## Facts

- Aparacor, Inc. granted Exchange National Bank of Chicago a perfected security interest in its assets to secure a revolving line of credit (up to $7.2 million) under a note executed in 1987.
- The note expired in April 1988, but the bank continued extending credit and maintaining the lending relationship.
- On November 18, 1988, Uni Imports, Inc. obtained a $66,000 federal judgment against Aparacor.
- On January 12, 1989, Uni registered the judgment and served a writ of execution on the bank, creating a judgment lien on Aparacor’s property held by the bank.
- The bank refused turnover, asserting its prior-perfected security interest had priority over Uni’s lien.
- In February 1989, the bank and Aparacor executed a document styled as a modification of the expired note; the bank continued disbursing funds through March 2, 1989.
- On March 2, 1989, Aparacor made an assignment for the benefit of creditors while owing the bank about $1 million.
- After the lien attached and after Aparacor’s assignment, the bank made additional payments tied to Aparacor’s account (including items such as interest, taxes, and legal fees), characterizing them as secured, non-advance expenditures.
- In supplementary proceedings, Uni sought a turnover order directing the bank to pay over assets sufficient to satisfy Uni’s judgment lien, arguing the bank’s post-lien advances and payments were subordinate.

## Issues

1. Under Illinois U.C.C. § 9-301(4), to what extent does a prior-perfected security interest retain priority over a later judgment lien for advances made after the lien attaches.
2. Whether advances made after the 45-day period following lien attachment are subordinate to the lien creditor when made with knowledge of the lien and not within a protected commitment.
3. Whether post-lien “non-advance” expenditures (e.g., interest, taxes, attorneys’ fees, protective disbursements) may remain senior to the judgment lien as secured reimbursement obligations, and what analysis is required to determine that priority.

## Decision

- The Seventh Circuit held that the bank’s perfected security interest had priority over Uni’s judgment lien only to the extent it secured advances made within 45 days after Uni’s lien attached.
- The court concluded that a $274,000 payment made after the 45-day period was not protected from subordination as a post-45-day advance under § 9-301(4).
- The court determined the record and the district court’s reasoning did not adequately address whether some post-45-day payments were non-advance reimbursement obligations secured by the prior-perfected security interest.
- The court vacated the turnover ruling to the extent it failed to separate and evaluate the bank’s post-45-day expenditures and payments and remanded for transaction-specific findings on priority.

## Legal Principles

- Under Illinois U.C.C. § 9-301(4), a secured party’s prior-perfected security interest has priority over a later lien creditor only for advances made within 45 days after the lien attaches (absent a qualifying statutory exception).
- Post-45-day extensions of new value characterized as “advances” are generally subject to subordination to the lien creditor under the statute when the secured party has notice and lacks protected status.
- Obligations that are not “advances” (such as reimbursement claims for contractually authorized interest, fees, taxes, or protective expenditures) may retain priority if they are within the scope of the preexisting, perfected security interest and relate to the pre-lien secured transaction.
- Courts must disaggregate post-lien account activity and decide priority item-by-item, distinguishing subordinated advances from potentially senior non-advance reimbursement obligations.

## Conclusion

The Seventh Circuit applied the 45-day priority limitation for post-lien advances under Illinois U.C.C. § 9-301(4), but remanded because the district court did not determine whether the bank’s post-45-day expenditures were subordinated advances or secured, senior non-advance reimbursement obligations requiring a payment-by-payment analysis.


Uni Imports, Inc. v. Exch. Nat’l Bank of Chi., 978 F.2d 984 (7th Cir. 1992)