1. 1 Secured Transactions Assignment 32 Secured Creditors against Secured Creditors

2. 2 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§9-322(a)Security interest Priority time:(perfection is the last of three attachment requirements and the perfection requirement) The earlier of: perfection or filing (perfection is the last of three attachment requirements and the perfection requirement) The Priority Rules

3. 3 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§9-322(a)Security interest Priority time:The earlier of perfection or filing (perfection is the last of three attachment requirements and the perfection requirement) The earlier of: perfection or filing (perfection is the last of three attachment requirements and the perfection requirement) The Priority Rules

4. 4 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§9-322(a)Security interest Priority time:The earlier of perfection or filing (perfection is the last of three attachment requirements and the perfection requirement) The earlier of: perfection or filing (perfection is the last of three attachment requirements and the perfection requirement) The Priority Rules

5. 5 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§9-324(a)Security interest Priority time:The earlier of perfection or filing The earlier of: perfection or filing (perfection is the last of three attachment requirements and the perfection requirement) The Priority Rules

6. 6 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§9-324(a)Security interest Priority time:The earlier of perfection or filing But PMSI always wins if perfected when debtor receives possession or within 20 days The earlier of: perfection or filing (perfection is the last of three attachment requirements and the perfection requirement) The Priority Rules

7. 7 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 Seller who perfected within 20 days §9-324(g)PMSI Lender who perfected within 20 days Priority time:The earlier of: perfection or filing The Priority Rules

8. 8 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 Seller who perfected within 20 days §9-324(g)PMSI Lender who perfected within 20 days Priority time:Seller winsThe earlier of: perfection or filing The Priority Rules

9. 9 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 Lender who perfected within 20 days §9-324(g) §9-322(a) PMSI Lender who perfected within 20 days Priority time:The earlier of: perfection or filing The Priority Rules

10. 10 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 Lender who perfected within 20 days §9-324(g) §9-322(a) PMSI Lender who perfected within 20 days Priority time:The earlier of: perfection or filing The Priority Rules

11. 11 9-317(e). If a person files a financing statement with respect to a purchase-money security interest Priority Rule: PMSI versus Lien Creditor, §9-317(e) PMSI Filing Lien creditor

12. 12 Delivery 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 20 day grace Priority Rule: PMSI versus Lien Creditor, §9-317(e) PMSI Filing Lien creditor

13. 13 Delivery 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 20 day grace Priority Rule: PMSI versus Lien Creditor, §9-317(e) PMSI Lien creditor Filing Lien creditor

14. 14 Delivery 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. 20 day grace Priority Rule: PMSI versus Lien Creditor, §9-317(e) PMSI Lien creditor Filing Attachment Lien creditor

15. 15 Possession 20 day grace Priority Rule: PMSI versus Security Interest, §9-324(a) PMSI Filing 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.

16. 16 Possession §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. 20 day grace Priority Rule: PMSI versus Security Interest, §9-324(a) PMSI SI Filing

17. 17 Delivery 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. 20 day grace PMSI Lien creditor Filing Possession §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. 20 day grace PMSI SI Filing

18. 18 Delivery 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. 20 day grace PMSI Lien creditor Filing Possession §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. 20 day grace PMSI SI Filing

19. 19 Delivery 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. 20 day grace PMSI Lien creditor Filing Attachment Levy Possession §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. 20 day grace PMSI SI Filing

20. 20 Delivery 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. 20 day grace PMSI Lien creditor Filing Attachment Levy Possession §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. 20 day grace PMSI SI Filing Levy

21. 21 SA and FS 2009 covers Debtor’s “equipment” Priority Rule: Transferor SI versus Transferee SI, §9-325(a) Debtor Secured 1

22. 22 SA and FS 2009 covers Debtor’s “equipment” Priority Rule: Transferor SI versus Transferee SI, §9-325(a) Debtor Secured 1 Reservation of priority against other lenders against the collateral.

23. 23 SA and FS 2009 covers Debtor’s “equipment” Priority Rule: Transferor SI versus Transferee SI, §9-325(a) AnotherDebtor Secured 2Secured 1 SA and FS 2012 covers Another’s “equipment” Reservation of priority against other lenders against the collateral.

24. 24 Priority Rule: Transferor SI versus Transferee SI, §9-325(a) AnotherDebtor Secured 2Secured 1 Sale (unauthorized) SA and FS 2012 covers Another’s “equipment” SA and FS 2009 covers Debtor’s “equipment” Reservation of priority against other lenders against the collateral.

25. 25 Sale (unauthorized) Priority Rule: Transferor SI versus Transferee SI, §9-325(a) AnotherDebtor Secured 2Secured 1 SA and FS 2012 covers Another’s “equipment” SA and FS 2009 covers Debtor’s “equipment” Reservation of priority against other lenders against the collateral.

26. 26 Sale (unauthorized) Priority Rule: Transferor SI versus Transferee SI, §9-325(a) AnotherDebtor Secured 2Secured 1 §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... SA and FS 2012 covers Another’s “equipment” SA and FS 2009 covers Debtor’s “equipment”

27. 27 Sale (unauthorized) Priority Rule: Transferor SI versus Transferee SI, §9-325(a) AnotherDebtor Secured 2Secured 1 §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! SA and FS 2012 covers Another’s “equipment” SA and FS 2009 covers Debtor’s “equipment”

28. 28 Priority Rule: Transferor SI versus Transferee SI, §9-325(a) AnotherDebtor Secured 2Secured 1 §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. SA and FS 2012 covers Another’s “equipment” SA and FS 2009 covers Debtor’s “equipment”

29. 29 Sale (unauthorized) §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... Priority Rule: Transferor SI versus Transferee SI, §9-325(a) AnotherDebtor Secured 2Secured 1 SA and FS 2012 covers Another’s “equipment” SA and FS 2009 covers Debtor’s “equipment”

30. 30 Problem 32.1, page 531 Bank1 files Aug 1

31. 31 Problem 32.1, page 531 Bank1 files Aug 1 Bank2 files SA, lends Aug 5

32. 32 C-Dogs Levies Problem 32.1, page 531 Bank1 files Aug 1 Bank2 files SA, lends Aug 5Aug 7

33. 33 C-Dogs Levies Problem 32.1, page 531 Bank1 files Aug 1 Bank1 SA, lends Bank2 files SA, lends Aug 5Aug 7Aug 10

34. 34 C-Dogs Levies Problem 32.1, page 531 Bank1 files Aug 1 Bank1 versus Bank2. Who wins? Bank1 SA, lends Bank2 files SA, lends Aug 5Aug 7Aug 10

35. 35 C-Dogs Levies Problem 32.1, page 531 Bank1 files Aug 1 Bank1 versus Bank2. Who wins? Bank1, filed before Bank2 filed or perfected. §9-322(a)(1). Bank1 SA, lends Bank2 files SA, lends Aug 5Aug 7Aug 10

36. 36 C-Dogs Levies Problem 32.1, page 531 Bank1 files Aug 1 Bank1 versus Bank2. Who wins? Bank1, filed before Bank2 filed or perfected. §9-322(a)(1). Bank2 versus C-Dogs. Who wins? Bank1 SA, lends Bank2 files SA, lends Aug 5Aug 7Aug 10

37. 37 C-Dogs Levies Problem 32.1, page 531 Bank1 files Aug 1 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). Bank1 SA, lends Bank2 files SA, lends Aug 5Aug 7Aug 10

38. 38 C-Dogs Levies Problem 32.1, page 531 Bank1 files Aug 1 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? Bank1 SA, lends Bank2 files SA, lends Aug 5Aug 7Aug 10

39. 39 C-Dogs Levies Problem 32.1, page 531 Bank1 files Aug 1 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? Bank1 SA, lends Bank2 files SA, lends Aug 5Aug 7Aug 10

40. 40 C-Dogs Levies Problem 32.1, page 531 Bank1 files Aug 1 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? Bank1 SA, lends Bank2 files SA, lends Aug 5Aug 7Aug 10

41. 41 C-Dogs Levies Problem 32.1, page 531 Bank1 files Aug 1 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.” Bank1 SA, lends Bank2 files SA, lends Aug 5Aug 7Aug 10 C-Dogs Bank1Bank2

42. 42 C-Dogs Levies Problem 32.1, page 531 Bank1 files Aug 1 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 Bank1 SA, lends Bank2 files SA, lends Aug 5Aug 7Aug 10 C-Dogs Bank1Bank2

43. 43 Centurion lends to Airco, perfects in flight simulation equipment, including after acquired. Problem 32.2, page 531 Centurion lends to Airco, perfects Mar 21

44. 44 Centurion lends to Airco, perfects in flight simulation equipment, including after acquired. Firstbank lends to FlightCo, perfects in flight simulation equipment, including after acquired. Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21 Centurion lends to Airco, perfects Mar 21

45. 45 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. Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21Nov 4 Centurion lends to Airco, perfects Mar 21 FlightCo sells MD-80 to Airco

46. 46 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? Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21Nov 4 Centurion lends to Airco, perfects Mar 21 FlightCo sells MD-80 to Airco

47. 47 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 Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21Nov 4 Centurion lends to Airco, perfects Mar 21 FlightCo sells MD-80 to Airco

48. 48 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 when [Airco] acquired the collateral... Priority Rule: Transferor SI versus Transferee SI, §9-325(a) FlightCoAirco First BankCenturion

49. 49 Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21Nov 4 Centurion lends to Airco, perfects Mar 21 FlightCo sells MD-80 to Airco b. Airco paid FlightCo $750K. FlightCo deposited to Centurion.

50. 50 Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21Nov 4 Centurion lends to Airco, perfects Mar 21 FlightCo sells MD-80 to Airco b. Airco paid FlightCo $750K. FlightCo deposited to Centurion. Does Centurion have a security interest in FlightCo’s Centurion account?

51. 51 Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21Nov 4 Centurion lends to Airco, perfects Mar 21 FlightCo sells MD-80 to Airco 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.

52. 52 Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21Nov 4 Centurion lends to Airco, perfects Mar 21 FlightCo sells MD-80 to Airco 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?

53. 53 Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21Nov 4 Centurion lends to Airco, perfects Mar 21 FlightCo sells MD-80 to Airco 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).

54. 54 Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21Nov 4 Centurion lends to Airco, perfects Mar 21 FlightCo sells MD-80 to Airco 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?

55. 55 Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21Nov 4 Centurion lends to Airco, perfects Mar 21 FlightCo sells MD-80 to Airco 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.

56. 56 Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21Nov 4 Centurion lends to Airco, perfects Mar 21 FlightCo sells MD-80 to Airco 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?

57. 57 Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21Nov 4 Centurion lends to Airco, perfects Mar 21 FlightCo sells MD-80 to Airco 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)

58. 58 Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21Nov 4 Centurion lends to Airco, perfects Mar 21 FlightCo sells MD-80 to Airco 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).

59. 59 Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21Nov 4 Centurion lends to Airco, perfects Mar 21 FlightCo sells MD-80 to Airco 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.

60. 60 Problem 32.2, page 531 FirstBank lends to FlightCo, perfects Jul 21Nov 4 Centurion lends to Airco, perfects Mar 21 FlightCo sells MD-80 to Airco 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!

61. 61 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.

62. 62 ONB lends on computer 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.” Problem 32.3, page 532 ONB files against “equipment”

63. 63 ONB lends on computer 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. ONB lends on dry cleaning equipment Problem 32.3, page 532 ONB files against “equipment”

64. 64 ONB lends on computer 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? ONB lends on dry cleaning equipment Problem 32.3, page 532 ONB files against “equipment”

65. 65 ONB lends on computer 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 equipment. §9-502(d). ONB lends on dry cleaning equipment ONB files against “equipment” Problem 32.3, page 532

66. 66 Problem 32.4, page 532 1K a. Carol loans $1K secured.

67. 67 Problem 32.4, page 532 1K 45K a. Carol loans $1K secured. BCA loans $45K secured

68. 68 Problem 32.4, page 532 1K 32K 45K a. Carol loans $1K secured. BCA loans $45K secured Assume boat worth about $32K.

69. 69 Problem 32.4, page 532 1K 32K 45K a. Carol loans $1K secured. BCA loans $45K secured Assume boat worth about $32K. BCA repossesses.

70. 70 Problem 32.4, page 532 1K 32K 45K a. Carol loans $1K secured. BCA loans $45K secured Assume boat worth about $32K. BCA repossesses. What effect if Carol advances $31K?

71. 71 Problem 32.4, page 532 32K 45K 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 §9- 322(a)(1) (provided SA signed)

72. 72 Problem 32.4, page 532 32K Before After 32K 45K 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 §9- 322(a)(1) (provided SA signed) What title passes at the sale?

73. 73 32K Problem 32.4, page 532 32K Before After 32K 45K 32K 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 §9- 322(a)(1) (provided SA signed) What title passes at the sale? Buyer takes subject to $32K.

74. 74 32K Problem 32.4, page 532 32K Before After 32K 45K 32K 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 §9- 322(a)(1) (provided SA signed) What title passes at the sale? Buyer takes subject to $32K. What can BCA expect from this sale?

75. 75 32K Problem 32.4, page 532 32K Before After 32K 45K 32K 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 §9- 322(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!

76. 76 32K Problem 32.4, page 532 32K Before After 32K 45K 32K 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 §9- 322(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! b. Same facts, except Carol had only a financing statement on file?

77. 77 32K Problem 32.4, page 532 32K Before After 32K 45K 32K 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 §9- 322(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! b. Same facts, except Carol had only a financing statement on file? Still works.

78. 78 Problem 32.5, page 532 32K 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. 1K 45K

79. 79 Problem 32.5, page 532 32K 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? 1K 45K

80. 80 Problem 32.5, page 532 32K 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. 1K 45K

81. 81 Problem 32.5, page 532 32K 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. Why would the first lenders give them? 1K 45K

82. 82 Problem 32.5, page 532 32K 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. Why would the first lenders give them? 1. Their borrowers want them. 1K 45K

83. 83 Problem 32.5, page 532 32K 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. 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. 1K 45K

84. 84 Sara sells speakers; on default, the inventory lender takes them. Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers

85. 85 Sara sells speakers; on default, the inventory lender takes them. How can Sara get priority? Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers

86. 86 Sara sells speakers; on default, the inventory lender takes them. How can Sara get priority? PMSI. Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers PMSI

87. 87 Sara sells speakers; on default, the inventory lender takes them. How can Sara get priority? PMSI. What must she do? Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers PMSI

88. 88 Sara sells speakers; on default, the inventory lender takes them. How can Sara get priority? PMSI. What must she do? Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers PMSI §9-324(b). A perfected purchase money security interest in inventory has priority over a conflicting security interest... if

89. 89 Sara sells speakers; on default, the inventory lender takes them. How can Sara get priority? PMSI. What must she do? Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers PMSI §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

90. 90 Sara sells speakers; on default, the inventory lender takes them. How can Sara get priority? PMSI. What must she do? Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers PMSI §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

91. 91 Sara sells speakers; on default, the inventory lender takes them. How can Sara get priority? PMSI. What must she do? Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers PMSI §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

92. 92 Sara sells speakers; on default, the inventory lender takes them. How can Sara get priority? PMSI. What must she do? Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers PMSI §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 a PMSI in inventory and describes the inventory.

93. 93 Sara sells speakers; on default, the inventory lender takes them. How can Sara get priority? PMSI. What must she do? Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers PMSI §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 a PMSI in inventory and describes the inventory. What problems do you foresee? What can Sara do about them?

94. 94 Sara sells speakers; on default, the inventory lender takes them. How can Sara get priority? PMSI. What must she do? Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers Sara’s own Lender Security Interest SI

95. 95 Sara sells speakers; on default, the inventory lender takes them. How can Sara get priority? PMSI. What must she do? Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers §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: Sara’s own Lender Security Interest SI

96. 96 Sara sells speakers; on default, the inventory lender takes them. How can Sara get priority? PMSI. What must she do? Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers §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]; Sara’s own Lender Security Interest SI

97. 97 Sara sells speakers; on default, the inventory lender takes them. How can Sara get priority? PMSI. What must she do? Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers §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; Sara’s own Lender Security Interest SI

98. 98 Sara sells speakers; on default, the inventory lender takes them. How can Sara get priority? PMSI. What must she do? Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers §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. Sara’s own Lender Security Interest SI

99. 99 Sara sells speakers; on default, the inventory lender takes them. How can Sara get priority? PMSI. What must she do? Problem 32.6, page 533 DealersSara Inventory Lender Security Interest Speakers §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. Sara’s own Lender Security Interest SI but 9-320(a)

100. 100 Problem 32.7, page 526 5M Grumman owes Centurion $1 million unsecured Grumman owes First $5 million, secured by all assets 5M

101. 101 Problem 32.7, page 526 5M Grumman owes Centurion $1 million unsecured Grumman owes First $5 million, secured by all assets First’s financing statement does not show up on a search

102. 102 Problem 32.7, page 526 5M 1.4M Grumman owes Centurion $1 million unsecured Grumman owes First $5 million, secured by all assets First’s financing statement does not show up on a search Plan: Centurion lends another $400K, gets first position

103. 103 Problem 32.7, page 526 5M 1.4M Grumman owes Centurion $1 million unsecured Grumman owes First $5 million, secured by all assets First’s financing statement does not show up on a search Plan: Centurion lends another $400K, gets first position. (Then First will refile.)

104. 104 Problem 32.7, page 526 Grumman owes Centurion $1 million unsecured Grumman owes First $5 million, secured by all assets First’s financing statement does not show up on a search Plan: Centurion lends another $400K, gets first position. (Then First will refile.) a.Is there any way First could have an effective financing statement on file? 5M 1.4M

105. 105 Problem 32.7, page 526 5M 1.4M Grumman owes Centurion $1 million unsecured Grumman owes First $5 million, secured by all assets First’s financing statement does not show up on a search Plan: Centurion lends another $400K, gets first position. (Then First will refile.) a.Is there any way First could have an effective financing statement on file? In a state where collateral or debtor were recently located Against a former owner of the collateral. §9-507(a) Incorrectly indexed by filing office error. §9-517

106. 106 Problem 32.7, page 526 5M 1.4M Hypothetical: The filing office wrongfully rejects Firstbank’s filing. Centurian knows that Firstbank claims a SI, but gets a clean search and purchases.

107. 107 Problem 32.7, page 526 5M 1.4M Hypothetical: The filing office wrongfully rejects Firstbank’s filing. Centurian knows that Firstbank claims a SI, but gets a clean search and purchases. §9-516(d). A record... the filing office wrongfully refuses to accept is effective, except as against a purchaser... which gives value in reasonable reliance upon the absence of the record from the files.

108. 108 Problem 32.7, page 526 5M 1.4M Hypothetical: The filing office wrongfully rejects Firstbank’s filing. Centurian knows that Firstbank claims a SI, but gets a clean search and purchases. §9-516(d). A record... the filing office wrongfully refuses to accept is effective, except as against a purchaser... which gives value in reasonable reliance upon the absence of the record from the files. Is Centurion’s reliance unreasonable?

109. 109 Problem 32.7, page 526 5M 1.4M Hypothetical: The filing office wrongfully rejects Firstbank’s filing. Centurian knows that Firstbank claims a SI, but gets a clean search and purchases. §9-516(d). A record... the filing office wrongfully refuses to accept is effective, except as against a purchaser... which gives value in reasonable reliance upon the absence of the record from the files. Is Centurion’s reliance unreasonable? If not, whose is?

110. 110 Problem 32.7, page 526 5M 1.4M Hypothetical: The filing office wrongfully rejects Firstbank’s filing. Centurian knows that Firstbank claims a SI, but gets a clean search and purchases. §9-516(d). A record... the filing office wrongfully refuses to accept is effective, except as against a purchaser... which gives value in reasonable reliance upon the absence of the record from the files. Is Centurian’s reliance unreasonable? If not, whose is? 9-338 Comment 2. “A purchaser who has not made itself aware of the information in the filing office with respect to the debtor cannot act in ‘reasonable reliance’ upon incorrect information.”

111. 111 Problem 32.7, page 526 5M 1.4M Hypothetical: The filing office wrongfully rejects Firstbank’s filing. Centurian knows that Firstbank claims a SI, but gets a clean search and purchases. §9-516(d). A record... the filing office wrongfully refuses to accept is effective, except as against a purchaser... which gives value in reasonable reliance upon the absence of the record from the files. Is Centurian’s reliance unreasonable? If not, whose is? 9-338 Comment 2. “A purchaser who has not made itself aware of the information in the filing office with respect to the debtor cannot act in ‘reasonable reliance’ upon incorrect information.” One who doesn’t search? Or one who knows of the rejection?

112. 112 Problem 32.7, page 526 5M 1.4M b. Is it safe to search for a misindexed filing?

113. 113 Problem 32.7, page 526 5M 1.4M b. Is it safe to search for a misindexed filing? If we find an erroneous filing before we lend, is it binding on us?

114. 114 Problem 32.7, page 526 5M 1.4M b. Is it safe to search for a misindexed filing? If we find an erroneous filing before we lend, is it binding on us? No. §9-322(a)(1). Knowledge is irrelevant.

115. 115 Problem 32.7, page 526 5M 1.4M b. Is it safe to search for a misindexed filing? If we find an erroneous filing before we lend, is it binding on us? No. §9-322(a)(1). Knowledge is irrelevant.

116. 116 Problem 32.7, page 526 5M 1.4M b. Is it safe to search for a misindexed filing? If we find an erroneous filing before we lend, is it binding on us? No. §9-322(a)(1). Knowledge is irrelevant. Yes. §9-516(d). We can’t reasonably rely on absence of the record from the files.

117. 117 Problem 32.7, page 526 5M 1.4M b. Is it safe to search for a misindexed filing? If we find an erroneous filing before we lend, is it binding on us? No. §9-322(a)(1). Knowledge is irrelevant. Yes. §9-516(d). We can’t reasonably rely on absence of the record from the files. c. What should we do?

118. 118 Problem 32.7, page 526 5M 1.4M b. Is it safe to search for a misindexed filing? If we find an erroneous filing before we lend, is it binding on us? No. §9-322(a)(1). Knowledge is irrelevant. Yes. §9-516(d). We can’t reasonably rely on absence of the record from the files. c. What should we do? Don’t just lend. We could be wrong.

119. 119 Problem 32.7, page 526 5M 1.4M b. Is it safe to search for a misindexed filing? If we find an erroneous filing before we lend, is it binding on us? No. §9-322(a)(1). Knowledge is irrelevant. Yes. §9-516(d). We can’t reasonably rely on absence of the record from the files. c. What should we do? Don’t just lend. We could be wrong. Make a contingent deal.

120. 120 Problem 32.7, page 526 5M 1.4M b. Is it safe to search for a misindexed filing? If we find an erroneous filing before we lend, is it binding on us? No. §9-322(a)(1). Knowledge is irrelevant. Yes. §9-516(d). We can’t reasonably rely on absence of the record from the files. c. What should we do? Don’t just lend. We could be wrong. Make a contingent deal. File a financing statement.

121. 121 Problem 32.7, page 526 5M 1.4M b. Is it safe to search for a misindexed filing? If we find an erroneous filing before we lend, is it binding on us? No. §9-322(a)(1). Knowledge is irrelevant. Yes. §9-516(d). We can’t reasonably rely on absence of the record from the files. c. What should we do? Don’t just lend. We could be wrong. Make a contingent deal. File a financing statement. Then give First a call.

122. 122 5M 1.4M b. Is it safe to search for a misindexed filing? If we find an erroneous filing before we lend, is it binding on us? No. §9-322(a)(1). Knowledge is irrelevant. Yes. §9-516(d). We can’t reasonably rely on absence of the record from the files. c. What should we do? Don’t just lend. We could be wrong. Make a contingent deal. File a financing statement. Then give First a call. d. Is there an ethical issue here? Problem 32.7, page 526

123. 123 Problem 31.3, page 519 2.0M 1.2M 1.5M 700K 90 days before 800K §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 Bankruptcy Day loan borrowed Day loan repaid 2.5M 1.2M 91 days before