Law Of Secured Transactions – Admission/Application Essay Example
In secured transactions, priority competition only arises when more than one creditor has been granted a security interest in the same collateral. Insuch a case, the time that a secured party files or perfects is a very important determining factor of priority between two secured parties, although in some instances, purchase money security interests (PMSIs) are given first priority. In case none of the secured parties has a PMSI and the debtor has given a security interest to more than one party, then three rules are used to determine priority.
The first rule covers a party with perfected security and that with unperfected security. In this case, the rule states that the party with perfect security interest gets priority over the one with unperfected security interest.
The second rule covers parties with unperfected security interests. In such a case the rule states that the first security interest to attach prevails. The third rule covers parties with perfected security interests. Here the rule states that the first party to either perfect or file gets priority (Martin, 2006, p. 38).
In this case both Hi Finance Company (HFC) and Metro Bank have perfected security interests. This means that the third rule applies in their case. This means that Hi Finance Company (HFC) having been the first to perfect or file will get priority over the collateral.
Martin et al. (2006). Emanuel Law Outlines: Secured Transactions. Publisher: Aspen Publishers Online