Priority

Question 1

When does a judicial lien creditor have priority over a perfected SI?

Answer 1

Never

Question 2

When does a judicial lien creditor have priority over an unperfected SI?

Answer 2

Always, except when the SI was unperfected solely b/c the SP had not yet given value

Question 3

When does a PMSI have priority over a judicial lien creditor?

Answer 3

When it is perfected within 20 days after the debtor receives possession of the collateral, the PMSI has priority over a lien that arose between attachment of SI and filing

Question 4

When does an SI securing an advance subordinate to a lien creditor’s rights?

Answer 4

When the advance is made 45 days after the person becomes a lien creditor, unless the advance is made without knowledge of the lien.

Question 5

When does a statutory (e.g., mechanic’s) lien have priority of an SI?

Answer 5

Always, if (1) the lien depends on the lienholder’s possession of the goods, and (2) the lien secures payment or performance in the ordinary course of the person’s business

Question 6

What takes priority between two perfected security interests?

Answer 6

The first to file, then the first to perfect. Lapse restarts the clock

Question 7

When does a consumer buyer take free of a security interest, a la garage sale?

Answer 7

1. Buy consumer goods for value
2. For personal use
3. From a consumer seller
4. Without knowledge of the SI
5. The SP has no filed a FS covering the goods

Question 8

When does a buyer in the ordinary course of business take free of a security interest?

Answer 8

1. Buys from merchant
2. In ordinary course of merchant’s business
3. in GF and w/o notice of SP’s rights
4. Merchant is engaged in sale of goods and NOT a pawnbroker

Question 9

When does a purchaser of chattel paper have priority over a security interest?

Answer 9

1. Gives new value and has possession or control
2. Buys in GF and in the ordinary course of business
3. Chattel paper does not indicate an assignment, or a purchase made w/o knowledge of SP’s rights

Question 10

When does a buyer of a negotiable instrument or document take free of a security interest?

Answer 10

Always

Question 11

When does a buyer of goods not in the ordinary course of business take free of a security interest?

Answer 11

A buyer takes free of any SI securing an advance made after the earlier of (1) the time the SP acquires knowledge of purchase or (2) 45 days after purchase

Question 12

When does a buyer of goods not in the ordinary course of business NOT take free of a security interest?

Answer 12

A buyer takes subject to the SI if the advance is made pursuant to a commitment entered into without knowledge of the buyer’s purchases and before the expiration of the 45-day period

Question 13

When does a transferee of money or funs take free of an SI?

Answer 13

Generally always, but a debtor is not a transferee

Question 14

Which has priority, an Article 2 or an Article 9 SI?

Answer 14

Article 2

Question 15

Which has priority, a perfected or unperfected SI

Answer 15

Always perfected SI

Question 16

Which has priority between two unperfected SIs?

Answer 16

First to attach has priority

Question 17

Which has priority, a PMSI or non-PMSI?

Answer 17

Usually a PMSI, subject to exceptions

Question 18

Which has priority, a PMSI in goods other than inventory, or any other SI?

Answer 18

A PMSI has priority if perfected before or within 20 days after the debtor receives possession of collateral

Question 19

Which has priority, a PMSI in inventory or livestock, or any other SI?

Answer 19

A PMSI has priority if perfected by the time the debtor receives possession, AND the purchase-money SP sends authenticated notice to the PMSI holdder of any conflicting SI before the debtor receives possession

Question 20

What has priority between two perfected PMSIs?

Answer 20

First to file or perfect has priority, BUT a seller PMSI has priority over a lender PMSI

Question 21

When does an SI in fixtures have priority over a real property interest?

Answer 21

Generally, an SI in fixtures has priority over the real property interest if the SI in fixtures is perfected by a fixture filing before the real property interest is recorded

Question 22

Which has priority, a perfected SI in fixtures or a subsequent judicial lien?

Answer 22

Perfected SI in fixtures

Question 23

When does a PMSI in fixtures have priority over a prior real property interest?

Answer 23

A PMSI in fixtures has priority if it is perfected by a fixture filing before the goods become fixtures, or within 20 days thereafter

Question 24

When does a prior construction mortgage have priority over an SI in fixtures?

Answer 24

When recorded before the goods become fixtures