27A ONC § 9-318 Particular priority rules

§ 9-318. Particular priority rules.

A. Relationship to Preceding Section. This section creates exceptions to the general priority rules of 27A ONC § 9-317.

B. Consignee Deemed to Have Rights of Consignor. For the purpose of this Osage Nation Secured Transactions Act, while goods are in the possession of a consignee, the consignee is deemed to have rights and title to the goods identical to those the consignor had or had power to transfer. If Part 3 of this Osage Nation Secured Transactions Act results in the consignor having priority over a creditor of the consignee, law other than this Osage Nation Secured Transactions Act determines the rights and title of the consignee with regard to that creditor.

C. Ordinary Course Buyers, Licensees and Lessees Take Free. Except as otherwise provided in this subsection, a buyer in ordinary course of business, a person that takes a nonexclusive license of a general intangible in ordinary course of business, or a person that takes a lease of goods in ordinary course of business, takes its interest in the collateral free of a security interest in the collateral created by the seller, licensor, or lessor, even if the security interest is perfected and the buyer, licensee or lessee knows of its existence. Whether a licensee or lessee takes its interest in ordinary course of business is to be determined by criteria parallel to those for a buyer in ordinary course of business (27A ONC § 9-106(A)(7)). This subsection does not apply to:

1. A buyer of farm products from a person engaged in farming operations, unless the buyer:

a. Obtains from the seller a notarized statement setting forth the name and address of any person that has a security interest in the farm products, and

b. Either:

i. Obtains consent to the sale free of the security interest from the secured party, or

ii. Makes payment for the farm products jointly to the seller and the secured party;

2. A buyer of goods in the possession of the secured party (27A ONC § 9-313).

D. Buyer of Consumer Goods Takes Free. A buyer of goods from a person who used or bought the goods for use primarily for personal, family or household purposes takes free of a security interest, even if perfected, if the buyer buys:

1. Without knowledge of the security interest;

2. For value;

3. Primarily for the buyer’s personal, family, or household purposes; and

4. In the case of goods having a value of Five Thousand Dollars ($5,000) or more, before the filing of a financing statement covering the goods. However, this subsection does not apply to a buyer of goods in the possession of the secured party (27A ONC § 9-313).

1. A purchaser of chattel paper or an instrument has priority over a security interest if:

a. The purchaser, in good faith and in the ordinary course of the purchaser’s business, gives new value and takes possession of the collateral;

b. The collateral does not indicate that it has been previously assigned to an identified person other than the purchaser; and

c. The purchaser is otherwise without knowledge that the purchase violates the rights of the secured party.

2. A purchaser with priority in chattel paper under subsection (E)(1) of this section also has priority in proceeds of the chattel paper to the extent that:

a. The proceeds consist of the specific goods covered by the chattel paper or cash proceeds of the specific goods, even if the security interest in the proceeds is unperfected; or

b. 27A ONC § 9-317(C), (D) or (E) so provides.

F. Holder in Due Course and Others Protected. This Osage Nation Secured Transactions Act does not limit the rights of, or impose liability on, a holder in due course of a negotiable instrument, a holder to which a negotiable document has been duly negotiated, or a person protected against the assertion of a claim to investment property under other applicable law. Filing under this Osage Nation Secured Transactions Act is not notice of a claim or defense to the holder or protected person.

1. With respect to a conflicting security interest, the priority of an advance under a security agreement is determined under 27A ONC § 9-317(B), except that perfection dates from the time the advance is made if the security interest securing it is perfected only by attachment (27A ONC § 9-309) or temporarily by law (27A ONC § 9-312(E), (F) or (G)) and is not made pursuant to a commitment entered into before or while the security interest is perfected by another means.

2. With respect to a lien creditor, the security interest securing an advance is subordinate if the advance is made more than forty-five (45) days after the person becomes a lien creditor, unless the advance is made without knowledge of the lien or pursuant to a commitment entered into without knowledge of the lien.

3. With respect to a buyer of goods other than a buyer in ordinary course of business (27A ONC § 9-106(A)(7)), and with respect to a lessee of goods that does not take its lease in ordinary course of business (27A ONC § 9-318(C)), the security interest securing an advance is subordinate if the advance is made after the earlier of the time the secured party acquires knowledge of the purchase or forty-five (45) days after the purchase, unless the advance is made pursuant to a commitment entered into without knowledge of the purchase and before the expiration of the forty-five (45) day period.

4. Subsections (G)(1) and (G)(2) of this section do not apply to a security interest held by a person that is a consignor or a buyer of accounts, chattel paper, payment intangibles or promissory notes.

H. Purchase-Money Super-Priority. The following rule governs the priority of a purchase-money security interest and a conflicting security interest in collateral and its proceeds:

1. Goods Other Than Inventory and Livestock. A perfected purchase-money security interest in goods other than inventory or livestock that are farm products has priority over a conflicting security interest, and a perfected security interest in identifiable proceeds also has priority, if the purchase-money security interest is perfected when the debtor receives possession of the collateral or within twenty (20) days thereafter.

2. Inventory and Livestock. A perfected purchase-money security interest in inventory or livestock that are farm products has priority over a conflicting security interest if the purchase-money security interest is perfected when the debtor acquires possession of the goods and the purchase-money secured party sends timely and appropriate notice to the holder of the conflicting security interest; provided, that no such notice is required unless the holder of the conflicting security interest has filed a financing statement covering the same types of goods:

a. Before the purchase-money security interest is perfected by filing, or

b. If the purchase-money security interest is temporarily perfected under 27A ONC § 9-312(F), before the beginning of the applicable twenty (20) day period.

If a purchase-money secured party has priority in inventory under this subsection (H)(2), it also has priority in chattel paper or an instrument constituting proceeds, in proceeds of the chattel paper except as otherwise provided in this section, and in identifiable cash proceeds received on or before delivery of the goods to a buyer. If a purchase-money secured party has priority in livestock that are farm products under this subsection (H)(2), it also has priority in their identifiable proceeds and products in their unmanufactured states.

3. Software. A perfected purchase-money security interest in software has priority over a conflicting security interest, and a perfected security interest in its identifiable proceeds also has priority, to the extent that the purchase-money security interest in the goods in which the software was acquired for use has priority in the goods and proceeds of the goods.

4. Priority among PMSIs. Notwithstanding the rest of this subsection (H), if two or more purchase-money security interests are perfected in the same collateral, the security interest securing an obligation for the price has priority, and otherwise priority is determined by the rule of 27A ONC § 9-317(B).

I. Transferee of Money or Funds Takes Free. A transferee of money or of funds from a deposit account takes the money or funds free of a security interest unless the transferee acts in collusion with the debtor in violating the rights of the secured party.

J. Priority of Interest Perfected by Control; Possession of Certificated Security in Registered Form. A security interest in a security or an investment account perfected by control (27A ONC § 9-314) has priority over a security interested perfected in another way. Multiple security interests perfected by control rank according to time of acquiring control; however, a security interest held by an investment intermediary in the investment account that it maintains has priority regardless of time of acquiring control. A security interest in a certificated security in registered form that is perfected by possession (27A ONC § 9-313) and not by control has priority over a conflicting security interest perfected by a method other than control.

K. Possessory Liens. A lien created by statute or rule of law which secures payment or performance of an obligation for services or materials furnished with respect to goods by a person in the ordinary course of the person’s business and whose effectiveness depends on the person’s possession of the goods has priority over a security interest in the goods unless the lien is created by a statute that expressly provides otherwise. ONCA 07-22, eff. June 18, 2007.