The control priority rule does not turn on an inquiry into the state of a secured party's awareness of potential conflicting claims because a rule under which a person's rights depended on that sort of after-the-fact inquiry could introduce an unacceptable measure of uncertainty. If an inquiry into awareness could provide a complete and satisfactory resolution of the problem in all cases, the priority rules of this section would have incorporated that test. The fact that they do not necessarily means that resort to other law based solely on that factor is precluded, though the question whether a control secured party induced or encouraged its financing arrangement with actual knowledge that the debtor would be violating the rights of another secured party may, in some circumstances, appropriately be treated as a factor in determining whether the control party's action is the kind of egregious conduct for which resort to other law is appropriate.

§9-1329.__Priority of security interests in letter-of-credit right

The following rules govern priority among conflicting security interests in the same letter-of-credit right.

(1)__A security interest held by a secured party having control of the letter-of-credit right under section 9-1107 has priority to the extent of its control over a conflicting security interest held by a secured party that does not have control.

(2)__Security interests perfected by control under section 9- 1314 rank according to priority in time of obtaining control.

Official Comment

1. Source. New; loosely modeled after former Section 9- 115(5).

2. General Rule. Paragraph (1) [Maine cite subsection (1)] awards priority to a secured party who perfects a security interest directly in letter-of-credit rights (i.e., one that takes an assignment of proceeds and obtains consent of the issuer or any nominated person under Section 5-114(c)) over another conflicting security interest (i.e., one that is perfected automatically in the letter-of-credit rights as supporting obligations under Section 9-308(d) [Maine cite section 9-1308, subsection (4)]). This is consistent with international