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Priority of Multiple Purchase Money Security Interest

37. What is the priority of conflicting purchase-money security interests?

Often a debtor will acquire property subject to multiple purchase-money security interests. This happens when multiple parties lend money for the purchase (enabling loans) and the seller of the good finances part of the purchase. In such a situation, the UCC provides priority for the individual financing the purchase over individuals providing a financing loan. If all of the financiers or enabling lenders are the same, the UCC provides that the first to file or perfect the security interest determines priority.

•    Discussion: Why do you think the law prefers financing sellers over enabling lenders? If all lenders have similar PMSIs, how do you feel about the first to file system?

•    Practice Question: ABC Corp purchase equipment from 123, LLC. ABC places a down payment of 50% of the value and finances the remaining 50% through 123. 333, Inc., and 444, Inc., make separate loans in equal amounts to ABC to provide the money to place the 50% down payment. In this situation, what is the priority of security interests?

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