Priority

Question 1

General Priority Rule

Answer 1

Conflicting perfected security interests rank according to priority in time of filing or perfection (always check to see who filed first

Question 2

Perfected Security interest v. unperfected security interest

Answer 2

Perfected security interest has priority

Question 3

Unperfected v. unperfected

Answer 3

first to attach has priority

Question 4

P Security Party v. Lien Creditor

Answer 4

First in time has priority

Question 5

UP Secured Party v. Lien Creditor

Answer 5

Lien Creditor has priority

Question 6

Special Priority Rules for PMSI

Answer 6

See notes

Question 7

Priority of invetment property

Answer 7

Investment property may be perfected by filing, but a secured party who perfects by control has priority

Question 8

Priority of Deposit Accounts

Answer 8

(1) Secured party with control has priority over secured party without control
(2) Bank with which the account is maintained has priority over conflicting security interest

Question 9

Fixture Def

Answer 9

Goods that have become so related to particular real property that an interest in them arises under real property law.

Question 10

How to determine fixture status

Answer 10

(1) degree of annexation to realty
(2) appropriate the use or purpose of the realty to which it is connected
(3) intention of th eparty making annexation (generally given the most weight

Question 11

What law governs fixtures

Answer 11

the law where the fixture is located

Question 12

Perfection of Fixtures

Answer 12

The fixture filing must contain name of the debtor, secured party, and a description of the collateral, as well as, indication thatit covers fixtures, a statement that it will also be filed int he real property records, description fo the real property, and name of the record property owner.
-File at the office where there is a recording of the mortgage on the real property

Question 13

Exception to Fixtures

Answer 13

A security interrest does not exist for ordinary building materials incorporated into an improvement.

Question 14

Special Priority Rule for Goods other than inventory or livestock

Answer 14

Perfected PMSI has priority if perfected when the debtor receives possession of collateral or within 20 days

Question 15

Special Priority Rule for inventory

Answer 15

Perfected PMSI has priority if perfected when the debtor receives possession of collateral, the purhcase money sends an authenticated notification to the holder of the conflicting security interest, the holder of conflicting security interest receives notification within 5 years (notice good for 5 years) before the debtor receives possession of the inventory, and the notice adequately describes the inventory.

Question 16

Special Priority Rule for Livestock

Answer 16

Perfected PMSI has priority if perfected when the debtor receives possession of collateral, the purhcase money sends an authenticated notification to the holder of the conflicting security interest, the holder of conflicting security interest receives notification within 6 months (notice good for 6 months) before the debtor receives possession of the inventory, and the notice adequately describes the inventory.

Question 17

Claims arising under Art 2

Answer 17

Upon rightful rejection of acceptance, a buyer has a security interest in goods in his possession and may resell them *only for amount paid + specific expenses)
-no need for attachment, but buyer must have possession or control

Question 18

Seller’s right to reclamation

Answer 18

A seller may reclaim goods received by a buyer when insolvent if demand is made within 10 days after the buyer’s receipt of goods; if there is a written misrepresentation of solvency within 3 months before delivery, then 10-day limitation doesnt apply

Question 19

Good Faith Purchaser for Value Elements (seller does not have to be a merchant)

Answer 19

A buyer, ohter than the secured party, of tangible chattel paper, documents, goods, instruments, or certificated securities, takes free of a security interest if the buyer:
(1) gives value
(2) receives delivery
-Buyer obtains title/ownership (physical possession is sufficient)
(3) without knowledge of the security interest
-without ACTUAL knowledge
(4) before it was perfected (watch for on exam)

Question 20

Buyer in the Ordinary Course of Business

Answer 20

A BIOCB, other than the person buying farm products from a person engaged in farming operations, takes free of the security interest created by the buyer’s seller, even if a security interest is perfected and the buyer knows of its existence.

Question 21

BIOCB Elements

Answer 21

(1) Seller Merchant
-someone in the business of selling goods of that kind
(2) created by the buyers seller
(3) buyer must take possession
-constructive likely enough
(4) Good faith
-no fraud or deceit
(5) without knowledge violates the rights of another
-buyer does not know the sale violated the SP’s rights

Question 22

Proceeds Rule

Answer 22

A security interest also attaches to the proceeds from the disposition of the collateral
-cash and exchanged items…..collateral and proceeds from its disposition in the hands of a third party

Question 23

Proceeds Priority

Answer 23

To have priority, a SP must also trace the proceeds

Question 24

Tracing requirement

Answer 24

The SP has the burden to establish that something is a proceed of collateral by tracing

Question 25

Methods of Tracing

Answer 25

(1) Pro Rata
(2) Intermediate Balance Rule

Question 26

Pro Rata Tracing

Answer 26

-need accounting records that show when the SP delivered, when it was delivered, and who else delivered what then…then determine SP percentage

Question 27

Intermediate Balance Tracing

Answer 27

The rule is implicated where proceeds from the disposition of the collateral are deposited into a bank account

Question 28

Authorized Disposition

Answer 28

An authorized disposition means that a SP can still seek the proceeds, but not the collateral in the hands of the third party.

Question 29

Chattel Paper Special Priority Rule

Answer 29

A purchaser has priority over a security interest in the chattel paper as proceeds if
(1) the purchaser gives new value
(2) the purchaser acts in good faith
(3)The purchaser has no actual knowledge, AND
-constructive knowledge not enough
(4) the purchaser takes possession or obtains control over the chattel paper

Question 30

Art 9 Consignment Rule

Answer 30

To avoid a SP’s properly perfected security interest in the consignee’s inventory, the consignor has the burden of proof on all the following six elements:
(1) consignor deliver the good to a merchant
(2) not an auctioneer
(3) consignee/debtor is not generally known by its creditor to be selling the goods of another
(4) with respect to each delivery, the aggregate value of the goods is $1,000 or more
(5)) goods are not consumer goods
(6) no security agreement between consignor and consignee
–if all elements met, SP wins and gets the goods.