Priority

Question 1

Priority b/w Secured Parties?

Answer 1

first to either file OR perfect (provided no period thereafter with no filing/perfection)

Question 2

PMSI in Goods other than ____ & _____ has _________.

Answer 2

Inventory & Livestock; priority over conflicting SI in same goods or their proceeds IF interest is perfected BEFORE OR WITHIN 20 days after debtor receives possession

Question 3

Priority b/w Unsecured Parties?

Answer 3

first to attach

Question 4

Priority b/w Unperfected and Perfected Secured Parties?

Answer 4

Perfected security interest generally defeats unperfected security interest

Question 4

Priority b/w Conflicting PMSIs?

Answer 4

1) Seller-financed PMSI prevails over financer-financed PMSI
2) Otherwise, 1st creditor to file OR perfect wins

Question 5

What is PMSI Superpriority?

Answer 5

PMSIs superior to prior perfected security interests in same collateral under some conditions

Question 6

What conditions needed for PMSI in Inventory & Livestock to have priority over conflicting SI in same inventory or proceeds of inventory that are chattel paper, instruments, or cash?

Answer 6

1) Perfected at time Debtor takes possession of inventory
2) Any secured party who’s filed their SI in same inventory receives authenticated notification of PMSI BEFORE debtor gets possession AND notification states PM party has/expects to take PMSI in inventory of Debtor described by kind OR type (effective for deliveries of same type of collateral for 5 yrs)

Question 7

What are consignor’s interest in consigned goods considered?

Answer 7

PMSI in inventory

Question 8

What’s unique about priority for SI perfected by control re Investment Property?

Answer 8

SI perfected by control has priority over SI perfected by any other method (rank according to time control obtained)

Question 9

What’s unique about priority for SI perfected by control re Deposit Accounts?

Answer 9

SI perfected by control has priority over SI perfected by any other method (rank based on method: best is co-ownership, then maintaining account, then control agreement)

Question 10

What’s the Authorized Sale exception (SP v. B/OT)?

Answer 10

If sale/lease of collateral authorized (express or implied from type of sale/conduct) by secured party free of SI, transferee takes free of SI

Question 10

What’s the Unauthorized Sale exception (SP v. B/OT)?

Answer 10

Generally, a buyer in the ordinary course of business takes free of nonpossessory SI in goods created by the buyer’s seller (applies to lessees of goods too)

Question 10

If a Debtor transfers money or deposit account funds to a person, that person takes _______ unless ______.

Answer 10

free of any security interest in the money/funds; transferee acts in collusion with debtor in violating secured party’s rights

Question 11

Priority b/w Secured Party & Buyer/Other Transferee?

Answer 11

When buyer/lessee buys or leases something with SI on it, SI stays unless exception applies
-authorized sales
-unauthorized sales (B in ord. cou.)
-C2C sales

Question 12

How is BIOC defined?

Answer 12

One who buys goods:
1) in good faith
2) w/o knowledge that sale violates rights of another person in goods AND
3) in the ordinary course of business from a seller in the business of selling goods of the kind purchased

Question 13

Buyers or lessees NOT in the ordinary course of business ______ & ______.

Answer 13

take subject to perfected SI
AND
take free from unperfected SI unless they know of SI when they give value/take delivery UNLESS
1) future advances
2) grace period

Question 14

For Consumer-to-Consumer Sales of consumer goods, buyer takes free of SI even if perfected IF _____.

Answer 14

buyer buys
1) w/o knowledge of SI
2) for value
3) for buyer’s own personal/family/home purposes
AND
4) before financing statement covering goods is filed

NOTE must be consumer goods in hands of both buyer & seller

Question 14

Priority b/w Secured Party & Judicial Lien Creditor?

Answer 14

Judicial lien creditor has priority IF lien creditor attains such status BEFORE SI perfected; otherwise, SI prevails; also, SI prevails IF creditor obtained security agreement & filed financing statement (but didn’t attach/perfect) before judicial lien

Question 15

What is the Future Advances exception?

Answer 15

For perfected future advance to have priority over judicial lien, future advance must be made
1) w/o knowledge of lien
2) w/i 45 days of lien arising
OR
3) pursuant to commitment entered into w/o knowledge of lien

Question 15

Priority b/w Secured Party & Holder in Due Course or the Like?

Answer 15

Holder in due course of a negotiable instrument has priority over SI in the negotiable instrument

Question 16

What is the PMSI Grace Period exception?

Answer 16

If secured party files financing statement with respect to PMSI within 20 days of Debtor receiving collateral, secured party has priority over judicial lien arising between time SI attaches and time of filing

Question 16

Priority b/w Secured Party & Article 2 Claimant?

Answer 16

If Art. 2 grants buyer/seller possessory interest in goods, claimant prevails over secured party so long as Art. 2 claimant retains possession of goods

Question 16

Priority b/w Secured Party & Possessory/Statutory Lien Holder?

Answer 16

Statutory LH prevails so long as goods/services provided in ordinary course of business AND collateral remains in lien holder’s possession