priority secured transactions

Question 1

When there are conflicting perfected security interests in the same collateral, which secured party takes priority?

Answer 1

The first to file or perfect prevails

Question 2

If A has an attached but unperfected security interests in collateral and B then takes a security interest in the same collateral and perfects that interest, will B’s interest have priority?

Answer 2

In a perfected vs unperfected security interest problem, the perfected security interest prevails

This applies even if perfected party takes interest with knowledge of earlier unperfected interest

Question 3

Between a perfected and unperfected security interest, which security interest has priority?

Answer 3

In a perfected vs unperfected security interest problem, the perfected security interest prevails

This applies even if perfected party takes interest with knowledge of earlier unperfected interest

Question 4

If A and B have security interests in the same collateral, but only B has attached her security interest, who’s security interest prevails?

Answer 4

An attached security interest prevails over an unattached security interest.

Question 5

How is priority determined when there are conflicting PMSIs in the same collateral?

Answer 5

Secured party who has PMSI as the seller of collateral (as opposed to lender) has priority

Otherwise, first secured party to file or perfect

Question 6

When will a PMSI in goods have priority over other security interests in the same goods?

(PMSI conditions for goods)

Answer 6

PMSI in goods has priority over other SIs in the same goods and their proceeds if PMSI is perfected before or within 20 days after debtor receives possession

Question 7

When will a PMSI in inventory have priority over other security interest in the same inventory (or proceeds from inventory)?

(PMSI conditions for inventory)

Answer 7

PMSI in inventory has priority over other security interests in inventory or proceeds from the inventory if

1. PMSI is perfected when debtor takes possession, AND
2. Other parties who filed their security interest in inventory receive authenticated notification of the PMSI before debtor takes possession of inventory

Question 8

Do PMSIs have priority over other perfected security interest in the same goods?

Answer 8

PMSIs are superpriorities, meaning they are superior to prior perfected security interests in the same goods subject to the PMSI in inventory and goods conditions

Question 9

For security interests in proceeds how would a secured party achieve priority for non-filing collateral?

Answer 9

Secured party would normally achieve priority by possession or control, not filing (e.g. cash, chattel paper, negotiable documents, instruments).

Question 10

For a security interest in proceeds, how would a secured party achieve priority for filing collateral?

Answer 10

Secured party would normally achieve priority by filing a financing statement (e.g. goods, accounts, general intangibles)

Question 11

How is priority determined where there are multiple security interests in proceeds?

Answer 11

Where multiple security interests exist in proceeds, the type of collateral that generated the proceeds can determine priority.

Question 12

What date of priority does a perfected security interest in proceeds from collateral have compared to a security interest in the original collateral that generates proceeds?

Answer 12

Perfected security interest in proceeds generally have the same date of priority as the security interest in the original collateral that generated the proceeds

Question 13

If there is a security interest in crops and a separate interest in the land on which crops are planted, which interest has priority?

Answer 13

A perfected security interest in crops has priority over an interest in the land on which crops are planted regardless of time of filing or perfection

Question 14

What is an accession?

How does accession affect a security interest?

Answer 14

Accession is collateral that does not lose its identity when physically united with other goods.

e.g. a hard drive serving as collateral does not lose its identity when installed in a laptop

Security interest in collateral can be created in the collateral and continue when collateral becomes an accession

Question 15

If a holder of a PMSI makes a fixture filing within 20 days of affixation, what priority will they have over a previously recorded real property interest?

Answer 15

PMSI secured parties who make a fixture filing within 20 days of affixation prevail over a real property interest recorded prior to affixation

Question 16

What is a fixture filing? Where is it recorded?

Answer 16

A fixture filing is a financial statement. It is recorded where the mortgage on the real property would be recorded

Question 17

Where a security interest in fixtures competes against an interest in the real property containing the attached fixture, which interest has priority?

Answer 17

First to file or record prevails

Question 18

If a buyer purchases consumer goods subject to a PMSI and sells those goods to a second buyer who will have priority between second buyer and PMSI holder?

Answer 18

Where a buyer purchases consumer goods subject to a PMSI, and sells the goods to another consumer, the second buyer takes free of the SI if he buys:

1. Without knowledge of the SI;
2. For value; and
3. Before financing statement covering the goods has been filed

Question 19

Where can a buyer prevail over a nonpossessory perfected security interest?

Answer 19

A BIOC prevails over nonpossessory perfected security interest if:

1. Buyer has no knowledge that the sale violates terms of seller’s security agreement; and
2. Buyer is in fact a BIOC (one who buys in the ordinary course of business from seller, who is in the business of selling goods of that kind)

Question 20

Who generally prevails between a buyer and a perfected security interest?

Answer 20

Generally perfected security interest prevails.

Question 21

When will a buyer prevail over an unperfected secured party?

Answer 21

Buyer will prevail if, before collateral is perfected he

1. Gives value and receives delivery; and
2. Has no knowledge of the security interest

Question 22

In what situation can a buyer of goods have priority over one who has a security interest in those goods?

Answer 22

Where a buyer purchases goods without knowledge that goods are collateral attached to a security interest, buyer can often have priority over the security interest holder.

This arises in buyers vs. unperfected secured party AND buyers in the ordinary course of business vs. perfected secured party

Question 23

What interest prevails between an unperfected security interest and a judicial lien creditor?

Answer 23

Judgment lien creditor prevails.

exception: Secured party who attaches a PMSI in collateral before JLC acquires an interest in collateral has priority if it files within 20 days after debtor receives collateral

Question 24

Between a perfected secured party and a judicial lien creditor, which interest prevails?

Answer 24

Prior perfected security interest prevails.

I.e. JLC prevails only if they become JLC before a secured party files or perfects.

Question 25

What is a judicial lien creditor?

Answer 25

A judicial lien creditor are those who acquire a lien on collateral through judicial attachment, levy, etc.

JLCs generally possess the same status as perfected secured parties