Can somebody tell me if this question/answer is wrong?
Question:
Burn Manufacturing borrowed $500,000 from Howard Finance Co., secured by Burn’s present and future inventory, accounts receivable, and the proceeds thereof. The parties signed a financing statement that described the collateral and it was filed in the appropriate state office. Burn subsequently defaulted in the repayment of the loan and Howard attempted to enforce its security interest. Burn contended that Howard’s security interest was unenforceable. In addition, Green, who subsequently gave credit to Burn without knowledge of Howard’s security interest, is also attempting to defeat Howard’s alleged security interest. The security interest in question is valid with respect to:
A. both Burn and Green.
B.neither Burn nor Green.
C. Burn but not Green.
D. Green but not Burn.
It say the answer is A and the explanation is Where multiple security interests exist in the same collateral, priority is given based on the time of filing of financing statements. Howard Finance would have priority over Green, but Green still has a valid interest.
My thought is that the answer choice should be “both Howard and Green”, not “both Burn and Green”. What do you guys think?
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