Secured Transactions Priority

Question 1

perfected secured creditor vs. perfected secured creditor

Answer 1

first to file OR perfect (whichever occurs first) has priority

Question 2

unperfected secured creditor (SC) vs. unperfected secured creditor

Answer 2

First to attach wins

Question 3

perfected SC vs. unperfected SC

Answer 3

The perfected party wins

EXCEPT if an exception applies:
- PMSI superiority in goods other than inventory or livestock
-

Question 4

PMSI superpriority in goods other than inventory or livestock

Answer 4

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

Question 5

A PMSI in inventory or livestock has priority over conflicting security interests in the same inventory or livestock if:

Answer 5

• 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\

Question 6

seller-financed PMSI vs. financer-financed PMSI

Answer 6

seller-financed PMSI wins

Question 7

special rule for investment property

Answer 7

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

Question 8

methods of perfection by control

Answer 8

1. 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

Question 9

special rule for deposit accounts

Answer 9

A SI perfected by control beats an SI perfected by a proceeds
if both perfected by control -> first to obtain control wins

Question 10

which method of perfection by control wins over all other control methods for deposit account priorities

Answer 10

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

Question 11

only way to perfect a security interest in a deposit account

Answer 11

control

Question 12

secured party vs. buyer

Answer 12

if the buyer buys something with a security interest on it, the security interest stays on through the purchase

Question 13

authorized sale exception

Answer 13

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

Question 14

implied authorized sale

Answer 14

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

Question 15

implied authorization by acquiescence

Answer 15

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

Question 16

buyer in the ordinary course rule exception

BIOC Rule exception

Answer 16

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

Question 17

buyer in the ordinary course

Answer 17

• 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

Question 18

who creates the security interest

BIOC exception

Answer 18

the debtor

Question 19

buyers not in the ordinary course
how do they take the collateral?

Answer 19

Take collateral:
- subject to perfected security interests
- free of unperfected security interests unless they know of the security interest

Question 20

consumer to consumer sales

Answer 20

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

Question 21

secured creditor vs. judgment lien creditor

Answer 21

judgment lienholder wins if the levy was before perfection of the security interest

a prior perfected security interest has priority over a judicial lien.

Question 22

judgment lien creditor (lien creditor)

Answer 22

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

Question 23

levy

Answer 23

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

Question 24

judicial lien

Answer 24

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)

Question 25

PMSI vs. lien creditor

Answer 25

If the PMSI secured party files within 20 days after the debtor receives possession of the collateral, the secured party wins

Question 26

future advance by a secured creditor vs. lien creditor

Answer 26

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

Question 27

secured party vs. statutory (possessory) lien claimant

Answer 27

statutory lienholder wins if they maintain possession of the collateral even over perfected security interest

Question 28

statutory lien claimant

Answer 28

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