Fact Pattern 29-2B
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 both loans.
-Refer to Fact Pattern 29-2B.Suppose that Helpful perfects its se?curity in?ter?est when GLC takes possession of the equipment.In that cir?cum?stance,the party with pri?ority to the collateral on GLC's default would be

Question

Fact Pattern 29-2B 
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 both loans.
-Refer to Fact Pattern 29-2B.Suppose that Helpful perfects its se?curity in?ter?est when GLC takes possession of the equipment.In that cir?cum?stance,the party with pri?ority to the collateral on GLC's default would be

Quizplus · Accepted Answer

Helpful Finance Corporation would have priority over Interstate Bank because it perfected its security interest when GLC took possession of the equipment. Under the first-to-file or first-to-perfect rule, the first creditor to perfect its security interest in collateral generally has priority over later creditors. Therefore, Helpful would have priority to the collateral on GLC's default. Interstate would only have a secondary claim to any remaining assets after Helpful's claim had been satisfied.