#26 - Priority under State Law

Question 1

State Law Priority - General Rules

Answer 1

Party w/ priority after a foreclosure sale gets satisfied in full. Waterfall beyond that. 9-615

If subordinate party forecloses and sells collateral, collateral is transferred subject to prior party’s security interest. 9-617(a)
-> Subordinate status has no ability to credit bid: if prior party forces sale, subordinate party must bid cash up to subordinate position

An implication of this “access to value” is that priority, secondarily, is the right to possession. Secured parties can take possession before the Article 9 sale of the collateral.

Question 2

UCC Notice of Sale

Answer 2

Party forcing sale must give notice of sale. 9-611
-> Party must give notice to other lienholders who have properly indexed f/s on file or who have perfected by filing in compliance w/ federal or state statutes.
–» BUT notice not required to these other lienholders if collateral is consumer goods, 9-611(c)(3) , or “melting ice cube,” (depreciating collateral like groceries) 9-611(d).
-> Party searches system 20-30 days before the “notification date” – date party will send the notice of sale – and sends notice to those lienholders who appear on search results. 9-611(e).
-> If provision met, all subordinate liens are discharged by sale. 9-611(c).

Question 3

Notification Date

Answer 3

Secured party must send debtor reasonable notice of disposition. 9-611

Secured party must send notice to other lienholders perfected as of the record date by filing or notation.
–» “record date” – 10 days before the notification date.