Smith Auto Sales has a secured loan on its inventory through Northshore Credit Union,which Northshore filed in February.In March,Smith Auto Sales has another secured loan on its inventory from GMAC credit.GMAC files its security interest in May.Which creditor will have priority in the event of a default by Smith Auto Sales?
A)Neither will have priority and both will share equal revenue from the sale of inventory.
B)Northshore will have priority and it will have its debt satisfied prior to GMAC receiving funds.
C)Since GMAC came last,it will have priority and will have its debt satisfied before Northshore.
D)Since there is a conflict with the security with the inventory,neither security interest will be recognized and both creditors will get nothing.

Question

Quizplus · Accepted Answer

According to UCC 9-322(a) (1),the basic rule is that when more than one security interest in the same collateral has been filed or perfected then priority is established by who filed first.

Smith Auto Sales Has a Secured Loan on Its Inventory