Secured Transactions Priority Flashcards
perfected secured creditor vs. perfected secured creditor
first to file OR perfect (whichever occurs first) has priority
unperfected secured creditor (SC) vs. unperfected secured creditor
First to attach wins
perfected SC vs. unperfected SC
The perfected party wins
EXCEPT if an exception applies:
- PMSI superiority in goods other than inventory or livestock
-
PMSI superpriority in goods other than inventory or livestock
A PMSI has priority over a conflicting security interest in the same collateral if the PMSI is perfected before or within 20 days after the debtor receives possession of the goods
A PMSI in inventory or livestock has priority over conflicting security interests in the same inventory or livestock if:
- before the debtor receives possession of the inventory or livestock
- the secured party perfects, AND
- sends an authenicated notice to other holders of previously filed conflicting security interests in the collateral
- which is received by those other holders within five years of the debtor getting possession of the inventory\
seller-financed PMSI vs. financer-financed PMSI
seller-financed PMSI wins
special rule for investment property
A security interest perfected by control beats other perfection method
Earlier control beats later control
An SI granted to a debtor’s intermediary beats other creditors
debtor’s intermediary=broker
methods of perfection by control
- automatic control by the bank maintaining the nonconsumer deposit account
2.1 putting the deposit account in the secured party’s name
2.2 control agreement
special rule for deposit accounts
A SI perfected by control beats an SI perfected by a proceeds
if both perfected by control -> first to obtain control wins
which method of perfection by control wins over all other control methods for deposit account priorities
2.1 putting the deposit account in the secured party’s name (creditor puts collateral in his own name)
next best is #1- creditor maintaining the deposit account
worst is the control agreement
only way to perfect a security interest in a deposit account
control
secured party vs. buyer
if the buyer buys something with a security interest on it, the security interest stays on through the purchase
authorized sale exception
secured creditor authorizes the sale of its collateral free of the security interest, the buyer takes free of the security interest
authorization may be expressed or implied
implied authorized sale
sale of
- inventory
- to an ordinary consumer
- when sale of the collateral is not expressly prohibited or the security agreement is silent on the issue of selling the collateral
collateral must be inventory in the hands of the original debtors
implied authorization by acquiescence
when the creditor doesn’t give express authorization to sell the collateral free of the security interest or creditor expressly tells the debtor not to sell the collateral but the creditor knows that the debtor has been selling the collateral and hasn’t stopped the creditor from doing so
buyer in the ordinary course rule exception
BIOC Rule exception
A buyer in the ordinary course of business takes free of a security interest **created by his seller **
even if
- the security interest is perfected and
- the buyer knows of its existence
buyer in the ordinary course
- a buyer in good faith
- without knowledge that the sale violates the secured creditor’s rights
- in ordinary course
- from a seller of goods of that kind
CAN have knowledge that there is a security interest on the item buyer is buying and not know that the sale violates the creditor’s rights
can only be a buyer in the “ordinary course” if your seller is a seller of the goods of that kind
who creates the security interest
BIOC exception
the debtor
buyers not in the ordinary course
how do they take the collateral?
Take collateral:
- subject to perfected security interests
- free of unperfected security interests unless they know of the security interest
consumer to consumer sales
a buyer takes **consumer goods **free of an SI if
- he takes without knowledge of the SI
- for value
- and for personal use
- if the seller has not filed a financing statement
goods must be consumer goods in the hands of both the buyer and the seller
secured creditor vs. judgment lien creditor
judgment lienholder wins if the levy was before perfection of the security interest
a prior perfected security interest has priority over a judicial lien.
judgment lien creditor (lien creditor)
An unsecured creditor who won a judgment in court that allows the creditor to enforce the judgment
the judgment allows the creditor to seize the debtor’s property/collateral (through law enforcement), sell it, and then give the judgment holder the money to pay off the judgment
levy
seizure of the collateral by the sheriff
when a judgment creditor sends the sheriff out and the sheriff seizes the debtor’s property
that seizure is a levy
the sheriff takes possession of the debtor’s property and a judicial lien is put on it
judicial lien
a court ruling giving a creditor the right to take possession of a debtor’s property if the debtor doesn’t fulfill their obligations (defaults)
PMSI vs. lien creditor
If the PMSI secured party files within 20 days after the debtor receives possession of the collateral, the secured party wins
future advance by a secured creditor vs. lien creditor
future advance secured creditor wins if the future advance was made:
- without knowledge of the lien
- within 45 days of the lien arising or
- pursuant to a commitment entered into without knowledge of the lien
secured party vs. statutory (possessory) lien claimant
statutory lienholder wins if they maintain possession of the collateral even over perfected security interest
statutory lien claimant
a lien that arises by operation of statute
ex: you get your car fixed by a mechanic but don’t pay. A lien pops up on your car in favor of the mechanic- the lien is provided by some auto mechanic’s lien statute in the jx
