Lena borrows from Mac and Nicol,using the same farm equipment as collateral for both loans.Only Nicol has a perfected security interest.Lena defaults on both loans.The party with first rights to the collateral is
A)Lena.
B)Mac and Nicol,in proportion to Lena's debt to each.
C)Mac only.
D)Nicol only.

Question

Quizplus · Accepted Answer

In this scenario, Nicol has the perfected security interest, which gives them first priority to the collateral in the event of default. This means that Nicol has the right to seize the farm equipment to satisfy Lena's debt. Mac can only recover their share of the collateral based on Lena's debt to them. Therefore, Nicol has first rights to the collateral.

Lena Borrows from Mac and Nicol,using the Same Farm Equipment