Maya borrowed money from Solvent National Bank and gave the bank a security interest in her business equipment, both present and after-acquired. She later borrowed money from Resilient Savings and Loans to purchase additional business equipment. Three and a half weeks after Maya purchased the new equipment and took possession of it, an employee of Resilient discovered the bank has filed financing statement concerning the bank's loan to Maya. Resilient immediately recorded a financing statement, so as to perfect its purchase money security interest in the equipment. Maya then defaulted on the obligation owed to the bank and on the obligation owed to Resilient. Who has the first priority security interest in the equipment purchased by Maya with the funds borrowed from Resilient Savings and Loans?

Question

Quizplus · Accepted Answer

The basic rule established by the Uniform Commercial Code is that when more than one security interest in the same collateral has been filed (or otherwise perfected), the first security interest to be filed (or perfected) has priority over any that is filed (or perfected) later. If only one security interest has been perfected, for example, by filing, then that security interest has priority. However, if none of the conflicting security interests has been perfected, then the first security interest to be attached to the collateral has priority. In this scenario, Solvent National Bank has the first priority security interest in the equipment purchased by Maya with the funds borrowed from Resilient Savings and Loans.

Maya Borrowed Money from Solvent National Bank and Gave the Bank