Florence borrows $1,500 from Fremont,leaving her gold necklace with Fremont as collateral.Two weeks later,Florence borrows $1,000 from Corner Bank.Florence signs a security agreement and a financing statement giving Corner Bank a security interest in the same gold necklace.The financing statement is filed in the appropriate location.If Florence defaults on both loans,which creditor has the superior rights to the necklace?

Question

Quizplus · Accepted Answer

Fremont has the superior rights to the necklace because his interest was the first to perfect. Even though Corner Bank has a security interest as well, their interest is subordinate to Fremont's because Fremont's interest was perfected first. Being first in time typically gives a creditor priority in a situation like this.

Florence Borrows $1,500 from Fremont,leaving Her Gold Necklace with Fremont