Priority Rules

Question 1

Secured Trans - Priority - Gral / process, gral rule for each category

Answer 1

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”)

Question 2

Secured Trans - Priority - Gral analysis order (4th)

Answer 2

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

Question 3

Secured Trans - Priority - PMSI advantages over other secured creditors (3)

Answer 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)

Question 4

Secured Trans - Priority - Judgment Creditor / when, effect

Answer 4

• 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)

Question 5

Secured Trans - Priority - Bankruptcy Trustee / when, effect

Answer 5

• Perfected as of date of of filing petition on federal bankruptcy court
• has priority on collateral w/out previous perfection

Question 6

Secured Trans - Priority - Unsecured Creditors / priority and distribution w/others, relation with SI

Answer 6

• 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

Question 7

Secured Trans - Priority - Exceptions (3) RAP (as super priorities)

Answer 7

1) Retail inventory - BIOCOB
2) Adding value to collateral
3) Preferential bankruptcy interests

Question 8

Secured Trans - Priority - RAP Exceptions - Retail Inventory - gral / concept, exception, req for sale, irrelevant matter

Answer 8

• 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

Question 9

Secured Trans - Priority - RAP Exceptions - Retail Inventory - BIOCOB

Answer 9

• Purchase by BIOCOB from someone who regularly sells goods of that kind
• Doesn’t include sale in bulk or from pawn shop

Question 10

Secured Trans - Priority - RAP Exceptions - Retail Inventory - Rule on consumer goods

Answer 10

• Buyer knowledge of the SI is irrelevant
• receives unencumbered property anyways

Question 11

Secured Trans - Priority - RAP Exceptions - Retail Inventory - Rule on Merchant Retailer

Answer 11

Goods entrusted to merchant who regularly deals in goods of that kind (as inventory)

• purchaser also takes clear and free

Question 12

Secured Trans - Priority - RAP Exceptions - Adding value to collateral - Situations (2)

Answer 12

1) Personal labor of workmen AND/OR Materials furnished by suppliers
2) Provide warehouse or transport - for storage, transport and maritime carrier.

Question 13

Secured Trans - Priority - RAP Exceptions - Adding value to collateral - Type of credits (2)

Answer 13

1) Chattel and real property lien
2) Warehouse and carrier lien

Question 14

Secured Trans - Priority - RAP Exceptions - Adding value to collateral - Chattel and real property lien - Gral / for whom, effect, sanction

Answer 14

• 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

Question 15

Secured Trans - Priority - RAP Exceptions - Adding value to collateral - Chattel and real property lien - Lien w/priority over (3):

Answer 15

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)

Question 16

Secured Trans - Priority - RAP Exceptions - Adding value to collateral - Warehouse and Carrier Lien - gral / when, lost if

Answer 16

• Lien for the storage/transport of collateral on their possession
• Lost if voluntarily re-delivered to collateral owner

Question 17

Secured Trans - Priority - RAP Exceptions - Adding value to collateral - Warehouse and Carrier Lien - Lien Foreclosure / effect, method

Answer 17

• Lien foreclose MUST be formally executed, the carrier/warehouse with super priority
• Formal execution can be achieved via disposition sale

Question 18

Secured Trans - Priority - RAP Exceptions - Preferential Bankruptcy Interests - Gral / when , possible effects

Answer 18

• 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)

Question 19

Secured Trans - Priority - RAP Exceptions - Preferential Bankruptcy Interests - Petition to declare void transaction (to “Set aside”) / timing, extension

Answer 19

• 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.