UCC Article 9 Priority Rules - Need Help Understanding 90 ALR 4th 859 Case Analysis

This is exactly right. I've seen cases where a general description like 'all equipment' in the senior UCC-1 beats a more specific description filed later. But if the senior creditor's description was something like 'office equipment' and the disputed items are manufacturing equipment, that's a different story.

Wait, doesn't the financing statement just need to reasonably identify the collateral? I thought as long as it gives notice to other creditors, specificity isn't required for priority purposes.

The 2019 filing says 'all equipment, machinery, and fixtures now owned or hereafter acquired.' The 2022 filing specifically lists 'CNC machining centers, model XR-500 and XR-750, serial numbers 12345 and 67890.' The equipment in question are those exact CNC machines that were purchased in 2021.

That's a slam dunk for the senior creditor then. 'All equipment now owned or hereafter acquired' clearly covers CNC machines purchased after the filing. The junior creditor's specific description doesn't give them priority over a proper broad description that was filed first.

Agreed. The 'hereafter acquired' language is key here. Even though the CNC machines weren't owned when the 2019 UCC-1 was filed, they're covered by the after-acquired property clause.

That sounds useful. Did it help with the legal analysis too, or just document checking?

Just document verification - it won't give legal advice, but it's great for catching filing errors that could impact priority. In my case, it spotted a debtor name discrepancy between the security agreement and UCC-1 that we needed to fix with an amendment.

Good point. I checked and both filings are still effective. The 2019 one was continued in 2024, and the 2022 one obviously doesn't need continuation yet.

Make sure that continuation was filed properly too. I've seen cases where the continuation statement had errors that affected the original filing's effectiveness.

The filing system exists to give public notice to other potential creditors. If priority was based on loan dates, there'd be no way for a later creditor to know about existing security interests. The UCC filing system creates transparency.

I guess that makes sense, but it still seems like a trap for people who don't know about all these filing requirements.

That's why due diligence searches are so important before making secured loans. Any commercial lender should be searching UCC filings before taking a security interest.

That's a great question. I need to check whether the 2022 creditor actually financed the purchase of the CNC machines or just took them as collateral for an existing debt.

PMSI priority can trump the first-to-file rule, but there are specific requirements. The PMSI creditor usually needs to file within a certain timeframe and sometimes give notice to prior creditors.

This is solid advice. I'd also recommend pulling certified copies of all the UCC filings from the Secretary of State to make sure you're working with the complete and accurate records.

Yes, and check the search reports to see if there are any other filings you might have missed. Sometimes there are multiple creditors involved that don't show up in basic searches.

That's the kind of error that can really hurt you in a priority dispute. Did you have to file a corrective amendment?

Exactly, we filed a UCC-3 correction to fix the filing number reference. Better to catch these issues early than discover them when there's a dispute.

This is huge. The debtor name has to match exactly what's on the organizational documents. Even small differences can make a filing seriously misleading.

I always double-check debtor names against the state corporate records before filing. It's such an easy mistake to make but can void your entire security interest.

Thanks, that matches my initial analysis. I'm going to dig deeper into the PMSI angle just to be thorough, but it's looking like the senior creditor has the stronger position.

Good approach. Always worth checking every possible angle in a priority dispute, especially with that much money at stake.

Good point. Priority is usually governed by the law of the state where the debtor is located, not where the collateral is physically located.

And if the debtor changed locations between the filings, that could affect the analysis too. There are specific rules about continuing effectiveness when debtors relocate.