| Whether SP-2 would be liable to D depends on the relative |
priority of SP-2's security interest and D's interest. By |
permitting SP-1 to create a security interest in the collateral |
(repledge), subsection (c)(3) [Maine cite subsection (3), |
paragraph (c)] provides a statutory power for SP-1 to give SP-2 a |
security interest (subject, of course, to any agreement by SP-1 |
not to give a security interest). In the vast majority of cases |
where repledge rights are significant, the security interest of |
the second secured party, SP-2 in the example, will be senior to |
the debtor's interest. By virtue of the debtor's consent or |
applicable legal rules, SP-2 typically would cut off D's rights |
in investment property or be immune from D's claims. See |
Sections 9-331 [Maine cite section 9-1331], 3-306 [Maine cite |
section 3-1306] (holder in due course), 8-303 [Maine cite section |
8-1303] (protected purchaser), 8-502 [Maine cite section 8-1502] |
(acquisition of a security entitlement), 8-503(e) [Maine cite |
section 8-1503 subsection (5)] (action by entitlement holder). |
Moreover, the expectations and business practices in some |
markets, such as the securities markets, are such that D's |
consent to SP-2's taking free of D's rights inheres in D's |
creation of SP-1's security interest which gives rise to SP-1's |
power under this section. In these situations, D would have no |
right to recover the collateral or recover damages from SP-2. |
Nevertheless, D would have a damage claim against SP-1 if SP-1 |
had given a security interest to SP-2 in breach of its agreement |
with D. Moreover, if SP-2's security interest secures an amount |
that is less than the amount secured by SP-1's security interest |
(granted by D), then D's exercise of its right to redeem would |
provide value sufficient to discharge SP-1's obligations to SP-2. |