Uniform Commercial Code Business Law Secured Transactions question, On May 1, Jo
ID: 453013 • Letter: U
Question
Uniform Commercial Code Business Law Secured Transactions question,
On May 1, Josh asked Ashton to loan him $5,000. Ashton indicated that she was willing to do so, but indicated that the loan had to be secured with some type of collateral. Josh agreed to put up his extensive baseball card collection as collateral. Ashton received permission to file a financing statement, Josh and Ashton signed a security agreement giving Ashton an interest in the baseball card collection and Ashton loaned Josh the money. On May 3, Josh borrowed money from Zach, pledging the baseball card collection to secure the debt. In order to protect his interest, Zach took possession of the baseball card collection and paid Josh money on the same day. On May 5, Ashton properly filed the financing statement. Who has priority, Ashton or Zach? Explain.
Explanation / Answer
In this case Zach has priority.Because there is a pledged security agreement between Josh and Zach where Zach took the possession of the baseball card collection and paid josh money on the same day.This is a case of perfection by creditor's possession.where the perfection is dated from the time of possession.The perfection of asecurity agreement allows a secured party to gain priority to the collateral over any third party.Ashton does not have priority because he has properly filed the financing statement after Zach has taken the possession of the collateral to secure the debt.
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