority of a judicial lien creditor

Answer 2

A perfected security interest has priority over a judicial lien creditor

Note: A judicial lien creditor has priority over an unperfected security interest

Question 3

Buyer in the Ordinary Course of Business (BOCB)

Answer 3

A person is a BOCB when:

1. Buys goods by giving new value
2. In the ordinary course
3. From a seller in the business of selling goods of that kind
4. In good faith; and
5. Without knowledge that the sale violates another’s rights in the goods

A BOCB takes free of any security interest

Question 4

Consumer Buyer

Answer 4

A person is a consumer buyer when:

1. Buys consumer goods for value
2. For his own personal, family, or household use
3. From a consumer seller; and
4. Without knowledge of the security interest

A consumer buyer will take free of any security interest in consumer goods unless the secured party filed a financing statement covering the goods

Question 5

Rights of Unperfected Secured Parties

Answer 5

Generally lose to everyone except the debtor

Note: If no one is in front of them, then they will have the same rights as regular secured parties

Question 6

Priorities Among Secured Parties

Answer 6

• Perfected v. Perfected - first to file or first to perfect (whichever first) has priority
• Perfected v. Unperfected - perfected has priority
• Unperfected v. Unperfected - first to attach has priority

Question 7

Super Priority/Queue Jumping of PMSI

Answer 7

Equipment

• PMSI has priority over any other secured interest where the secured party files within 20 days of debtor receives possession or control of collateral

Inventory

• PMSI secured party must be sure he is perfected before the debtor received possession
• Must give notice to all filed secured parties describing new inventory and stating intent to take PMSI

Question 8

Fixtures

Answer 8

Something attached to the property that is perfected by filing with the real estate records where the property is located

A security interest in a fixture is subordinate to a conflicting interest of an encumbrancer or owner of the real property other than the debtor unless the security interest in fixtures is perfected before the real property interest is perfected

Question 9

General Priority Rules for Transferees

Answer 9

Transferee - obtain full title to collateral as a result of a transfer from debtor

Transferee v. SP with security interest - security interest generally continues in collateral unless the SP authorized the transfer free of the security interest

Buyer’s rights v. unperfected SI - Buyer takes free of SI if buyer gave value and receives delivery without knowledge of SI

Buyer v. Perfected SI - Buyer takes subject to the SI

Question 10

Priority of a Construction Mortgage

Answer 10

Has priority over subsequent security interests in fixture if recorded before the goods become fixtures