Priority Rules Flashcards
Secured Trans - Priority - Gral / process, gral rule for each category
1st: Define the type of SI (is attached/perfected) then
2nd: set the priority among each piece of collateral
3rd: Within each category of priority application of “f_irst in time first in right_” (check effective date of attachment/perfection)
- Possible RAP exceptions (As “super priorities”)
Secured Trans - Priority - Gral analysis order (4th)
1st: Any perfection? No: who attached first?
2nd: Perfection: prevails over attachment. But control prevails over other methods when for deposit accounts and letter of credit
3rd: mx creditors perfected: “1st in time 1st in right” with consideration of PMSI / judgment creditor / bankruptcy trustee
4th: Unsecured creditors
Secured Trans - Priority - PMSI advantages over other secured creditors (3)
1) 20-day grace period for filing + relate back for non-inventory
2) Perfection by attachment for consumer goods
3) Priority of PSMI on inventory over prior perfected non-PSMI if notify them
* (asserting an after-acq property interest)
Secured Trans - Priority - Judgment Creditor / when, effect
- Perfect on date of registration of judgment at country seat
- Judgment turns into lien on all debtor real property and fixtures (levy needed for personal property)
Secured Trans - Priority - Bankruptcy Trustee / when, effect
- Perfected as of date of of filing petition on federal bankruptcy court
- has priority on collateral w/out previous perfection
Secured Trans - Priority - Unsecured Creditors / priority and distribution w/others, relation with SI
- Lowest priority (as gral creditor in case of bankruptcy)
- After liquidation sale, it shares pro-rata with all other unsecured creditors
- Oral SI: ineffective, treated as unsecured
Secured Trans - Priority - Exceptions (3) RAP (as super priorities)
1) Retail inventory - BIOCOB
2) Adding value to collateral
3) Preferential bankruptcy interests
Secured Trans - Priority - RAP Exceptions - Retail Inventory - gral / concept, exception, req for sale, irrelevant matter
- Buyer of inventory in the ordinary course of business (BIOCOB) takes title clear/free of any security interest created by seller
- EXCEPT: farm products bought from farmer
- Sale has to be by _original debto_r
- later use of collateral by transferee is irrelevant
- existence of prior filing of SI is irrelevant
Secured Trans - Priority - RAP Exceptions - Retail Inventory - BIOCOB
- Purchase by BIOCOB from someone who regularly sells goods of that kind
- Doesn’t include sale in bulk or from pawn shop
Secured Trans - Priority - RAP Exceptions - Retail Inventory - Rule on consumer goods
- Buyer knowledge of the SI is irrelevant
- receives unencumbered property anyways
Secured Trans - Priority - RAP Exceptions - Retail Inventory - Rule on Merchant Retailer
Goods entrusted to merchant who regularly deals in goods of that kind (as inventory)
- purchaser also takes clear and free
Secured Trans - Priority - RAP Exceptions - Adding value to collateral - Situations (2)
1) Personal labor of workmen AND/OR Materials furnished by suppliers
2) Provide warehouse or transport - for storage, transport and maritime carrier.
Secured Trans - Priority - RAP Exceptions - Adding value to collateral - Type of credits (2)
1) Chattel and real property lien
2) Warehouse and carrier lien
Secured Trans - Priority - RAP Exceptions - Adding value to collateral - Chattel and real property lien - Gral / for whom, effect, sanction
- For person who performed labor or furnished materials
- Creates a lien of property that must be formally filed at dept of licensing within 90 days of work
- Failure to fill gives purchaser free/clear title to BFP
Secured Trans - Priority - RAP Exceptions - Adding value to collateral - Chattel and real property lien - Lien w/priority over (3):
1) Previous attached not perfected interest
2) Subsequent interest to labor/material provided
3) Over prior perfected interest only when established by statute (i.e. labor lien on harvested timber, or lien on the cost of agricultural products)
Secured Trans - Priority - RAP Exceptions - Adding value to collateral - Warehouse and Carrier Lien - gral / when, lost if
- Lien for the storage/transport of collateral on their possession
- Lost if voluntarily re-delivered to collateral owner
Secured Trans - Priority - RAP Exceptions - Adding value to collateral - Warehouse and Carrier Lien - Lien Foreclosure / effect, method
- Lien foreclose MUST be formally executed, the carrier/warehouse with super priority
- Formal execution can be achieved via disposition sale
Secured Trans - Priority - RAP Exceptions - Preferential Bankruptcy Interests - Gral / when , possible effects
- Upon filing of bankruptcy petition, the court will appoint trustee to represent unsecured/gral creditors
- Court can SET ASIDE debtor’s bargain sales and any payment to SI for “Antecedent debts” on eve of bankruptcy (created prior to insolvency that otherwise wouldn’t have been created)
Secured Trans - Priority - RAP Exceptions - Preferential Bankruptcy Interests - Petition to declare void transaction (to “Set aside”) / timing, extension
- Petition by bankruptcy trustee within 90 days of bankruptcy petition
- can be extended to 1 year IF transferee was an insider OR related party OR transfer was fraudulent.
