Fact Pattern 20-1
General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1 million from Business Finance Corporation for a security interest in the equipment. The next day, GLC borrows $500,000 from Commercial Bank, also for a security interest in the equipment. GLC defaults on the loans.
-Refer to Fact Pattern 20-1.Suppose that Business Finance perfects its security interest when GLC takes possession of the equipment. In that circumstance, the party with priority to the collateral on GLC's default would be

Question

Fact Pattern 20-1
General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1 million from Business Finance Corporation for a security interest in the equipment. The next day, GLC borrows $500,000 from Commercial Bank, also for a security interest in the equipment. GLC defaults on the loans.
-Refer to Fact Pattern 20-1.Suppose that Business Finance perfects its security interest when GLC takes possession of the equipment. In that circumstance, the party with priority to the collateral on GLC's default would be​

Quizplus · Accepted Answer

Business Finance would have a priority over Commercial Bank because they perfected their security interest first. GLC would not have priority over either lender in the event of default. Therefore, Business Finance would be the only party with priority to the collateral on GLC's default.

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