The Bank of Nova Scotia and MMX Corp Are Discussing

Multiple Choice

The Bank of Nova Scotia and MMX Corp are discussing setting up a line of credit for MMX. Under the terms of the line of credit, MMX will be able to require the bank to advance it funds at any time up to an aggregate cap of $10 000. MMX will give the Bank a security interest in all of its present and future assets. The parties have not yet entered into an agreement and the Bank has advanced no money. The Bank files a financing statement to register its interest in anticipation of the agreement being entered into. Subsequently, Melanie, the president of MMX, lends the corporation $20 000. MMX gives her a security interest in all its present and future assets. Melanie files a financing statement to register her interest. Which statement best describes the relative priority of the claims of Melanie and the Bank?

A) The Bank has priority over Melanie because MMX and the Bank began negotiating before Melanie's loan was made.
B) The Bank has priority over Melanie because Melanie has a close relationship with the corporation as its president.
C) Melanie has priority over the Bank because the Bank's security interest never attached and is unperfected.
D) Melanie has priority over the Bank because her claim is for a larger amount of money than the Bank's.
E) The Bank has priority over Melanie because it registered its security interest before Melanie registered hers.