Problem.SP vs. SP

     A.  Rock Maninoff decided to open a small restaurant operating from the kitchen and large sun porch of his ranch home in the foothills. He planned to operate the restaurant only for dinner on Saturday evenings and for brunch on Sundays and selected holidays.

     At the same time, Rock, an accomplished pianist, decided to purchase a new grand piano, replacing an inferior piano he had been playing for years, so that he could entertain his restaurant patrons in addition to pursuing his musical avocation. Rock purchased the piano on secured credit from Music Masters, but Music Masters didn't file a financing statement.

     Rock's business fared poorly and he soon found himself between himself and a hard place. He borrowed some additional funds from Foolish Finance, which took a security interest in the piano to secure the loan even though informed by Rock of the security agreement with Music Masters. Foolish Finance filed a sufficient financing statement in the correct location.

     The infusion of funds from Foolish Finance bought Rock some time but not success.  He eventually defaulted on payments to both Music Masters and Foolish Finance.  Rock surrendered the piano to Foolish Finance.  Under an agreement with Music Masters, Foolish agreed to conduct a foreclosure sale and to hold the proceeds for distribution subject to your advice about who should get the proceeds.  What do you advise?   U.C.C. 9-322(a), U.C.C. 9-309(1).  

     The foregoing problem is but one of many illustrations of a priority dispute betweeen two secured parties having a claim to the same collateral.   For a variety of others, including those in which the claim is to the proceeds of collateral in which both parties have a security interest, see the examples in the Official Comments to U.C.C. 9-322.  

     B.  In January, Bank of Bambino entered into a security agreement with the Cooperstown Bat Corporation, taking a security interest in all of Cooperstown’s inventory, accounts receivable, and equipment, then existing and thereafter acquired. The bank filed a sufficient financing statement in the correct location.

     A year later, RuthWorks, manufacturer of bat making equipment, sold Cooperstown a new bat maker (the RW-600) on credit, retaining a security interest in the equipment.  RuthWorks delivered the equipment to the debtor in stages and assembled the equipment at Cooperstown's manufacturing site.  RuthWorks filed a sufficient financing statement in the correct location a week after completing assembly of the quipment.   

     A fire destroyed the RW-600 a few days after its delivery to Cooperstown.  Fortunately, it was insured.  To whom should Cooperstown indorse the insurance check?  U.C.C. 9-324(a), Official Comment 3 to U.C.C. 9-324, 9-315, 9-102(a)(64), 9-102(a)(9).  

     C.  You will find analagous issues in the context of inventory and accounts financing.  Will a purchase-money inventory financier take priority over an earlier inventory financier with an after-acquired property clause?  Will the security interest of a purchase-money financier in the proceeds of the sale of inventory take priority over an earlier accounts or inventory financier with an after-acquired property clause?  See U.C.C. 9-324(c), (d), Official Comments 4, 5 and 8 to U.C.C. 9-324, and the examples in Official Comment 9 to U.C.C. 9-324.