Priority

Question 1

For priority purposes, what is the ranking order of the players?

Answer 1

BIOC (Buyer in Ordinary Course): purchases collateral from merchant inventory (supreme winner)
PAC (Perfected Attached Creditor): Art. 9 creditor who succeeds in attaining perfection
LC (Lien Creditor): GUC who gets judicial lien on collateral from court
NOC (Non-Ordinary Course Buyer): purchases collateral outside the stream of commerce
AUC (Attached Unperfected Creditor): Art. 9 creditor who creates an enforceable security interests but tries and/or fails to perfect
GUC (General Unsecured Creditor): lender who never bothered to take collateral (supreme loser)

Question 2

After-Acquired Collateral Financier (AACF) v. Purchase-Money Security Interest (PMSI)

Answer 2

1. EQUIPMENT: If there is an AACF-PAC and a later-in-time PMSI lender, the PMSI lender can have first priority if she files properly within 20 days after debtor takes possession
2. INVENTORY: If there is an AACF-PAC and a later-in-time PMSI lender, the PMSI lender can have first priority if she:
   (i) files properly BEFORE the debtor takes possession AND
   (ii) notify AACF-PAC BEFORE debtor takes possession

Question 3

PAC v. BIOC

Answer 3

A buyer in the ordinary course of business takes free of a perfected security interest in seller’s inventory.

Rationale: promote commerce and honor buyer expectation