Transcript Assignment 32

Secured Transactions
Assignment 32
Secured Creditors against
Secured Creditors
1
The Priority Rules
The system of priority is basically “first in time, first in right.”
Question: Precisely what must a creditor do first to be first?
Competitors:
Security interest
Priority time:
(perfection is the
last of three
attachment
requirements
and the
perfection
requirement)
§9-322(a)
Security interest
The earlier of:
perfection or
filing
(perfection is the
last of three
attachment
requirements
and the
perfection
requirement) 2
The Priority Rules
The system of priority is basically “first in time, first in right.”
Question: Precisely what must a creditor do first to be first?
Competitors:
Security interest
Priority time:
The earlier of
perfection or
filing
(perfection is the
last of three
attachment
requirements
and the
perfection
requirement)
§9-322(a)
Security interest
The earlier of:
perfection or
filing
(perfection is the
last of three
attachment
requirements
and the
perfection
requirement) 3
The Priority Rules
The system of priority is basically “first in time, first in right.”
Question: Precisely what must a creditor do first to be first?
Competitors:
Security interest
Priority time:
The earlier of
perfection or
filing
(perfection is the
last of three
attachment
requirements
and the
perfection
requirement)
§9-322(a)
Security interest
The earlier of:
perfection or
filing
(perfection is the
last of three
attachment
requirements
and the
perfection
requirement) 4
The Priority Rules
The system of priority is basically “first in time, first in right.”
Question: Precisely what must a creditor do first to be first?
Competitors:
PMSI
Priority time:
The earlier of
perfection or
filing
§9-324(a)
Security interest
The earlier of:
perfection or
filing
(perfection is the
last of three
attachment
requirements
and the
perfection
requirement) 5
The Priority Rules
The system of priority is basically “first in time, first in right.”
Question: Precisely what must a creditor do first to be first?
Competitors:
PMSI
Priority time:
The earlier of
perfection or
filing
But PMSI always
wins if perfected
when debtor
receives
possession or
within 20 days
§9-324(a)
Security interest
The earlier of:
perfection or
filing
(perfection is the
last of three
attachment
requirements
and the
perfection
requirement) 6
The Priority Rules
The system of priority is basically “first in time, first in right.”
Question: Precisely what must a creditor do first to be first?
Competitors:
Priority time:
PMSI Seller
who perfected
within 20 days
§9-324(g)
PMSI Lender
who perfected
within 20 days
The earlier of:
perfection or
filing
7
The Priority Rules
The system of priority is basically “first in time, first in right.”
Question: Precisely what must a creditor do first to be first?
Competitors:
Priority time:
PMSI Seller
who perfected
within 20 days
Seller wins
§9-324(g)
PMSI Lender
who perfected
within 20 days
The earlier of:
perfection or
filing
8
The Priority Rules
The system of priority is basically “first in time, first in right.”
Question: Precisely what must a creditor do first to be first?
Competitors:
Priority time:
PMSI Lender
who perfected
within 20 days
§9-324(g)
§9-322(a)
PMSI Lender
who perfected
within 20 days
The earlier of:
perfection or
filing
9
The Priority Rules
The system of priority is basically “first in time, first in right.”
Question: Precisely what must a creditor do first to be first?
Competitors:
Priority time:
PMSI Lender
who perfected
within 20 days
The earlier of:
perfection or
filing
§9-324(g)
§9-322(a)
PMSI Lender
who perfected
within 20 days
The earlier of:
perfection or
filing
10
Priority Rule: PMSI versus Lien
Creditor, §9-317(e)
Filing
PMSI
Lien creditor
9-317(e). If a person files a financing statement with respect
to a purchase-money security interest
11
Priority Rule: PMSI versus Lien
Creditor, §9-317(e)
Delivery
20 day grace
Filing
PMSI
Lien creditor
9-317(e). If a person files a financing statement with respect
to a purchase-money security interest before or within 20
days after the debtor receives delivery
12
Priority Rule: PMSI versus Lien
Creditor, §9-317(e)
Delivery
20 day grace
Filing
PMSI
Lien creditor
Lien creditor
9-317(e). If a person files a financing statement with respect
to a purchase-money security interest before or within 20
days after the debtor receives delivery . . . the security
interest takes priority over the rights of a . . . lien creditor
13
Priority Rule: PMSI versus Lien
Creditor, §9-317(e)
Delivery
PMSI
Lien creditor
20 day grace
Attachment
Filing
Lien creditor
9-317(e). If a person files a financing statement with respect
to a purchase-money security interest before or within 20
days after the debtor receives delivery . . . the security
interest takes priority over the rights of a . . . lien creditor
which arise between the time the security interest
attaches and the time of filing.
14
Priority Rule: PMSI versus
Security Interest, §9-324(a)
Possession
20 day grace
Filing
PMSI
SI
§9-324(a). A perfected purchase-money security interest in
goods . . . has priority over a conflicting security interest in the
same goods . . . if the purchase money security interest is
perfected when the debtor receives possession of the collateral
or within 20 days thereafter.
15
Priority Rule: PMSI versus
Security Interest, §9-324(a)
Possession
20 day grace
Filing
PMSI
SI
Filing
§9-324(a). A perfected purchase-money security interest in
goods . . . has priority over a conflicting security interest in the
same goods . . . if the purchase money security interest is
perfected when the debtor receives possession of the collateral
or within 20 days thereafter.
16
Possession
20 day grace
Filing
PMSI
SI
§9-324(a). A perfected purchase-money security interest in goods .
. . has priority over a conflicting security interest in the same goods
. . . if the purchase money security interest is perfected when the
debtor receives possession . . . or within 20 days thereafter.
Delivery
20 day grace
Filing
PMSI
Lien creditor
9-317(e). If a person files a financing statement with respect to a
purchase-money security interest before or within 20 days after
the debtor receives delivery . . . the security interest takes
priority over the rights of a . . . lien creditor which arise between
17
the time the security interest attaches and the time of filing.
Possession
20 day grace
Filing
PMSI
SI
§9-324(a). A perfected purchase-money security interest in goods .
. . has priority over a conflicting security interest in the same goods
. . . if the purchase money security interest is perfected when the
debtor receives possession . . . or within 20 days thereafter.
Delivery
20 day grace
Filing
PMSI
Lien creditor
9-317(e). If a person files a financing statement with respect to a
purchase-money security interest before or within 20 days after
the debtor receives delivery . . . the security interest takes
priority over the rights of a . . . lien creditor which arise between
18
the time the security interest attaches and the time of filing.
Possession
PMSI
SI
20 day grace
Filing
Filing
§9-324(a). A perfected purchase-money security interest in goods .
. . has priority over a conflicting security interest in the same goods
. . . if the purchase money security interest is perfected when the
debtor receives possession . . . or within 20 days thereafter.
Delivery
PMSI
Lien creditor
20 day grace
Attachment
Filing
Levy
9-317(e). If a person files a financing statement with respect to a
purchase-money security interest before or within 20 days after
the debtor receives delivery . . . the security interest takes
priority over the rights of a . . . lien creditor which arise between
19
the time the security interest attaches and the time of filing.
Possession
PMSI
SI
20 day grace
Filing
Filing
§9-324(a). A perfected purchase-money security interest in goods .
. . has priority over a conflicting security interest in the same goods
. . . if the purchase money security interest is perfected when the
debtor receives possession . . . or within 20 days thereafter.
Delivery
PMSI
Lien creditor
20 day grace
Attachment
Filing
Levy
Levy
9-317(e). If a person files a financing statement with respect to a
purchase-money security interest before or within 20 days after
the debtor receives delivery . . . the security interest takes
priority over the rights of a . . . lien creditor which arise between
20
the time the security interest attaches and the time of filing.
Priority Rule: Transferor SI versus
Transferee SI, §9-325(a)
Secured 1
Debtor
SA and FS
2009 covers
Debtor’s
“equipment”
21
Priority Rule: Transferor SI versus
Transferee SI, §9-325(a)
Secured 1
Debtor
SA and FS
2009 covers
Debtor’s
“equipment”
Reservation of priority
against other lenders
against the collateral.
22
Priority Rule: Transferor SI versus
Transferee SI, §9-325(a)
SA and FS
2012 covers
Another’s
“equipment”
Secured 2
Secured 1
Another
Debtor
SA and FS
2009 covers
Debtor’s
“equipment”
Reservation of priority
against other lenders
against the collateral.
23
Priority Rule: Transferor SI versus
Transferee SI, §9-325(a)
SA and FS
2012 covers
Another’s
“equipment”
Secured 2
Another
Secured 1
SA and FS
2009 covers
Debtor’s
“equipment”
Debtor
Sale
(unauthorized)
Reservation of priority
against other lenders
against the collateral.
24
Priority Rule: Transferor SI versus
Transferee SI, §9-325(a)
SA and FS
2012 covers
Another’s
“equipment”
Secured 2
Another
Secured 1
SA and FS
2009 covers
Debtor’s
“equipment”
Debtor
Sale
(unauthorized)
Reservation of priority
against other lenders
against the collateral.
25
Priority Rule: Transferor SI versus
Transferee SI, §9-325(a)
SA and FS
2012 covers
Another’s
“equipment”
Secured 2
Another
Secured 1
Debtor
Sale
(unauthorized)
SA and FS
2009 covers
Debtor’s
“equipment”
§9-322(a)(1). Priority dates from the earlier of the time a filing
covering the collateral is first made or the security
interest . . . is first perfected . . .
26
Priority Rule: Transferor SI versus
Transferee SI, §9-325(a)
SA and FS
2012 covers
Another’s
“equipment”
Secured 2
Another
Secured 1
Debtor
Sale
(unauthorized)
SA and FS
2009 covers
Debtor’s
“equipment”
§9-322(a)(1). Priority dates from the earlier of the time a filing
covering the collateral is first made or the security
interest . . . is first perfected . . .
Secured 1 appears to win!
27
Priority Rule: Transferor SI versus
Transferee SI, §9-325(a)
SA and FS
2012 covers
Another’s
“equipment”
Secured 2
Secured 1
Another
Debtor
SA and FS
2009 covers
Debtor’s
“equipment”
§9-322(a)(1). Priority dates from the earlier of the time a filing
covering the collateral is first made or the security
interest . . . is first perfected . . .
Secured 1 appears to win!
But if Secured 1 wins, Secured 2 won’t lend. Unauthorized
sale would take Secured 1’s priority.
28
Priority Rule: Transferor SI versus
Transferee SI, §9-325(a)
SA and FS
2012 covers
Another’s
“equipment”
Secured 2
Another
Secured 1
Debtor
Sale
(unauthorized)
SA and FS
2009 covers
Debtor’s
“equipment”
§9-325(a). [Notwithstanding § 9-322(a) and 9-324] a security
interest created by a debtor is subordinate to a security
interest in the same collateral created by another person if:
(1) The debtor acquired the collateral subject to the security
interest created by the other person;
(2) The security interest created by the other person was
perfected when the debtor acquired the collateral . . .
29
Problem 32.1, page 531
Bank1
files
Aug 1
30
Problem 32.1, page 531
Bank1
files
Bank2 files
SA, lends
Aug 1
Aug 5
31
Problem 32.1, page 531
Bank1
files
Bank2 files
SA, lends
C-Dogs
Levies
Aug 1
Aug 5
Aug 7
32
Problem 32.1, page 531
Bank1
files
Bank2 files
SA, lends
C-Dogs
Levies
Bank1
SA, lends
Aug 1
Aug 5
Aug 7
Aug 10
33
Problem 32.1, page 531
Bank1
files
Bank2 files
SA, lends
C-Dogs
Levies
Bank1
SA, lends
Aug 1
Aug 5
Aug 7
Aug 10
Bank1 versus Bank2. Who wins?
34
Problem 32.1, page 531
Bank1
files
Bank2 files
SA, lends
C-Dogs
Levies
Bank1
SA, lends
Aug 1
Aug 5
Aug 7
Aug 10
Bank1 versus Bank2. Who wins? Bank1, filed before Bank2
filed or perfected. §9-322(a)(1).
35
Problem 32.1, page 531
Bank1
files
Bank2 files
SA, lends
C-Dogs
Levies
Bank1
SA, lends
Aug 1
Aug 5
Aug 7
Aug 10
Bank1 versus Bank2. Who wins? Bank1, filed before Bank2
filed or perfected. §9-322(a)(1).
Bank2 versus C-Dogs. Who wins?
36
Problem 32.1, page 531
Bank1
files
Bank2 files
SA, lends
C-Dogs
Levies
Bank1
SA, lends
Aug 1
Aug 5
Aug 7
Aug 10
Bank1 versus Bank2. Who wins? Bank1, filed before Bank2
filed or perfected. §9-322(a)(1).
Bank2 versus C-Dogs. Who wins? Bank2, perfected before
C-Dogs levied. §9-317(a)(2).
37
Problem 32.1, page 531
Bank1
files
Bank2 files
SA, lends
C-Dogs
Levies
Bank1
SA, lends
Aug 1
Aug 5
Aug 7
Aug 10
Bank1 versus Bank2. Who wins? Bank1, filed before Bank2
filed or perfected. §9-322(a)(1).
Bank2 versus C-Dogs. Who wins? Bank2, perfected before
C-Dogs levied. §9-317(a)(2).
C-Dogs versus Bank1. Who wins?
38
Problem 32.1, page 531
Bank1
files
Bank2 files
SA, lends
C-Dogs
Levies
Bank1
SA, lends
Aug 1
Aug 5
Aug 7
Aug 10
Bank1 versus Bank2. Who wins? Bank1, filed before Bank2
filed or perfected. §9-322(a)(1).
Bank2 versus C-Dogs. Who wins? Bank2, perfected before
C-Dogs levied. §9-317(a)(2).
C-Dogs versus Bank1. Who wins? C-Dogs, levied before
Bank 1 perfected or filed and complied with §9-203(b)(3).
Who is first?
39
Problem 32.1, page 531
Bank1
files
Bank2 files
SA, lends
C-Dogs
Levies
Bank1
SA, lends
Aug 1
Aug 5
Aug 7
Aug 10
Bank1 versus Bank2. Who wins? Bank1, filed before Bank2
filed or perfected. §9-322(a)(1).
Bank2 versus C-Dogs. Who wins? Bank2, perfected before
C-Dogs levied. §9-317(a)(2).
C-Dogs versus Bank1. Who wins? C-Dogs, levied before
Bank 1 perfected or filed and complied with §9-203(b)(3).
Who is first?
40
Problem 32.1, page 531
Bank1
files
Bank2 files
SA, lends
C-Dogs
Levies
Bank1
SA, lends
Aug 1
Aug 5
Aug 7
Aug 10
Bank1 versus Bank2. Who wins? Bank1, filed before Bank2
filed or perfected. §9-322(a)(1).
Bank2 versus C-Dogs. Who wins? Bank2, perfected before
C-Dogs levied. §9-317(a)(2).
C-Dogs versus Bank1. Who wins? C-Dogs, levied before
Bank 1 perfected or filed and complied with §9-203(b)(3).
Who is first? “Circularity of liens.”
Bank2
Bank1
C-Dogs
41
Problem 32.1, page 531
Bank1
files
Bank2 files
SA, lends
C-Dogs
Levies
Bank1
SA, lends
Aug 1
Aug 5
Aug 7
Aug 10
Bank1 versus Bank2. Who wins? Bank1, filed before Bank2
filed or perfected. §9-322(a)(1).
Bank2 versus C-Dogs. Who wins? Bank2, perfected before
C-Dogs levied. §9-317(a)(2).
C-Dogs versus Bank1. Who wins? C-Dogs, levied before
Bank 1 perfected or filed and complied with §9-203(b)(3).
Who is first? “Circularity of liens.”
Key: Bank1 has two priority dates
Bank2
Bank1
C-Dogs
42
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
Centurion lends to Airco, perfects in flight simulation
equipment, including after acquired.
43
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
Jul 21
Centurion lends to Airco, perfects in flight simulation
equipment, including after acquired.
Firstbank lends to FlightCo, perfects in flight simulation
equipment, including after acquired.
44
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
FlightCo sells
MD-80
to Airco
Jul 21
Nov 4
Centurion lends to Airco, perfects in flight simulation
equipment, including after acquired.
Firstbank lends to FlightCo, perfects in flight simulation
equipment, including after acquired.
FlightCo sells MD-80 flight simulation equipment to
Centurion in an unauthorized sale.
45
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
FlightCo sells
MD-80
to Airco
Jul 21
Nov 4
Centurion lends to Airco, perfects in flight simulation
equipment, including after acquired.
Firstbank lends to FlightCo, perfects in flight simulation
equipment, including after acquired.
FlightCo sells MD-80 flight simulation equipment to
Centurion in an unauthorized sale.
a. Who is first in the MD-80 flight simulation equipment?
46
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
FlightCo sells
MD-80
to Airco
Jul 21
Nov 4
Centurion lends to Airco, perfects in flight simulation
equipment, including after acquired.
Firstbank lends to FlightCo, perfects in flight simulation
equipment, including after acquired.
FlightCo sells MD-80 flight simulation equipment to
Centurion in an unauthorized sale.
a. Who is first in the MD-80 flight simulation equipment?
Firstbank, §9-325
47
Priority Rule: Transferor SI versus
Transferee SI, §9-325(a)
First Bank
Centurion
FlightCo
Airco
Sale
(unauthorized)
§9-325(a). [Notwithstanding § 9-322(a)] a security interest
created by [Airco] is subordinate to a security interest in
the same collateral created by [FlightCo] if:
(1) [Airco] acquired the collateral subject to the security
interest created by [FlightCo];
(2) The security interest created by [FlightCo] was perfected
48
when [Airco] acquired the collateral . . .
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
FlightCo sells
MD-80
to Airco
Jul 21
Nov 4
b. Airco paid FlightCo $750K. FlightCo deposited to Centurion.
49
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
FlightCo sells
MD-80
to Airco
Jul 21
Nov 4
b. Airco paid FlightCo $750K. FlightCo deposited to Centurion.
Does Centurion have a security interest in FlightCo’s Centurion
account?
50
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
FlightCo sells
MD-80
to Airco
Jul 21
Nov 4
b. Airco paid FlightCo $750K. FlightCo deposited to Centurion.
Does Centurion have a security interest in FlightCo’s Centurion
account? Yes, §9-203(b), boilerplate.
51
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
FlightCo sells
MD-80
to Airco
Jul 21
Nov 4
b. Airco paid FlightCo $750K. FlightCo deposited to Centurion.
Does Centurion have a security interest in FlightCo’s Centurion
account? Yes, §9-203(b), boilerplate.
Is Centurion perfected in the account?
52
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
FlightCo sells
MD-80
to Airco
Jul 21
Nov 4
b. Airco paid FlightCo $750K. FlightCo deposited to Centurion.
Does Centurion have a security interest in FlightCo’s Centurion
account? Yes, §9-203(b), boilerplate.
Is Centurion perfected in the account? Yes, §9-104(a)(1).
53
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
FlightCo sells
MD-80
to Airco
Jul 21
Nov 4
b. Airco paid FlightCo $750K. FlightCo deposited to Centurion.
Does Centurion have a security interest in FlightCo’s Centurion
account? Yes, §9-203(b), boilerplate.
Is Centurion perfected in the account? Yes, §9-104(a)(1).
Does FirstBank have a security interest in the $750,000?
54
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
FlightCo sells
MD-80
to Airco
Jul 21
Nov 4
b. Airco paid FlightCo $750K. FlightCo deposited to Centurion.
Does Centurion have a security interest in FlightCo’s Centurion
account? Yes, §9-203(b), boilerplate.
Is Centurion perfected in the account? Yes, §9-104(a)(1).
Does FirstBank have a security interest in the $750,000? Yes,
§9-102(a)(64), §9-315(a)(2) and (b). LIB rule.
55
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
FlightCo sells
MD-80
to Airco
Jul 21
Nov 4
b. Airco paid FlightCo $750K. FlightCo deposited to Centurion.
Does Centurion have a security interest in FlightCo’s Centurion
account? Yes, §9-203(b), boilerplate.
Is Centurion perfected in the account? Yes, §9-104(a)(1).
Does FirstBank have a security interest in the $750,000? Yes,
§9-102(a)(64), §9-315(a)(2) and (b). LIB rule.
Is Firstbank perfected in the $750,000?
56
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
FlightCo sells
MD-80
to Airco
Jul 21
Nov 4
b. Airco paid FlightCo $750K. FlightCo deposited to Centurion.
Does Centurion have a security interest in FlightCo’s Centurion
account? Yes, §9-203(b), boilerplate.
Is Centurion perfected in the account? Yes, §9-104(a)(1).
Does FirstBank have a security interest in the $750,000? Yes,
§9-102(a)(64), §9-315(a)(2) and (b). LIB rule.
Is Firstbank perfected in the $750,000? Yes, §9-315(c), (d)(2)
57
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
FlightCo sells
MD-80
to Airco
Jul 21
Nov 4
b. Airco paid FlightCo $750K. FlightCo deposited to Centurion.
Does Centurion have a security interest in FlightCo’s Centurion
account? Yes, §9-203(b), boilerplate.
Is Centurion perfected in the account? Yes, §9-104(a)(1).
Does FirstBank have a security interest in the $750,000? Yes,
§9-102(a)(64), §9-315(a)(2) and (b). LIB rule.
Is Firstbank perfected in the $750,000? Yes, §9-315(c), (d)(2)
Who’s first? §9-327(1) and (3).
58
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
FlightCo sells
MD-80
to Airco
Jul 21
Nov 4
b. Airco paid FlightCo $750K. FlightCo deposited to Centurion.
Does Centurion have a security interest in FlightCo’s Centurion
account? Yes, §9-203(b), boilerplate.
Is Centurion perfected in the account? Yes, §9-104(a)(1).
Does FirstBank have a security interest in the $750,000? Yes,
§9-102(a)(64), §9-315(a)(2) and (b). LIB rule.
Is Firstbank perfected in the $750,000? Yes, §9-315(c), (d)(2)
Who’s first? §9-327(1) and (3). Centurion has control;
Firstbank doesn’t. §9-104(a)(1). So Centurion has priority.
59
Problem 32.2, page 531
Centurion lends
to Airco, perfects
Mar 21
FirstBank lends
to FlightCo, perfects
FlightCo sells
MD-80
to Airco
Jul 21
Nov 4
b. Airco paid FlightCo $750K. FlightCo deposited to Centurion.
Does Centurion have a security interest in FlightCo’s Centurion
account? Yes, §9-203(b), boilerplate.
Is Centurion perfected in the account? Yes, §9-104(a)(1).
Does FirstBank have a security interest in the $750,000? Yes,
§9-102(a)(64), §9-315(a)(2) and (b). LIB rule.
Is Firstbank perfected in the $750,000? Yes, §9-315(c), (d)(2)
Who’s first? §9-327(1) and (3). Centurion has control;
Firstbank doesn’t. §9-104(a)(1). So Centurion has priority.
Bank accounts are black holes!
60
Problem 32.3, page 532
ONB lends
on computer
A year ago: ONB perfects in the computer and any
“substitutions, replacements or accessions.” No provisions
regarding future advances.
61
Problem 32.3, page 532
ONB lends
on computer
ONB files against
“equipment”
A year ago: ONB perfects in the computer and any
“substitutions, replacements or accessions.” No provisions
regarding future advances. Financing statement describes
collateral as “equipment.”
62
Problem 32.3, page 532
ONB lends
on computer
ONB files against
“equipment”
ONB lends on dry
cleaning equipment
A year ago: ONB perfects in the computer and any
“substitutions, replacements or accessions.” No provisions
regarding future advances. Financing statement describes
collateral as “equipment.”
Now: ONB lends against dry cleaning equipment.
63
Problem 32.3, page 532
ONB lends
on computer
ONB files against
“equipment”
ONB lends on dry
cleaning equipment
A year ago: ONB perfects in the computer and any
“substitutions, replacements or accessions.” No provisions
regarding future advances. Financing statement describes
collateral as “equipment.”
Now: ONB lends against dry cleaning equipment. Is a new
financing statement necessary?
64
Problem 32.3, page 532
ONB lends
on computer
ONB files against
“equipment”
ONB lends on dry
cleaning equipment
A year ago: ONB perfects in the computer and any
“substitutions, replacements or accessions.” No provisions
regarding future advances. Financing statement describes
collateral as “equipment.”
Now: ONB lends against dry cleaning equipment. Is a new
financing statement necessary?
No. The new security interest will have priority as of the old
financing statement. “Equipment” describes the dry cleaning
65
equipment. §9-502(d).
Problem 32.4, page 532
a. Carol loans $1K secured.
1K
66
Problem 32.4, page 532
a. Carol loans $1K secured. BCA
loans $45K secured
45K
1K
67
Problem 32.4, page 532
a. Carol loans $1K secured. BCA
loans $45K secured
Assume boat worth about $32K.
32K
45K
1K
68
Problem 32.4, page 532
a. Carol loans $1K secured. BCA
loans $45K secured
Assume boat worth about $32K.
BCA repossesses.
32K
45K
1K
69
Problem 32.4, page 532
a. Carol loans $1K secured. BCA
loans $45K secured
Assume boat worth about $32K.
BCA repossesses.
What effect if Carol advances $31K?
32K
45K
1K
70
Problem 32.4, page 532
a. Carol loans $1K secured. BCA
loans $45K secured
Assume boat worth about $32K.
BCA repossesses.
What effect if Carol advances $31K?
Advance will have priority §9322(a)(1) (provided SA signed)
45K
32K
32K
71
Problem 32.4, page 532
a. Carol loans $1K secured. BCA
loans $45K secured
Assume boat worth about $32K.
BCA repossesses.
What effect if Carol advances $31K?
Advance will have priority §9322(a)(1) (provided SA signed)
What title passes at the sale?
45K
32K
32K
Before
After
72
Problem 32.4, page 532
a. Carol loans $1K secured. BCA
loans $45K secured
Assume boat worth about $32K.
BCA repossesses.
What effect if Carol advances $31K?
Advance will have priority §9322(a)(1) (provided SA signed)
What title passes at the sale?
45K
32K
32K
32K
32K
Before
After
Buyer takes subject to $32K.
73
Problem 32.4, page 532
a. Carol loans $1K secured. BCA
loans $45K secured
Assume boat worth about $32K.
BCA repossesses.
What effect if Carol advances $31K?
Advance will have priority §9322(a)(1) (provided SA signed)
What title passes at the sale?
45K
32K
32K
32K
32K
Before
After
Buyer takes subject to $32K.
What can BCA expect from this
sale?
74
Problem 32.4, page 532
a. Carol loans $1K secured. BCA
loans $45K secured
Assume boat worth about $32K.
BCA repossesses.
What effect if Carol advances $31K?
Advance will have priority §9322(a)(1) (provided SA signed)
What title passes at the sale?
45K
32K
32K
32K
32K
Before
After
Buyer takes subject to $32K.
What can BCA expect from this
sale?
Nothing. Bob beat BCA!
75
Problem 32.4, page 532
a. Carol loans $1K secured. BCA
loans $45K secured
Assume boat worth about $32K.
BCA repossesses.
What effect if Carol advances $31K?
Advance will have priority §9322(a)(1) (provided SA signed)
What title passes at the sale?
Buyer takes subject to $32K.
What can BCA expect from this
sale?
Nothing. Bob beat BCA!
45K
32K
32K
32K
32K
Before
After
b. Same facts, except
Carol had only a
financing statement
on file?
76
Problem 32.4, page 532
a. Carol loans $1K secured. BCA
loans $45K secured
Assume boat worth about $32K.
BCA repossesses.
What effect if Carol advances $31K?
Advance will have priority §9322(a)(1) (provided SA signed)
What title passes at the sale?
Buyer takes subject to $32K.
What can BCA expect from this
sale?
Nothing. Bob beat BCA!
45K
32K
32K
32K
32K
Before
After
b. Same facts, except
Carol had only a
financing statement
on file? Still works.
77
Problem 32.5, page 532
BCA wants to continue lending in
second position, but doesn’t
want the first to be able to lend
more money after BCA makes
its loan.
32K
45K
1K
78
Problem 32.5, page 532
BCA wants to continue lending in
second position, but doesn’t
want the first to be able to lend
more money after BCA makes
its loan.
How can BCA accomplish that?
32K
45K
1K
79
Problem 32.5, page 532
BCA wants to continue lending in
second position, but doesn’t
want the first to be able to lend
more money after BCA makes
its loan.
How can BCA accomplish that?
Subordination agreements with
the first lenders.
32K
45K
1K
80
Problem 32.5, page 532
BCA wants to continue lending in
second position, but doesn’t
want the first to be able to lend
more money after BCA makes
its loan.
How can BCA accomplish that?
Subordination agreements with
the first lenders.
32K
45K
1K
Why would the first lenders give
them?
81
Problem 32.5, page 532
BCA wants to continue lending in
second position, but doesn’t
want the first to be able to lend
more money after BCA makes
its loan.
How can BCA accomplish that?
Subordination agreements with
the first lenders.
32K
45K
1K
Why would the first lenders give
them?
1. Their borrowers want them.
82
Problem 32.5, page 532
BCA wants to continue lending in
second position, but doesn’t
want the first to be able to lend
more money after BCA makes
its loan.
How can BCA accomplish that?
Subordination agreements with
the first lenders.
32K
45K
1K
Why would the first lenders give
them?
1. Their borrowers want them.
2. First lender gives up only the
right to make a loan it doesn’t
want to make.
83
Problem 32.6, page 533
Sara
Inventory
Lender
Security
Interest
Speakers
Dealers
Sara sells speakers; on
default, the inventory
lender takes them.
84
Problem 32.6, page 533
Sara
Inventory
Lender
Security
Interest
Speakers
Dealers
Sara sells speakers; on
default, the inventory
lender takes them.
How can Sara get
priority?
85
Problem 32.6, page 533
Sara
Inventory
Lender
Security
Interest
Speakers
Dealers
PMSI
Sara sells speakers; on
default, the inventory
lender takes them.
How can Sara get
priority? PMSI.
86
Problem 32.6, page 533
Sara
Inventory
Lender
Security
Interest
Speakers
Dealers
PMSI
Sara sells speakers; on
default, the inventory
lender takes them.
How can Sara get
priority? PMSI.
What must she do?
87
Problem 32.6, page 533
Sara
Inventory
Lender
Security
Interest
Speakers
Dealers
PMSI
Sara sells speakers; on
default, the inventory
lender takes them.
How can Sara get
priority? PMSI.
What must she do?
§9-324(b). A perfected purchase money security interest in
inventory has priority over a conflicting security interest . . . if
88
Problem 32.6, page 533
Sara
Inventory
Lender
Security
Interest
Speakers
Dealers
PMSI
Sara sells speakers; on
default, the inventory
lender takes them.
How can Sara get
priority? PMSI.
What must she do?
§9-324(b). A perfected purchase money security interest in
inventory has priority over a conflicting security interest . . . if
(1) The PMSI is perfected when the debtor receives possession
89
Problem 32.6, page 533
Sara
Inventory
Lender
Security
Interest
Speakers
Dealers
PMSI
Sara sells speakers; on
default, the inventory
lender takes them.
How can Sara get
priority? PMSI.
What must she do?
§9-324(b). A perfected purchase money security interest in
inventory has priority over a conflicting security interest . . . if
(1) The PMSI is perfected when the debtor receives possession
(2) The PMSI party sends an authenticated notification to the
holder of the conflicting security interest
90
Problem 32.6, page 533
Sara
Inventory
Lender
Security
Interest
Speakers
Dealers
PMSI
Sara sells speakers; on
default, the inventory
lender takes them.
How can Sara get
priority? PMSI.
What must she do?
§9-324(b). A perfected purchase money security interest in
inventory has priority over a conflicting security interest . . . if
(1) The PMSI is perfected when the debtor receives possession
(2) The PMSI party sends an authenticated notification to the
holder of the conflicting security interest
(3) The holder . . . receives the notification within five years
before the debtor receives possession
91
Problem 32.6, page 533
Sara
Inventory
Lender
Security
Interest
Speakers
Dealers
PMSI
Sara sells speakers; on
default, the inventory
lender takes them.
How can Sara get
priority? PMSI.
What must she do?
§9-324(b). A perfected purchase money security interest in
inventory has priority over a conflicting security interest . . . if
(1) The PMSI is perfected when the debtor receives possession
(2) The PMSI party sends an authenticated notification to the
holder of the conflicting security interest
(3) The holder . . . receives the notification within five years
before the debtor receives possession
(4) The notification states that the sender expects to acquire 92
a
PMSI in inventory and describes the inventory.
Problem 32.6, page 533
What problems do you
foresee? What can
Sara do about them?
Sara
Inventory
Lender
Security
Interest
Speakers
Dealers
PMSI
Sara sells speakers; on
default, the inventory
lender takes them.
How can Sara get
priority? PMSI.
What must she do?
§9-324(b). A perfected purchase money security interest in
inventory has priority over a conflicting security interest . . . if
(1) The PMSI is perfected when the debtor receives possession
(2) The PMSI party sends an authenticated notification to the
holder of the conflicting security interest
(3) The holder . . . receives the notification within five years
before the debtor receives possession
(4) The notification states that the sender expects to acquire 93
a
PMSI in inventory and describes the inventory.
Problem 32.6, page 533
Sara’s own
Inventory
Lender
Lender
Security
Security
Interest Speakers
Interest
Sara
Dealers
SI
Sara sells speakers; on
default, the inventory
lender takes them.
How can Sara get
priority? PMSI.
What must she do?
94
Problem 32.6, page 533
Sara’s own
Inventory
Lender
Lender
Security
Security
Interest Speakers
Interest
Sara
Dealers
SI
Sara sells speakers; on
default, the inventory
lender takes them.
How can Sara get
priority? PMSI.
What must she do?
§9-325. A security interest created by a debtor [Dealers] is
subordinate to a security interest in the same collateral
created by another person [Sara] if:
95
Problem 32.6, page 533
Sara’s own
Inventory
Lender
Lender
Security
Security
Interest Speakers
Interest
Sara
Dealers
SI
Sara sells speakers; on
default, the inventory
lender takes them.
How can Sara get
priority? PMSI.
What must she do?
§9-325. A security interest created by a debtor [Dealers] is
subordinate to a security interest in the same collateral
created by another person [Sara] if:
(1) The debtor [Dealers] acquired the collateral subject to the
security interest created by the other person [Sara];
96
Problem 32.6, page 533
Sara’s own
Inventory
Lender
Lender
Security
Security
Interest Speakers
Interest
Sara
Dealers
SI
Sara sells speakers; on
default, the inventory
lender takes them.
How can Sara get
priority? PMSI.
What must she do?
§9-325. A security interest created by a debtor [Dealers] is
subordinate to a security interest in the same collateral
created by another person [Sara] if:
(1) The debtor [Dealers] acquired the collateral subject to the
security interest created by the other person [Sara];
(2) The security interest created by the other person [Sara] was
perfected when the debtor [Dealers] acquired the collateral;
97
Problem 32.6, page 533
Sara’s own
Inventory
Lender
Lender
Security
Security
Interest Speakers
Interest
Sara
Dealers
SI
Sara sells speakers; on
default, the inventory
lender takes them.
How can Sara get
priority? PMSI.
What must she do?
§9-325. A security interest created by a debtor [Dealers] is
subordinate to a security interest in the same collateral
created by another person [Sara] if:
(1) The debtor [Dealers] acquired the collateral subject to the
security interest created by the other person [Sara];
(2) The security interest created by the other person [Sara] was
perfected when the debtor [Dealers] acquired the collateral;
and
(3) There is no period thereafter when the SI is unperfected. 98
Problem 32.6, page 533
Sara’s own
Inventory
Lender
Lender
Security but 9-320(a) Security
Interest Speakers
Interest
Sara
Dealers
SI
Sara sells speakers; on
default, the inventory
lender takes them.
How can Sara get
priority? PMSI.
What must she do?
§9-325. A security interest created by a debtor [Dealers] is
subordinate to a security interest in the same collateral
created by another person [Sara] if:
(1) The debtor [Dealers] acquired the collateral subject to the
security interest created by the other person [Sara];
(2) The security interest created by the other person [Sara] was
perfected when the debtor [Dealers] acquired the collateral;
and
(3) There is no period thereafter when the SI is unperfected. 99
Problem 31.3, page 519
1.2M
800K
1.2M
2.5M
2.0M
Day loan
borrowed
91 days before
800K
700K
Day loan
repaid
90 days before
1.5M
Bankruptcy
§547(c)(5). “The trustee may not avoid . . . a transfer . . . that
creates a perfected security interest in inventory or a receivable .
. . except to the extent that the aggregate of all such transfers . . .
caused a reduction, as of the date of filing . . . of any amount by
which the debt secured . . . exceeded the value of all security
interests . . . 90 days before the filing of the petition.” $0
123