Priority Flashcards
What is priority?
Priority is the purpose of collateralization, and the secured party seeks to subordinate, not to share. Each claimant is entitled to satisfaction in full before a subordinated claimant is entitled to take.
What is an attached unperfected creditor (AUPie)?
This is the article 9 creditor who creates an enforceable security interest (i.e. attaches), but either never bothers to perfect or tries to perfect but botches the effort, perhaps by filing in the wrong place.
What is a lien creditor (LC)?
This is the general unsecured creditor who goes to court to get a judicial lien on the collateral.
What is a perfected attached creditor (PAC)?
This is the Article 9 creditor who succeeds in attaining perfection.
Anticipate though that the collateral has been sold to a BIOC or NOCie.
What is a non-ordinary course buyer (NOCie)?
This is someone who purchases the collateral outside the ordinary stream of commerce.
For example, Steven Tyler buying a guitar from his auto mechanic.
What is a buyer in ordinary course (BIOC)?
This is someone who purchases the collateral from a merchant’s inventory.
For example, Steven Tyler buys a guitar from Sam Ash Guitar store.
What is a general unsecured creditor (GUC)?
This is the lender who never bothered to take collateral.
Generally, what is the order of priority?
BIOC (buyer in ordinary course)
PAC (perfected attached creditor)
LC (lien creditor)
NOCie (non-ordinary course buyer)
AUPie (attached unperfected creditor)
GUC (general unsecured creditor)
Who wins in AUPie v. the world?
AUPie’s interest is enforceable against debtor, and AUPie will defeat any subsequent AUPie as well as any GUC.
However, AUPie will lose to PAC, to LC, and to any buyer without knowledge of the security interest.
Who wins in PAC vs. the world?
PAC defeats all, except:
i. the PAC who filed first - first in time, first in right;
ii. certain PMSI-holders;
iii. the BIOC.
Will priority relate back to the early filing date (even before the creditor attaches)?
Yes.
Who wins between the after-acquired collateral financier (AACF) and holders of PMSI?
These two creditors collide in one of two ways:
a. the AACF v. the PMSI-holder when the collateral is equipment - if the PMSI holder files anytime within 20 days after the debtor gets possession of the collateral - it will have priority over the PAC AACF.
b. the AACF v. the PMSI-holder when the collateral is inventory - the PMSI must file properly AND must notify others with a security interest in the inventorybefore the debtor takes possession in order to have priority over the PAC AACF.
Who wins between PAC v. BIOC?
PAC loses to BIOC.
