posted by Anonymous .
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?
The first party who is to file the statement has the priority to the collateral. The person signing over the papers and giving the bank permission to take the collateral has every right to calm the property that was disclosed in the financing statement. Agile borrowed five hundred thousand dollars from the Metro Bank and signed the dis-closer and settled the amount with interest. Along with the dis-closer was a written note explaining the collateral and what they could take if the loan is not paid in full in a timely fashion. Since Agile did not pay the loan in full at the time it was to be paid, the Metro Bank took the collateral. The collateral's were made up of the person getting the loan’s inventory and proceeds. The HFC would get first choice of the property, inventory and proceeds because they are the first priority of the loan. Then the bank will get the rest of what is left over due to them being a second party in the loan process. If Agile did not want the collateral to be taken than he should have paid in full the loan and got it over with.