41-09-42. (9-322) Priorities among conflicting security interests in and agricultural
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/nd/title-41/chapter-41-09-secured-transactions/41-09-42·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
liens on same collateral.
1. Except as otherwise provided in this section, priority among conflicting security
interests and agricultural liens in the same collateral is determined according to the
following rules:
a. Conflicting perfected security interests and agricultural liens rank according to
priority in time of filing or perfection. Priority dates from the earlier of the time a
filing covering the collateral is first made or the security interest or agricultural lien
is first perfected, if there is no period thereafter when there is neither filing nor
perfection.
b. A perfected security interest or agricultural lien has priority over a conflicting
unperfected security interest or agricultural lien.
c. The first security interest or agricultural lien to attach or become effective has
priority if conflicting security interests and agricultural liens are unperfected.
2. For the purposes of subdivision a of subsection 1:
a. The time of filing or perfection as to a security interest in collateral is also the time
of filing or perfection as to a security interest in proceeds; and
b. The time of filing or perfection as to a security interest in collateral supported by a
supporting obligation is also the time of filing or perfection as to a security interest
in the supporting obligation. 3. Except as otherwise provided in subsection 6, a security interest in collateral which
qualifies for priority over a conflicting security interest under section 41-09-47,
41-09-48, 41-09-49, 41-09-50, or 41-09-51 also has priority over a conflicting security
interest in:
a. Any supporting obligation for the collateral; and
b. Proceeds of the collateral if:
(1)The security interest in proceeds is perfected;
(2)The proceeds are cash proceeds or of the same type as the collateral; and
(3)In the case of proceeds that are proceeds of proceeds, all intervening
proceeds are cash proceeds, proceeds of the same type as the collateral, or
an account relating to the collateral. 4. Subject to subsection 5 and except as otherwise provided in subsection 6, if a security
interest in chattel paper, deposit accounts, negotiable documents, instruments,
investment property, or letter-of-credit rights is perfected by a method other than filing,
conflicting perfected security interests in proceeds of the collateral rank according to
priority in time of filing. 5. Subsection 4 applies only if the proceeds of the collateral are not cash proceeds,
chattel paper, negotiable documents, instruments, investment property, or
letter-of-credit rights. 6. Subsections 1 through 5 are subject to:
a. Subsection 7 and the other provisions of this part;
b. Section 41-04-22 with respect to a security interest of a collecting bank;
c. Section 41-05-18 with respect to a security interest of an issuer or nominated
person; and
d. Section 41-09-10 with respect to a security interest arising under chapter 41-02 or
41-02.1. 7. A perfected agricultural lien on collateral has priority over the conflicting rights of a lien
creditor and over a conflicting security interest in or agricultural lien on the same
collateral if the statute creating the agricultural lien so provides.
41-09-43. (9-323) Future advances. 1. Except as otherwise provided in subsection 3, for purposes of determining the priority
of a perfected security interest under subdivision a of subsection 1 of section
41-09-42, perfection of the security interest dates from the time an advance is made to
the extent that the security interest secures an advance that:
a. Is made while the security interest is perfected only:
(1)Under section 41-09-29 when it attaches; or
(2)Temporarily under subsection 5, 6, or 7 of section 41-09-32; and
b. Is not made pursuant to a commitment entered into before or while the security
interest is perfected by a method other than under section 41-09-29 or
subsection 5, 6, or 7 of section 41-09-32. 2. Except as otherwise provided in subsection 3, a security interest is subordinate to the
rights of a person that becomes a lien creditor to the extent that the security interest
secures an advance made more than forty-five days after the person becomes a lien
creditor unless the advance is made:
a. Without knowledge of the lien; or
b. Pursuant to a commitment entered into without knowledge of the lien. 3. Subsections 1 and 2 do not apply to a security interest held by a secured party that is
a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a
consignor. 4. Except as otherwise provided in subsection 5, a buyer of goods takes free of a security
interest to the extent that it secures advances made after the earlier of:
a. The time the secured party acquires knowledge of the buyer's purchase; or
b. Forty-five days after the purchase. 5. Subsection 4 does not apply if the advance is made pursuant to a commitment entered
into without knowledge of the buyer's purchase and before the expiration of the
forty-five-day period. 6. Except as otherwise provided in subsection 7, a lessee of goods takes the leasehold
interest free of a security interest to the extent that it secures advances made after the
earlier of:
a. The time the secured party acquires knowledge of the lease; or
b. Forty-five days after the lease contract becomes enforceable. 7. Subsection 6 does not apply if the advance is made pursuant to a commitment entered
into without knowledge of the lease and before the expiration of the forty-five-day
period.
41-09-44. (9-324) Priority of purchase-money security interests. 1. Except as otherwise provided in subsection 7, 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 section
41-09-47, 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 twenty days thereafter. 2. Subject to subsection 3 and except as otherwise provided in subsection 7, 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 section 41-09-50, and, except as otherwise provided in
section 41-09-47, 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:
a. The purchase-money security interest is perfected when the debtor receives
possession of the inventory;
b. The purchase-money secured party sends a signed notification to the holder of
the conflicting security interest;
c. The holder of the conflicting security interest receives the notification within five
years before the debtor receives possession of the inventory; and
d. 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. 3. Subdivisions b through d of subsection 2 apply only if the holder of the conflicting
security interest had filed a financing statement covering the same types of inventory:
a. If the purchase-money security interest is perfected by filing, before the date of
the filing; or
b. If the purchase-money security interest is temporarily perfected without filing or
possession under subsection 6 of section 41-09-32, before the beginning of the
twenty-day period thereunder. 4. Subject to subsection 5 and except as otherwise provided in subsection 7, 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
section 41-09-47, a perfected security interest in their identifiable proceeds and
identifiable products in their unmanufactured states also has priority, if:
a. The purchase-money security interest is perfected when the debtor receives
possession of the livestock;
b. The purchase-money secured party sends a signed notification to the holder of
the conflicting security interest;
c. The holder of the conflicting security interest receives the notification within six
months before the debtor receives possession of the livestock; and
d. 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. 5. Subdivisions b through d of subsection 4 apply only if the holder of the conflicting
security interest had filed a financing statement covering the same types of livestock:
a. If the purchase-money security interest is perfected by filing, before the date of
the filing; or
b. If the purchase-money security interest is temporarily perfected without filing or
possession under subsection 6 of section 41-09-32, before the beginning of the
twenty-day period thereunder. 6. Except as otherwise provided in subsection 7, 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 section 41-09-47, 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 section. 7. If more than one security interest qualifies for priority in the same collateral under
subsection 1, 2, 3, or 4:
a. 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
b. In all other cases, subsection 1 of section 41-09-42 applies to the qualifying
security interests.
41-09-45. (9-325) Priority of security interests in transferred collateral. 1. Except as otherwise provided in subsection 2, a security interest created by a debtor is
subordinate to a security interest in the same collateral created by another person if:
a. The debtor acquired the collateral subject to the security interest created by the
other person;
b. The security interest created by the other person was perfected when the debtor
acquired the collateral; and
c. There is no period thereafter when the security interest is unperfected. 2. Subsection 1 subordinates a security interest only if the security interest:
a. Otherwise would have priority solely under subsection 1 of section 41-09-42 or
section 41-09-44; or
b. Arose solely under subsection 3 of section 41-02-90 or subsection 5 of section
41-02.1-56.
41-09-46. (9-326) Priority of security interests created by new debtor. 1. Subject to subsection 2, a security interest that is created by a new debtor in collateral
in which the new debtor has or acquired rights and perfected by a filed financing
statement that would be ineffective to perfect the security interest but for the
application of section 41-09-79 or of section 41-09-79 and subdivision a of
subsection 9 of section 41-09-36 is subordinate to a security interest in the same
collateral which is perfected other than by such a filed financing statement. 2. The other provisions of this part determine the priority among conflicting security
interests in the same collateral perfected by filed financing statements described in
subsection 1. However, if the security agreements to which a new debtor became
bound as debtor were not entered into by the same original debtor, the conflicting
security interests rank according to priority in time of the new debtor's having become
bound.