Secured Transactions - Priorities

Question 1

Priority is determiend by

Answer 1

1. identifying status of each claimant
2. applying appropiate priority rule

Question 2

General creditor (unsecured) / priority

Answer 2

has a claim including a judgement against the debtor but no lien on or security in the collateral

priority: security interest > general creditor

Question 3

judicial lien creditor / priority

Answer 3

acquires lien on collateral by a judicial process

priority: perfected security interest > judicial lien > unperfected security interest

Question 4

Exceptions regarding judicial lien creditors

Answer 4

• An unperfected security interest has priority if the reason it’s unperfected -> secured party didn’t give value yet.
• If a PMSI is perfected 20 days after the debtor receives possession of the collateral, then the PMSI has priority over a creditor’s rights that arose between attachment and filing
• A SI securing an advance is subordinate to a lien creditor’s rights when advance is made more than 45 days after person becomes a lien creditor, unless advance is made without knowledge of the lien

Question 5

Statutory or common-law lien creditor / priority

Answer 5

has a possessory lien on collateral by statute or common law rule (nonconsensual lien)

priority: possessory lien secures payment for goods or services furnished in ordinary course of buisness (mechanic’s lien [legal guarantee of payment to builders, contractors, and subcontractors]) > any security interest

Question 6

transferee gets

Answer 6

full title to collateral as result of a transfer from the debtor

Question 7

the typical inquiry regarding priority is whether the transferee

Answer 7

takes the collateral free from or subject to the security interest

Question 8

transferee (nonbuyer) v. secured party with a security interest

Answer 8

the security interest in the collateral continues [transferee take subject to the security interest] unless secured party authorized the transfer free from the security interest

Question 9

buyer v. unperfected security interest

Answer 9

the buyer takes the collateral free from the security interest if the buyer gives:
* value
* receives delivery and
* has no knowledge of security interest

Question 10

buyer v. perfected security interest

Answer 10

buyer takes the collateral subject to the security interest

Question 11

transferee is a buyer

Answer 11

in the ordinary course of business

Question 12

Transferee buys goods in good faith:

priority:

Answer 12

(not farm products) without knowledge that sale violates another’s rights in the same goods and in the ordinary course from a seller in the business of selling goods of that kind

priority: takes free of any security interest in goods given by the seller

Question 13

A consumer buyer buys:
priority:

Answer 13

consumer goods for value for his own personal, family, or household use from a consumer seller without knowledge of the security interest

priority: takes free of any security interest unless secured party filed a financing statement covering the goods (garage sale rule)

Question 14

Purchaser of chattel paper:

priority:

Answer 14

gives new value and has possession/control of collateral, purchases it in good faith and in the ordinary course of business and does not indicate an assignment to an identified assignee in the chattel paper

priorty: has priority over a security interest in chattel paper

Question 15

future advances:

priority:

Answer 15

a buyer of goods who secures an advance made after the secured party gets knowledge of the purchase or 45 days after the purchase - whichever is earlier

priority: takes free of the security interest

Question 16

transferee of money or funds
priotrity:

Answer 16

a transferee of money or of funds from a bank deposit account

priority: takes free of a security interest in the money or funds

Question 17

article 2 security interest

priority

Answer 17

a buyer or seller with posession of the goods

priority: has priority over an article 9 security interest

Question 18

clean certificate of title

priority:

Answer 18

a buyer without knowledge of a prior security interest not noted on the title

priority: takes free of the security interest

Question 19

General rules for priority among secured parties

perfected v. perfected

Answer 19

first to file or protect has priority

Question 20

General rules for priority among secured parties

perfected v. unperfected

Answer 20

perfected > unperfected

Question 21

General rules for priority among secured parties

unperfected v. unperfected

Answer 21

the first to attach has priority

Question 22

PMSI v. non-PMSI

Answer 22

PMSI has priority over non PMSI security interest

Question 23

PMSI in goods other than inventory or livestock versus any security interest:

Answer 23

PMSI has priority if perfected before or within 20 days after the debtor takes possession of the collateral

Question 24

PMSI in inventory or livestock versus any security interest

Answer 24

A PMSI has priority if it is perfected by the time the debtor takes possession of the collateral.

If the security interest was perfected by filing, then the purchase-money secured party must send an authenticated notice of the PMSI to the holder of any conflicting security interest before the debtor takes possession.

Question 25

Perfected PMSI versus perfected PMSI

Answer 25

The first to file or perfect has priority. A seller with a PMSI has priority over a lender with a PMSI.

Question 26

Proceeds from PMSI in goods

Answer 26

The priority of a PMSI in goods extends to the proceeds of the original collateral, if the security interest is perfected when the debtor takes possession of the collateral or within 20 days thereafter.

Question 27

Security interest in fixtures v. real property interest:

Answer 27

security interest in fixtures has priority over interest in the real property with which the fixtures are associated if the security interest is perfected by a fixture filing before the real property interest is recorded.

Question 28

Perfected security interest in fixtures v. subsequent judicial lien

Answer 28

perfected security interest in fixtures has priority.

Question 29

PMSI in fixtures v. prior real property interest

Answer 29

A PMSI in fixtures has priority if it is perfected by a fixture filing before the goods become fixtures or within 20 days thereafter.

Question 30

Prior construction mortgage v. security interest in fixtures

Answer 30

A prior construction mortgage has priority if recorded before the goods become fixtures.

Question 31

What rule applies to proceeds?

Answer 31

first to file or perfect applies. The filing or perfection date for the original collateral is the filing or perfection date for the proceeds.

Question 32

what rule applies to future advances

Answer 32

first to file or perfect rule applies. perfection dates from the time the advance is made

Question 33

what rule apply to accessions

Answer 33

general priority rules apply. after a default a secured party may have a right to remove the accession

Question 34

investment property and deposit accounts

Answer 34

a security interest held by a secured party with control over the collateral has priority over a secured party without control over the collateral