Colorado § 4-9-317 - Interests that take priority over or take free of security interest or agricultural lien.

§ 4-9-317. Interests that take priority over or take free of security interest or agricultural lien.

(a) A security interest or agricultural lien is subordinate to the rights of:

(1) A person entitled to priority under section 4-9-322; and

(2) Except as otherwise provided in subsection (e) of this section, a person that becomes a lien creditor before the security interest or agricultural lien is perfected.

(b) Except as otherwise provided in subsection (e) of this section, a buyer, other than a secured party, of goods, instruments, tangible documents, or a certificated security takes free of a security interest or agricultural lien if the buyer gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.

(c) Except as otherwise provided in subsection (e) of this section, a lessee of goods takes free of a security interest or agricultural lien if the lessee gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.

(d) Subject to subsections (f) to (i) of this section, a licensee of a general intangible or a buyer, other than a secured party, of collateral other than goods, instruments, tangible documents, or a certificated security takes free of a security interest if the licensee or buyer gives value without knowledge of the security interest and before it is perfected.

(e) Except as otherwise provided in sections 4-9-320 and 4-9-321, if a person files a financing statement with respect to a purchase-money security interest before or within twenty days after the debtor receives delivery of the collateral, or if a person perfects under article 6 of title 42, C.R.S., a purchase-money security interest in a motor vehicle, other than inventory, before or within thirty days after the debtor receives delivery of the motor vehicle, the security interest takes priority over the rights of a buyer, lessee, or lien creditor which arise between the time the security interest attaches and the time of filing.

(f) A buyer, other than a secured party, of chattel paper takes free of a security interest if, without knowledge of the security interest and before it is perfected, the buyer gives value and:

(1) Receives delivery of each authoritative tangible copy of the record evidencing the chattel paper; and

(2) If each authoritative electronic copy of the record evidencing the chattel paper can be subjected to control under section 4-9-105, obtains control of each authoritative electronic copy.

(g) A buyer of an electronic document takes free of a security interest if, without knowledge of the security interest and before it is perfected, the buyer gives value and, if each authoritative electronic copy of the document can be subjected to control under section 4-7-106, obtains control of each authoritative electronic copy.

(h) A buyer of a controllable electronic record takes free of a security interest if, without knowledge of the security interest and before it is perfected, the buyer gives value and obtains control of the controllable electronic record.

(i) A buyer, other than a secured party, of a controllable account or a controllable payment intangible takes free of a security interest if, without knowledge of the security interest and before it is perfected, the buyer gives value and obtains control of the controllable account or controllable payment intangible.

Source: L. 2001: Entire article R&RE, p. 1355, § 1, effective July 1. L. 2006: (b) and (d) amended, p. 502, § 42, effective September 1. L. 2009: (e) amended, (SB 09-150), ch. 182, p. 801, § 1, effective April 22. L. 2012: (b) and (d) amended, (HB 12-1262), ch. 170, p. 598, § 6, effective July 1, 2013. L. 2023: (b) and (d) amended and (f), (g), (h), and (i) added, (SB 23-090), ch. 136, p. 554, § 62, effective August 7.

Editor's note: (1) The provisions of this section are similar to former §§ 4-9-301 and 4-2.5-307 (2) as they existed prior to 2001.

(2) Colorado legislative change: In subsection (a)(2), Colorado did not adopt the phrases "the earlier of the time" after the word "before" and "or a financing statement covering the collateral is filed" at the end of the sentence.

ANNOTATION

Law reviews. For article, "Buyer-Secured Party Conflicts Under Section 9-307(1) of the Uniform Commercial Code", see 46 U. Colo. L. Rev. 333 (1974-75). For article, "The Rights of Landlords in Tenants' Personal Property", see 57 Den. L.J. 685 (1980).

Annotator's note. Since § 4-9-317 is similar to § 4-9-301 as it existed prior to the 2001 repeal and reenactment of this article, relevant cases construing that provision have been included in the annotations to this section.

Reliance upon ownership of collateral by a debtor is not relevant to a determination of priority under the uniform commercial code, for there is no provision in the code for knowledge or reliance on ownership as a factor in determining the relative rights of secured creditors. Am. Nat'l Bank v. Magor, 28 Colo. App. 522, 476 P.2d 267 (1970).

Paramount status accorded to first to file. The drafters of the code, by their emphasis on procedural rigidity, accorded paramount status to the secured creditor first to file. Am. Nat'l Bank v. Magor, 28 Colo. App. 522, 476 P.2d 267 (1970).

An unperfected security interest becomes subordinate to the rights acquired by a lien creditor when a writ of garnishment is served on the garnishee at a time when the garnishor has no notice of the security interest. Welbourne Dev. Co. v. Affiliated Clearance Corp., 28 Colo. App. 313, 472 P.2d 684 (1970).

Subsection (4) was adopted to address issues relating to advances made under a perfected security interest and federal tax liens. ITT Diversified Credit Corp. v. Couch, 669 P.2d 1355 (Colo. 1983).

Security agreement in nature of chattel mortgage creates lien for the benefit of the secured party and title reposes in the debtor or mortgagor, in the absence of a contrary contractual provision. People ex rel. VanMeveren v. District Court, 619 P.2d 494 (Colo. 1980).

Code specifies which interests take priority over an unperfected security interest, and where the seller's interest or right in the goods does not fall within any of those specified interests, its right to reclaim the goods does not take priority over a bank's unperfected security interest. Guy Martin Buick, Inc. v. Colo. Springs Nat'l Bank, 32 Colo. App. 235, 511 P.2d 912 (1973), aff'd, 184 Colo. 166, 519 P.2d 354 (1974).

Right to reclaim goods is not one of the interests so specified. The right to reclaim goods conveyed as part of a cash sale transaction is not one of the interests which is listed as having priority over an unperfected security interest. Guy Martin Buick, Inc. v. Colo. Springs Nat'l Bank, 184 Colo. 166, 519 P.2d 354 (1974).

Priority of judicial lien rules. A perfected security interest securing an obligation that was undertaken by debtor before creation of a judicial lien took priority over the lien even if such obligation did not become due until after the lien's creation. Alling v. Am. Tool & Grinding Co., Inc., 648 F. Supp. 1344 (D. Colo. 1986).

A creditor who holds a perfected security interest in collateral can be held liable to an unsecured creditor for benefits that enhance the value of the secured collateral on the basis of unjust enrichment, even where holding the secured creditor liable alters the priority system set forth in this section. The standard for determining whether a secured creditor is unjustly enriched as a result of benefits conferred by the unsecured creditor is the extent to which the secured creditor was involved in the transactions through which the unsecured creditor supplied goods or services that enhanced the value of the collateral. Ninth Dist. Prod. Credit v. Ed Duggan, 821 P.2d 788 (Colo. 1991).

Creditor's unperfected security interest is not subordinate to interest of creditors who had actual knowledge of such security interest. Although creditor failed to note his security interest on the certificate of title for certain vehicles, party who assumes the obligations under an indenture and security agreement takes title to property subject to such security interest. Vance v. Casebolt, 841 P.2d 394 (Colo. App. 1992).

The Colorado Certificate of Title Act (CCTA) does not supersede subsection (e) of this section because subsection (e) does not govern the manner or timing of the perfection of liens. It governs only the priority of a lien and is not inconsistent with the CCTA. In re Roser, 613 F.3d 1240 (10th Cir. 2010).

Applied in Rocky Mt. Ass'n of Credit Mgt. v. Hessler Mfg. Co., 37 Colo. App. 551, 553 P.2d 840 (1976); Young v. Golden State Bank, 39 Colo. App. 45, 560 P.2d 855 (1977); Bd. of County Comm'rs v. Berkeley Vill., 40 Colo. App. 431, 580 P.2d 1251 (1978); Dept. of Natural Res. v. Benjamin, 41 Colo. App. 520, 587 P.2d 1207 (1978); Young v. Golden State Bank, 632 P.2d 1053 (Colo. App. 1981); Heinrichsdorff v. Raat, 655 P.2d 860 (Colo. App. 1982); Yeager Trucking v. Circle Leasing, 29 B.R. 131 (Bankr. D. Colo. 1983).