Timothy R. Zinnecker, Pimzy Whimsy in the Eleventh Circuit: Reflections on In Re Alphatech Systems, Inc., 40 Gonz. L. Rev. 379 (2005).
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As a general rule, a priority dispute between holders of competing security interests under Uniform Commercial Code Article 9 (“U.C.C. Article 9”) is resolved in favor of the secured party that was the first creditor to file its financing statement or perfect its security interest. However, a different non-temporal rule may apply if one of the security interests is a purchase-money security interest (“PMSI”). One of these non-temporal rules affords the second-in-time creditor with first-in-line status, the so-called “super-priority” rule, if the creditor has timely perfected a PMSI “in goods other than inventory or livestock.”
The application of this super-priority rule was at the heart of the analysis in Textron Financial Corp. v. United Financial Group, Inc. (In re Alphatech Systems, Inc.), a decision recently rendered by a three-judge panel of the United States Court of Appeals for the Eleventh Circuit.
Textron involved a priority dispute between two secured creditors, each claiming a perfected security interest in a piece of the bankrupt debtor’s equipment.
One creditor claimed priority based on its earlier filing and its after-acquired property clause while the other creditor alleged super-priority as a holder of a timely perfected PMSI.
The appellate panel affirmed earlier decisions by the bankruptcy court and the district court by awarding priority to the initial creditor, concluding that the purchase-money creditor was not entitled to super-priority because it had failed to timely file its financing statement….Read More