1) Lloyd borrows money from Collin. In exchange for the loan, Lloyd offers Collins a security interest in his boat. The next day, Lloyd offers Matilda a security interest in the same boat in exchange for a loan. Neither Collin nor Matilda properly perfects the security interest. Lloyd defaults on both loans. Matilda begins attachment proceedings and property attaches the boat. Who will receive the boat? Why?
1 Answer from Attorneys
Is this a law school quiz? Collin was an idiot for not recording a UCC 1 and/or a lien on the title to the boat and holding title to the boat or taking actual possession of the boat. Matilda was also an idiot for loaning money without doing this.
Whichever one gets to a lawyer first and manages to perfect the security interest will win. So if Matilda gets to a lawyer and perfects before Collin, she will win over Collin. If neither perfect, then Collin would win because his rights attached first.
See PA UCC 13 Pa.C.S.A. § 9322. Priorities among conflicting security interests in and agricultural liens on same collateral
(a) General priority rules.--Except as otherwise provided in this section, priority among conflicting security interests and agricultural liens in the same collateral is determined according to the following rules:
(1) Conflicting perfected security interests and agricultural liens rank according to priority in time of filing or perfection. Priority dates from the earlier of the time a filing covering the collateral is first made or the security interest or agricultural lien is first perfected, if there is no period thereafter when there is neither filing nor perfection.
(2) A perfected security interest or agricultural lien has priority over a conflicting unperfected security interest or agricultural lien.
(3) The first security interest or agricultural lien to attach or become effective has priority if conflicting security interests and agricultural liens are unperfected.
See 13 Pa.C.S.A. § 9308 - § 9314 for a discussion of perfecting a security interest.
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