Priority Flashcards
Secured Party v. Secured Party
General Rule: the first to file or perfect, whichever occurs first has priority.
PMSI Priority in Good Other Than Inventory or Livestock. (Equipment)
- Has priority over conflicting SIs in the same goods and their identifiable proceeds, but
- ONLY if the interest is perfected before or within 20 days after the debtor receives possession of the goods.
Conflicting PMSIs - Seller over creditor/lender. Otherwise, first in time
PMSI Priority in Livestock and Inventory
- Priority over a conflicting SI in the same inventory or livestock (as well as proceeds that are chattel paper, instruments, and identifiable cash proceeds) if, BEFORE the Debtor receives possession of the inventory or livestock, the SP:
1. Perfects, AND
2. Sends authenticated notification to holders of previously filed conflicting security interests in the collateral. - Notice of inventory: The one notification is effective for deliveries of the same type of collateral for 5 yrs
- Notice of livestock: Must be received w/ 6 months
PMSI in Crops
In GA, a secured party who gives new value to enable a debtor to grow crops within 3 months before the crops are planted has priority over perfected security interests covering obligations incurred more than 6 months before the crops were planted.
- True even if the secured party giving new value had knowledge of the earlier security interest
PMSI v. PMSI
PM Seller beats out the PM creditor/lender of the collateral
Investment Property Priority
- SI perfected by control beats out others
- Control v. control - First in time
- A security interest granted to a debtor’s intermediary has priority over a security interest granted by the debtor to another secured party (unless intermediary agrees otherwise)
- With the exception of 3 scenarios above, first to file or perfect wins
Deposit Account Priority
- Control wins over any other!
- If conflicting interest were perfected by control -Rank according to time of obtaining control
- Control in your own name has priority over everyone else! (even a Bank)
- A bank that has control because it maintains the account has priority over al other secured parties except party who has control by putting account in his name.
Purchaser of Chattel Paper Priority
If purchaser in good faith gives new value and takes possession in the ordinary course of business, he will have priority over:
- A SI that arises merely as proceeds of inventory
- Any other SI in the chattel paper so long as the purchaser had no knowledge that its purchase violated the rights of the secured party.
***Any notation on the chattel paper stating that it has been assigned to a secured party is sufficient to give the purchaser knowledge that its purchase violated the rights of the secured party.
Purchaser of Instrument Priority
Purchaser of instrument has priority over a perfected security interest in the instrument if the purchaser gives value and take possession of the instrument in good faith and without knowledge that the purchase violates the rights of the secured party.
Secured Party v. Buyer of Collateral (Authorized Sale)
- If the sale is authorized, buyer takes free of the SI.
- Authorization may be express or implied
Secured Party v. Buyer of Collateral (Unauthorized Sale)
-A buyer in the ordinary course of biz (other than a person buying farm products from a person engaged in farming operations) takes free of SI created by his seller even through the SI is perfected and even though the buyer knows of its existence (unless buyer knows it’s a violation of the terms of SI)
Buyer in Ordinary Course
One who buys goods in the ordinary course of business from a seller who is engaged in the business of selling goods of the kind purchased.
- Doesn’t apply to farm products.
- BIOC generally takes free of a non-possessory perfected interest in the inventory even if the buyer knows of it, unless the buyer also knows that the sale is in violation of the terms of the security agreement. THIS ONLY APPLIES TO SI’S CREATED BY THE BUYER’S SELLER!
Buyer Not in Ordinary Course
- Take subject to perfect SI
- Take free from unperfected SI (and unperfected agricultural liens) unless they know of the SI
Consumer to Consumer Sales
Garage Sale Exception
- In the case of consumer goods A holder of a PMSI is protected against lien creditors and other security interests without filing (because the consumer goods automatically perfect), but she will lose to consumer buyers unless she files.
- ** The goods must be consumer goods in the hands of both the buyer and the seller.
ex. Someone trading in TV to a retailer for credit towards a new tv WOULD NOT fall under this exception, as retailer not a buyer in ordinary course. Automatic perfection would protect SI here.
Secured Party v. Judicial Lien Creditor
In GA, a SP that files or perfects before the judgment lien is properly recorded has priority over the judgment lien; a SP that files or perfects after the judgment lien is properly recorded is subordinate.
*****Special Rule: A PMSI will win over a judgment lien if he perfects within 20 days of judgment lien being filed.
