Priority Rules

Question 1

How to answer priority question

Answer 1

1) ID the combatants
2) Apply fight rule
3) See you wins

Question 2

perfected Secured party v. perfected secured party: general rule

Answer 2

the first to file or perfect has priority

Question 3

unperfected SP v. unperfected SP

Answer 3

the first to attach wins

Question 4

perfected SP v. unperfected SP

Answer 4

perfected wins

Question 5

PMSI in goods other than inventory or livestock v. SP

Answer 5

1) PMSI wins

2) IF PMSI is perfected at the time debtor received possession of the collateral or within 20 days thereafter

Question 6

PMSI in inventory or livestock v. SP

Answer 6

1) PMSI wins IF
2) before debtor receives possession
3) secured party perfects, and sends an authenticated notification to holds of previously filed conflicting security interests in the collateral
4) holder must receive notice within 5 years

Question 7

PMSI v. PMSI

Answer 7

Seller PMSI priority over financier PMSI

Question 8

Priority rules for Deposit Accounts

Answer 8

1) SI perfected by control has priority over SI perfected via proceeds in deposit account
2) both control = first to gain control wins
3) control in own name wins over all other secured parties with control
4) bank that has control because it maintains the deposit account wins over all other secured parties with control EXCEPT for the party whose name is on the account

Question 9

SP v. Buyer of collateral: authorized sales

Answer 9

buyer takes free of the security interest

Question 10

SP v. Buyer of collateral: implied authorized sales

Answer 10

1) when collateral is inventory
2) only applies to ordinary sales
3) can also be authorization by acquiescence

Question 11

SP v. Buyer of collateral: unauthorized sales

Answer 11

1) buyer in ordinary course of business (unless farm products from farmer)
2) takes free of a security interest created by seller
3) even if the security interest is perfected
4) and even if the buyer knew of its existence

Question 12

Priority rules: buyer in ordinary course

Answer 12

1) buys in good faith
2) without knowledge that the sale violates the right of another party
3) from a person in the business of selling goods of that kind

Question 13

SP v. Buyer of collateral: buyer not in ordinary course

Answer 13

1) takes subject to perfected security interests
2) takes free from unperfected security interests
3) UNLESS know of security interest

Question 14

Priority: Consumer to consumer sales (garage sale rule)

Answer 14

1) buyer takes free of a security interest
2) even if perfected
3) if he buys without knowledge of the security interest
4) for value
5) and for his own personal, family, or household purposes
6) UNLESS prior to purchase secured party has filed a financing statement covering the goods

Question 15

SP v. Judgment lien holders

Answer 15

1) LOOK at time of perfection vs. time of levy
2) if security interest perfected before sheriff levies, security interest wins
3) if levy precedes perfection, judicial lien wins

Question 16

PMSI v. Lien creditor

Answer 16

1) if PMSI files within 20 days after the debtor receives possession of the collateral
2) takes priority over the rights of a lien creditor which arises between the time the security interest attaches and the time of filing

Question 17

SP v. Statutory lien claimants

Answer 17

statutory lien beats even a PMSI

Question 18

SP in fixtures v. real estate

Answer 18

first in time has priority

Question 19

PMSI in fixtures v. real estate

Answer 19

PMSI takes priority if perfected by a fixture filing before the goods become fixtures or within 20 days

Question 20

Construction mortgage

Answer 20

No one beats a construction mortgage no matter what time perfected or if PMSI