| 3. General Rule: Priority of Security Interest Perfected by |
Control. Under paragraph (1) [Maine cite subsection (1)], a |
secured party who obtains control has priority over a secured |
party who does not obtain control. The control priority rule |
does not turn on either temporal sequence or awareness of |
conflicting security interests. Rather, it is a structural rule, |
based on the principle that a lender should be able to rely on |
the collateral without question if the lender has taken the |
necessary steps to assure itself that it is in a position where |
it can foreclose on the collateral without further action by the |
debtor. The control priority rule is necessary because the |
perfection rules provide considerable flexibility in structuring |
secured financing arrangements. For example, at the "retail" |
level, a secured lender to an investor who wants the full measure |
of protection can obtain control, but the creditor may be willing |
to accept the greater measure of risk that follows from |
perfection by filing. Similarly, at the "wholesale" level, a |
lender to securities firms can leave the collateral with the |
debtor and obtain a perfected security interest under the |
automatic perfection rule of Section 9-309(a)(10) [Maine cite |
section 9-1309, subsection (1), paragraph (j)], but a lender who |
wants to be entirely sure of its position will want to obtain |
control. The control priority rule of paragraph (1) [Maine cite |
subsection (1)] is an essential part of this system of |
flexibility. It is feasible to provide more than one method of |
perfecting security interests only if the rules ensure that those |
who take the necessary steps to obtain the full measure of |
protection do not run the risk of subordination to those who have |
not taken such steps. A secured party who is unwilling to run |
the risk that the debtor has granted or will grant a conflicting |
control security interest should not make a loan without |
obtaining control of the collateral. |