What factors determine priority among multiple perfected security interests?

• A. The party who files first always has priority, regardless of perfection timing.
• B. Priority is determined by the order of creation of the security agreement.
• C. Priority generally follows the 'first to file or perfect' rule, with PMSIs having special priority in some contexts; perfection timing and exceptions govern.
• D. Priority is determined by court's discretionary fairness.

Answer: (C)

The main idea is that priority among perfected security interests follows the timing of perfection. In general, the rule is “first to file or perfect”—the creditor whose security interest is perfected earlier has priority over those perfected later. Perfection is usually achieved by filing a financing statement, but some collateral can be perfected by possession or control, so the exact date of perfection can vary by type of collateral.

PMSIs (purchase money security interests) introduce important exceptions. In many contexts, a PMSI can have superpriority over other perfected interests in the same collateral, provided the PMSI is properly perfected and the appropriate notice to other secured parties is given. This means that, even if another party perfected earlier, a qualifying PMSI in that specific asset (like inventory or certain other goods) can override those interests if the conditions are met. In sum, who wins comes down to the timing of perfection, with special PMSI rules giving certain PMSIs extra priority in particular contexts.