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 Howard and Green.
C.
Howard but not Green.
I answered C. The Correct Answer is A.
The explanation even states “Howard has rights towards Burn the debtor (1. written financing statement, 2. Howard gave $500,000, and 3. Burn has rights to the inventory and AR). Since there are two creditors, the first creditor to perfect has priority (Howard perfected first).”
So how can the answer be A if Howard perfected first? I thought even if Green had no knowledge of Howard's security interest, he still technically knows since the security interest is perfected and should public knowledge.
.