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SubPart 3 - Priority

      (810 ILCS 5/Art. 9 Pt. 3 Sub. 3 heading)SUBPART 3. PRIORITY

    (810 ILCS 5/9‑317)(from Ch. 26, par. 9‑317)
    Sec. 9‑317. Interests that take priority over or take free of security interest or agricultural lien.
    (a) Conflicting security interests and rights of lien creditors. A security interest or agricultural lien is subordinate to the rights of:
        (1) a person entitled to priority under Section

9‑322; and

(2) except as otherwise provided in subsection (e)

or (f), a person that becomes a lien creditor before the earlier of the time:

(A) the security interest or agricultural lien

is perfected; or

(B) one of the conditions specified in Section

9‑203(b)(3) is met and a financing statement covering the collateral is filed.

(b) Buyers that receive delivery. Except as otherwise provided in subsection (e), a buyer, other than a secured party, of tangible chattel paper, tangible documents, goods, instruments, or a security certificate takes free of a security interest or agricultural lien if the buyer gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.     (c) Lessees that receive delivery. Except as otherwise provided in subsection (e), a lessee of goods takes free of a security interest or agricultural lien if the lessee gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.     (d) Licensees and buyers of certain collateral. A licensee of a general intangible or a buyer, other than a secured party, of accounts, electronic chattel paper, electronic documents, general intangibles, or investment property other than a certificated security takes free of a security interest if the licensee or buyer gives value without knowledge of the security interest and before it is perfected.     (e) Purchase‑money security interest. Except as otherwise provided in Sections 9‑320 and 9‑321, if a person files a financing statement with respect to a purchase‑money security interest before or within 20 days after the debtor receives delivery of the collateral, the security interest takes priority over the rights of a buyer, lessee, or lien creditor which arise between the time the security interest attaches and the time of filing.     (f) Public deposits. An unperfected security interest shall take priority over the rights of a lien creditor if (i) the lien creditor is a trustee or receiver of a bank or acting in furtherance of its supervisory authority over such bank and (ii) a security interest is granted by the bank to secure a deposit of public funds with the bank or a repurchase agreement with the bank pursuant to the Government Securities Act of 1986, as amended. (Source: P.A. 95‑895, eff. 1‑1‑09.)

(810 ILCS 5/9‑318) (from Ch. 26, par. 9‑318)     Sec. 9‑318. No interest retained in right to payment that is sold; rights and title of seller of account or chattel paper with respect to creditors and purchasers.     (a) Seller retains no interest. A debtor that has sold an account, chattel paper, payment intangible, or promissory note does not retain a legal or equitable interest in the collateral sold.     (b) Deemed rights of debtor if buyer's security interest unperfected. For purposes of determining the rights of creditors of, and purchasers for value of an account or chattel paper from, a debtor that has sold an account or chattel paper, while the buyer's security interest is unperfected, the debtor is deemed to have rights and title to the account or chattel paper identical to those the debtor sold. (Source: P.A. 91‑893, eff. 7‑1‑01.)

(810 ILCS 5/9‑319)     Sec. 9‑319. Rights and title of consignee with respect to creditors and purchasers.     (a) Consignee has consignor's rights. Except as otherwise provided in subsection (b), for purposes of determining the rights of creditors of, and purchasers for value of goods from, a consignee, while the goods are in the possession of the consignee, the consignee is deemed to have rights and title to the goods identical to those the consignor had or had power to transfer.     (b) Applicability of other law. For purposes of determining the rights of a creditor of a consignee, law other than this Article determines the rights and title of a consignee while goods are in the consignee's possession if, under this Part, a perfected security interest held by the consignor would have priority over the rights of the creditor. (Source: P.A. 91‑893, eff. 7‑1‑01.)

(810 ILCS 5/9‑320)     Sec. 9‑320. Buyer of goods and farm products.     (a) Buyer in ordinary course of business. Except as otherwise provided in subsections (e) and (f), a buyer in the ordinary course of business takes free of a security interest created by the buyer's seller, even if the security interest is perfected and the buyer knows of its existence.     (b) Buyer of consumer goods. Except as otherwise provided in subsection (e), a buyer of goods from a person who used or bought the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys:         (1) without knowledge of the security interest;         (2) for value;         (3) primarily for the buyer's personal, family, or

household purposes; and

(4) before the filing of a financing statement

covering the goods.

(c) Effectiveness of filing for subsection (b). To the extent that it affects the priority of a security interest over a buyer of goods under subsection (b), the period of effectiveness of a filing made in the jurisdiction in which the seller is located is governed by Section 9‑316(a) and (b).     (d) Buyer in ordinary course of business at wellhead or minehead. A buyer in ordinary course of business buying oil, gas, or other minerals at the wellhead or minehead or after extraction takes free of an interest arising out of an encumbrance.     (e) Possessory security interest not affected. Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under Section 9‑313.     (f) Buyer of farm products.         (1) A buyer of farm products takes subject to a

security interest created by the seller if:

(A) within one year before the sale of the farm

products, the buyer has received from the secured party or the seller written notice of the security interest organized according to farm products that:

(i) is an original or reproduced copy

thereof;

(ii) contains: (a) the name and address of

the secured party; (b) the name and address of the person indebted to the secured party; (c) the social security number of the debtor or, in the case of a debtor doing business other than as an individual, the Internal Revenue Service taxpayer identification number of such debtor; (d) a description of the farm products subject to the security interest created by the debtor, including the amount of such products where applicable, crop year, county, and a reasonable description of the property;

(iii) must be amended in writing, within 3

months, similarly signed and transmitted, to reflect material changes;

(iv) will lapse on either the expiration

period of the statement or the transmission of a notice signed by the secured party that the statement has lapsed, whichever occurs first; and

(v) sets forth any payment obligations

imposed on the buyer by the secured party as conditions for waiver or release of the security interest; and

(B) the buyer has failed to perform the payment

obligations.

(2) For the purposes of this subsection (f), a buyer

of farm products has received notice from the secured party or seller when written notice of the security interest is sent to the buyer by registered or certified mail.

(Source: P.A. 91‑893, eff. 7‑1‑01.)

(810 ILCS 5/9‑320.1)     Sec. 9‑320.1. Liability of commission merchant or selling agent engaged in sale of livestock or other farm products to holder of security interest.     (a) A commission merchant or selling agent who sells a farm product for others shall be subject to a security interest created by the seller in such farm product if:         (1) within one year before the sale of the farm

products, the buyer has received from the secured party or the seller written notice of the security interest organized according to farm products that:

(A) is an original or reproduced copy thereof;             (B) contains: (i) the name and address of the

secured party; (ii) the name and address of the person indebted to the secured party; (iii) the social security number of the debtor or, in case of a debtor doing business other than as an individual, the Internal Revenue Service taxpayer identification number of such debtor; (iv) a description of the farm products subject to the security interest created by the debtor, including the amount of such products where applicable, crop year, county, and a reasonable description of the property;

(C) must be amended in writing, within 3 months,

similarly signed and transmitted, to reflect material changes;

(D) will lapse on either the expiration period

of the statement or the transmission of a notice signed by the secured party that the statement has lapsed, whichever occurs first; and

(E) sets forth any payment obligations imposed

on the buyer by the secured party as conditions for waiver or release of the security interest; and

(2) the commission merchant or selling agent has

failed to perform the payment obligations.

(b) For the purposes of this Section, a commission merchant or selling agent has received notice from the secured party or seller when written notice of the security interest is sent to the commission merchant or selling agent by registered or certified mail. (Source: P.A. 91‑893, eff. 7‑1‑01.)

(810 ILCS 5/9‑320.2)     Sec. 9‑320.2. Notice to seller of farm products. A commission merchant or selling agent who sells farm products for others, and any person buying farm products in the ordinary course of business from a person engaged in farming operations, shall post at each licensed location where the merchant, agent, or person buying farm products in the ordinary course of business does business a notice that shall read as follows: "NOTICE TO SELLERS OF FARM PRODUCTS     It is a criminal offense to sell farm products subject to a security interest without making payment to the secured party. You should notify the purchaser if there is a security interest in the farm products you are selling.".     The notice shall be posted in a conspicuous manner and shall be in contrasting type, large enough to be read from a distance of 10 feet. (Source: P.A. 91‑893, eff. 7‑1‑01.)

(810 ILCS 5/9‑321)     Sec. 9‑321. Licensee of general intangible and lessee of goods in ordinary course of business.     (a) "Licensee in ordinary course of business." In this Section, "licensee in ordinary course of business" means a person that becomes a licensee of a general intangible in good faith, without knowledge that the license violates the rights of another person in the general intangible, and in the ordinary course from a person in the business of licensing general intangibles of that kind. A person becomes a licensee in the ordinary course if the license to the person comports with the usual or customary practices in the kind of business in which the licensor is engaged or with the licensor's own usual or customary practices.     (b) Rights of licensee in ordinary course of business. A licensee in ordinary course of business takes its rights under a nonexclusive license free of a security interest in the general intangible created by the licensor, even if the security interest is perfected and the licensee knows of its existence.     (c) Rights of lessee in ordinary course of business. A lessee in ordinary course of business takes its leasehold interest free of a security interest in the goods created by the lessor, even if the security interest is perfected and the lessee knows of its existence. (Source: P.A. 91‑893, eff. 7‑1‑01.)

(810 ILCS 5/9‑322)     Sec. 9‑322. Priorities among conflicting security interests in and agricultural liens on same collateral.     (a) General priority rules. 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:         (1) 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.

(2) A perfected security interest or agricultural

lien has priority over a conflicting unperfected security interest or agricultural lien.

(3) The first security interest or agricultural lien

to attach or become effective has priority if conflicting security interests and agricultural liens are unperfected.

(b) Time of perfection: proceeds and supporting obligations. For the purposes of subsection (a)(1):         (1) 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

(2) 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.

(c) Special priority rules: proceeds and supporting obligations. Except as otherwise provided in subsection (f), a security interest in collateral which qualifies for priority over a conflicting security interest under Section 9‑327, 9‑328, 9‑329, 9‑329.1, 9‑330, or 9‑331 also has priority over a conflicting security interest in:         (1) any supporting obligation for the collateral; and         (2) proceeds of the collateral if:             (A) the security interest in proceeds is

perfected;

(B) the proceeds are cash proceeds or of the

same type as the collateral; and

(C) 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.

(d) First‑to‑file priority rule for certain collateral. Subject to subsection (e) and except as otherwise provided in subsection (f), if a security interest in chattel paper, deposit accounts, negotiable documents, instruments, investment property, letter‑of‑credit rights, or beneficial interests in Illinois land trusts 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.     (e) Applicability of subsection (d). Subsection (d) applies only if the proceeds of the collateral are not cash proceeds, chattel paper, negotiable documents, instruments, investment property, beneficial interests in Illinois land trusts, or letter‑of‑credit rights.     (f) Limitations on subsections (a) through (e). Subsections (a) through (e) are subject to:         (1) subsection (g) and the other provisions of this

Part;

(2) Section 4‑210 with respect to a security

interest of a collecting bank;

(3) Section 5‑118 with respect to a security

interest of an issuer or nominated person; and

(4) Section 9‑110 with respect to a security

interest arising under Article 2 or 2A.

(g) Priority under agricultural lien statute. A perfected agricultural lien on collateral has priority over a conflicting security interest in or agricultural lien on the same collateral if the statute creating the agricultural lien so provides. (Source: P.A. 91‑893, eff. 7‑1‑01; 92‑234, eff. 1‑1‑02.)

(810 ILCS 5/9‑323)     Sec. 9‑323. Future advances.     (a) When priority based on time of advance. Except as otherwise provided in subsection (c), for purposes of determining the priority of a perfected security interest under Section 9‑322(a)(1), perfection of the security interest dates from the time an advance is made to the extent that the security interest secures an advance that:         (1) is made while the security interest is perfected

only:

(A) under Section 9‑309 when it attaches; or             (B) temporarily under Section 9‑312(e), (f), or

(g); and

(2) is not made pursuant to a commitment entered

into before or while the security interest is perfected by a method other than under Section 9‑309 or 9‑312(e), (f), or (g).

(b) Lien creditor. Except as otherwise provided in subsection (c), 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 45 days after the person becomes a lien creditor unless the advance is made:         (1) without knowledge of the lien; or         (2) pursuant to a commitment entered into without

knowledge of the lien.

(c) Buyer of receivables. Subsections (a) and (b) 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.     (d) Buyer of goods. Except as otherwise provided in subsection (e), a buyer of goods other than a buyer in ordinary course of business takes free of a security interest to the extent that it secures advances made after the earlier of:         (1) the time the secured party acquires knowledge of

the buyer's purchase; or

(2) 45 days after the purchase.     (e) Advances made pursuant to commitment: priority of buyer of goods. Subsection (d) 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 45‑day period.     (f) Lessee of goods. Except as otherwise provided in subsection (g), a lessee of goods, other than a lessee in ordinary course of business, takes the leasehold interest free of a security interest to the extent that it secures advances made after the earlier of:         (1) the time the secured party acquires knowledge of

the lease; or

(2) 45 days after the lease contract becomes

enforceable.

(g) Advances made pursuant to commitment: priority of lessee of goods. Subsection (f) 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 45‑day period. (Source: P.A. 91‑893, eff. 7‑1‑01.)

(810 ILCS 5/9‑324)     Sec. 9‑324. Priority of purchase‑money security interests.     (a) General rule: purchase‑money priority. Except as otherwise provided in subsection (g), 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 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.     (b) Inventory purchase‑money priority. Subject to subsection (c) and except as otherwise provided in subsection (g), 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 9‑330, and, except as otherwise provided in Section 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:         (1) the purchase‑money security interest is

perfected when the debtor receives possession of the inventory;

(2) the purchase‑money secured party sends an

authenticated notification to the holder of the conflicting security interest;

(3) the holder of the conflicting security interest

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