Agile Corporation borrows $1 million from Hi Finance Company (HFC). Agile signs a financing statement that describes the collateral, its inventory and proceeds, and HFC files the statement in the appropriate state office. Using the same collateral, Agile later borrows $500,000 from Metro Bank, which files its financing statement. Agile defaults on the loans. Metro claims that at the time of its loan it was unaware of HFCs interest. Between these parties, who has priority to the collateral?
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The institution that has a perfected security interest has priority to the collateral, and if both have perfected security interests, the one that perfected first has the right. If both have not perfected, the HFC has the right to collateral.
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Jun 14th, 2015
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