Fact Pattern 20-1
General Leasing Company (GLC) buys equipment for use as inventory, borrow¬ing $1 million from Helpful Finance Corporation for a security in¬terest in the equipment. The next day, GLC borrows $500,000 from Interstate Bank, also for a security interest in the equipment. GLC defaults on the loans.

-Refer to Fact Pattern 20-1. Suppose that two weeks after GLC takes possession of the equipment, Helpful and Interstate file financing statements, with Interstate filing first. In that circumstance, the party with priority to the equipment is
A) GLC.
B) Helpful and Interstate proportionately.
C) Helpful only.
D) Interstate only.

Question

Fact Pattern 20-1
General Leasing Company (GLC) buys equipment for use as inventory, borrow¬ing $1 million from Helpful Finance Corporation for a security in¬terest in the equipment. The next day, GLC borrows $500,000 from Interstate Bank, also for a security interest in the equipment. GLC defaults on the loans.

-Refer to Fact Pattern 20-1. Suppose that two weeks after GLC takes possession of the equipment, Helpful and Interstate file financing statements, with Interstate filing first. In that circumstance, the party with priority to the equipment is
A) GLC.
B) Helpful and Interstate proportionately.
C) Helpful only.
D) Interstate only.

Quizplus · Accepted Answer

Under the first-to-file rule, the party who filed their financing statement first (in this case, Interstate) takes priority over any subsequently filed financing statements. Therefore, Interstate has priority to the equipment over Helpful Finance Corporation. GLC does not have priority as they defaulted on the loans.

Fact Pattern 20-1 General Leasing Company (GLC) Buys Equipment for Use as Inventory