Priority of Security Interests Flashcards
What are 2 things you must assess when heading into a Secured Transactions essay?
Type of collateral involved: goods, inventory, livestock
Type of parties involved: secured vs unsecured party, secured vs. secured, secured party vs. lien creditor.
List out the only 3 possible Priority disputes between parties in Secured Transactions
Attached vs. unAttached/unSecured party: attached SI prevails. (Beware of scenarios where someone signed a security agreement but not yet given value/obtained proper title).
Perfected vs. unPerfected SI: perfected SI prevails.
Perfected SI vs. Perfected SI: first to file, or perfect prevails. Doesn’t matter who has knowledge of prior perfection.
What priority is given to PMSIs?
They are top priority and are considered suprapriorities.
What are the 3 limitations to PMSI prioritization?
PMSI is inventory: as long as PMSI is perfected and knowledge is given to other creditors, PMSI prevails.
PMSI in goods: has priority over other SIs in same goods and their proceeds if PMSI is perfected within 20 days.
Conflicting PMSIs: priority goes seller of collateral. Otherwise, first secured party to file or perfect.
What is the prioritization order where there are multiple SIs on proceeds?
Filing collateral: secured party would normally achieve priority by filing financing statement.
Non-Filing Collateral: secured party would normally achieve priority by possession or control, not filing.
Who gets priority for fixtures?
First to file a fixture filing or record.
Or, if a PMSI secured party makes a fixture filing within 20 days of affixation.
What is an Accession?
Collateral that does not lose its identity when physically United with other goods.
Can SIs be created in a collateral and continue when collateral becomes an accession?
Yes.
What is the prioritization when it comes to crops & land?
Perfected SI in crops has priority over an interest in the land on which crops are planted regardless of time of filing or perfection.
Who prevails when a Buyer vs. unperfected secured party?
Buyer prevails as long as he:
gives value and receives delivery
And
has no knowledge of SI
Who prevails when a Buyer vs. Perfected secured party?
Generally, perfected SI prevails unless
BIOC exception: buyer is a BOIC who has no knowledge of past SI and is one who buys in ordinary court of business from seller.
PMSI in consumer goods: where buyer purchases consumer goods subject to PMSI and sells the goods to another consumer - the second buyer takes free of the SI if he buys no knowledge, for value, and before financing statement is filed
What’s a judicial Lien creditor?
Those who acquire lien on collateral through judicial attachment. (They get same status as perfected secured parties)
Who prevails if Perfected secured party vs. JLC?
Prior perfected SI prevails.
I.e., JLC prevails only if they become JLC before a secured party files/perfects.
Who prevails if JLC vs. Unperfected secured party?
JLC.
