GA Code § 11-9-324 (2021)
2021 Georgia Code|Title 11 - Commercial Code|Article 9 - Secured Transactions|Part 3 - Perfection and Priority|§ 11-9-324. Priority of Purchase Money Security Interests

  General rule; purchase money priority. Except as otherwise provided in subsection (g) of this Code section, a perfected purchase money security interest in goods other than inventory or livestock has priority over a conflicting security interest in the same goods, and, except as otherwise provided in Code Section 11-9-327, a perfected security interest in its identifiable proceeds also has priority if the purchase money security interest is perfected when the debtor receives possession of the collateral or within 20 days thereafter.   Inventory purchase money priority. Subject to subsection (c) of this Code section and except as otherwise provided in subsection (g) of this Code section, a perfected purchase money security interest in inventory has priority over a conflicting security interest in the same inventory, has priority over a conflicting security interest in chattel paper or an instrument constituting proceeds of the inventory and in proceeds of the chattel paper, if so provided in Code Section 11-9-330, and, except as otherwise provided in Code Section 11-9-327, also has priority in identifiable cash proceeds of the inventory to the extent the identifiable cash proceeds are received on or before the delivery of the inventory to a buyer, if:   The purchase money security interest is perfected when the debtor receives possession of the inventory;   The purchase money secured party sends an authenticated notification to the holder of the conflicting security interest;   The holder of the conflicting security interest receives the notification within five years before the debtor receives possession of the inventory; and   The notification states that the person sending the notification has or expects to acquire a purchase money security interest in inventory of the debtor and describes the inventory.     Holders of conflicting inventory security interests to be notified. Paragraphs (2) through (4) of subsection (b) of this Code section apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of inventory:   If the purchase money security interest is perfected by filing, before the date of the filing; or   If the purchase money security interest is temporarily perfected without filing or possession under subsection (f) of Code Section 11-9-312, before the beginning of the 20 day period thereunder.     Livestock purchase money priority. Subject to subsection (e) of this Code section and except as otherwise provided in subsection (g) of this Code section, a perfected purchase money security interest in livestock that are farm products has priority over a conflicting security interest in the same livestock, and, except as otherwise provided in Code Section 11-9-327, a perfected security interest in their identifiable proceeds and identifiable products in their unmanufactured states also has priority, if:   The purchase money security interest is perfected when the debtor receives possession of the livestock;   The purchase money secured party sends an authenticated notification to the holder of the conflicting security interest;   The holder of the conflicting security interest receives the notification within six months before the debtor receives possession of the livestock; and   The notification states that the person sending the notification has or expects to acquire a purchase money security interest in livestock of the debtor and describes the livestock.     Holders of conflicting livestock security interests to be notified. Paragraphs (2) through (4) of subsection (d) of this Code section apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of livestock:   If the purchase money security interest is perfected by filing, before the date of the filing; or   If the purchase money security interest is temporarily perfected without filing or possession under subsection (f) of Code Section 11-9-312, before the beginning of the 20 day period thereunder.     Software purchase money priority. Except as otherwise provided in subsection (g) of this Code section, a perfected purchase money security interest in software has priority over a conflicting security interest in the same collateral, and, except as otherwise provided in Code Section 11-9-327, 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 under this Code section.   Conflicting purchase money security interests. If more than one security interest qualifies for priority in the same collateral under subsection (a), (b), (d), or (f) of this Code section:   A security interest securing an obligation incurred as all or part of the price of the collateral has priority over a security interest securing an obligation incurred for value given to enable the debtor to acquire rights in or the use of collateral; and   In all other cases, subsection (a) of Code Section 11-9-322 applies to the qualifying security interests.       (Code 1981, §11-9-324, enacted by Ga. L. 2001, p. 362, § 1.)   Law reviews.   - For article discussing the resolution of conflicting claims to goods between an unsecured seller of goods and a creditor of a buyer claiming under an after-acquired property clause, see 28 Mercer L. Rev. 625 (1977). For article, "The Revisions to Article IX of the Uniform Commercial Code," see 15 Ga. St. B.J. 120 (1977). For article "The Good Faith Purchase Idea and the Uniform Commercial Code," see 15 Ga. L. Rev. 605 (1981). For article, "Preparing the Georgia Farmer (or Other Smaller Entrepreneur) for Bankruptcy," see 22 Ga. State Bar J. 186 (1986). For note examining the conflict between the floating lien in after-acquired property under the Uniform Commercial Code and the voidable preferences provisions of the Bankruptcy Act, see 9 Ga. L. Rev. 685 (1975). For comment discussing good faith performance and priorities of secured parties, see 36 Emory L.J. 948 (1987).   JUDICIAL DECISIONS   Editor's notes.   - In the light of the similarity of the provisions, decisions under former Article 9 are included in the annotations for this Code section. For a table of comparable provisions, see the table at the beginning of the Article.   Time of notification.    - While 1978 "amendments" to former section made changes in notification procedure they did not effectuate change in timing of notification; that notification need not precede filing is clear, if for no other reason than that former paragraph (3)(d) contemplates that notification may state that purchase money security interest "has" been acquired in debtor's inventory. King's Appliance & Elecs., Inc. v. Citizens & S. Bank, 157 Ga. App. 857, 278 S.E.2d 733 (1981) (decided under former Code Section11-9-312).    Filing may precede notification envisioned under former subsection (3) of section. King's Appliance & Elecs., Inc. v. Citizens & S. Bank, 157 Ga. App. 857, 278 S.E.2d 733 (1981) (decided under former Code Section11-9-312).    Under former paragraph (3)(c) of section, notification is timely if holder of conflicting prior security interest receives it no more than five years before date debtor receives possession of inventory. King's Appliance & Elecs., Inc. v. Citizens & S. Bank, 157 Ga. App. 857, 278 S.E.2d 733 (1981) (decided under former Code Section11-9-312).   Limitation on floating liens.    - "Floating lien" theory, by which all subsequently acquired property comes under earlier security instrument, has been approved by former § 11-9-204, however, former paragraph (4) of this section provides seller of noninventory goods under purchase money contract with right to retain priority provided the seller perfects the security interest before delivery or within ten days (now 15 days) after delivery. Babson Credit Plan, Inc. v. Cordele Prod. Credit Ass'n, 146 Ga. App. 266, 246 S.E.2d 354 (1978) (decided under former Code Section11-9-312).   Priority between perfected and unperfected interests.    - Where seller of personal property which is later affixed to realty retains security interest in the goods, which is not perfected, seller's security interest attaches upon delivery and is superior to another creditor's prior perfected security interest in the personalty and "after-acquired" "personal property" and "equipment of every description" of the common debtor, when such "after-acquired" personalty is affixed to realty as fixtures. Babson Credit Plan, Inc. v. Cordele Prod. Credit Ass'n, 146 Ga. App. 266, 246 S.E.2d 354 (1978) (decided under former Code Section11-9-312).   When status of "debtor" attaches.   - Buyer of cows who had milked and cared for the cows for several weeks prior to obtaining a loan for their purchase, but who did not finally decide to purchase the cows until after obtaining the loan, was not a "debtor," and did not take possession, until the loan was closed. United States v. Hooks, 40 Bankr. 715 (Bankr. M.D. Ga. 1984) (decided under former Code Section 11-9-312).   Possession of collateral.   - For the purposes of former subsection (4), a buyer takes possession at the time of the decision to buy, not at the time of technical physical possession if physical possession was obtained earlier. Orix Credit Alliance, Inc. v. CIT Group/Equipment Fin., Inc., 230 Bankr. 213 (Bankr. M.D. Ga. 1998) (decided under former Code Section 11-9-312).   Timely perfection of interest.   - Where lease agreements with option to purchase specifically dated back to the time of delivery when debtor took possession, it was held that debtor acquired possession of three scrapers for purposes of former subsection (4) at the time they were delivered by seller, rather than the time that debtor and seller entered into the lease agreements for the three scrapers, and because seller did not file its financing statement on two of the scrapers within 15 days of the time debtor took possession, as required by former subsection (4), seller failed to timely perfect its purchase money security interest in these two scrapers, so bank's prior security interest in equipment, including after-acquired property, had priority over seller's purchase money security interest in these two scrapers pursuant to former subsection (5)(a), but because it timely perfected its purchase money security interest in the third scraper, seller had priority over the bank pursuant to former subsection (4). Iron Peddlers, Inc. v. Ivie & Assocs., 84 Bankr. 882 (Bankr. N.D. Ga. 1988) (decided under former Code Section 11-9-312).    Where a bank's perfected security interest in a skidder did not qualify as a purchase money security interest because the funds it lent were not used by a logging company to purchase the skidder, and where the logging company received possession and became indebted for the purchase price on the date the purchase money lender paid the seller directly, the purchase money lender was the only creditor holding a purchase money security interest, and its perfection of that interest by filing its financing statement within 15 days after the acquisition of ownership and execution by the purchaser of the note evidencing its obligation to pay the purchase price gave that purchase money lender priority. Citizens Bank of Americus v. Federal Fin. Servs., Inc., 235 Ga. App. 482, 509 S.E.2d 339 (1998).   Security interest unperfected.    - Where the creditor's security interest in vehicles was not noted on the certificates of title under Georgia's Motor Vehicle Certificate of Title Act, even if it was a purchase money security interest, the creditor was unperfected and O.C.G.A. § 11-9-324(a) did not apply; the debtor's bankruptcy trustee could avoid the security interests under 11 U.S.C.S. 544(a)(1). Tidwell v. First Cmty. Bank (In re Charley's Auto., Inc.), Bankr. (Bankr. M.D. Ga. May 8, 2003).   RESEARCH REFERENCES   Am. Jur. 2d.   - 68A Am. Jur. 2d, Secured Transactions, §§ 15, 70, 71, 96-100, 106, 149, 231 et seq., 248, 291, 293, 310, 311, 313, 440-467, 780-791, 836-868.   C.J.S.   - 72 C.J.S., Pledges, § 23.   U.L.A.   - Uniform Commercial Code (U.L.A.) § 9-324.   ALR.    - Priority where senior instrument affecting real property is recorded after execution but before recording of junior instrument, 32 A.L.R. 344.    Construction and effect of provisions of Uniform Conditional Sales Law regarding refiling when goods are removed from district where contract is filed, 68 A.L.R. 554.    Priority as between holders of different notes or obligations secured by the same mortgage (or vendor's lien) or mortgages executed contemporaneously, 115 A.L.R. 40.    Applicability of proceeds of sale of collateral security to barred portion of debt secured, 139 A.L.R. 478.   Priority as between seller or conditional seller of personalty and claimant under after-acquired-property clause of mortgage or other instrument, 86 A.L.R.2d 1152.   Equitable estoppel of secured party's right to assert prior, perfected security interest against other secured creditor or subsequent purchaser under Article 9 of Uniform Commercial Code, 9 A.L.R.5th 708.