The core issue here is the perfection of a security interest in accounts that are part of a sale of a business. Under North Carolina’s Article 9, when a seller sells its accounts, the buyer of those accounts generally obtains a perfected security interest in those accounts automatically upon attachment, without the need for filing a financing statement, provided the buyer is not acting as a secured party for other collateral. This is because the sale of accounts is treated as a true sale, and the buyer’s interest is not a security interest in collateral for a debt. However, if the transaction is structured as a secured loan where the accounts are collateral, then filing would be required for perfection against third parties. In this scenario, the transfer of accounts is described as a “sale,” and the buyer is acquiring ownership of those accounts, not merely using them as collateral for a loan. Therefore, the buyer’s security interest in the accounts is automatically perfected by operation of law under North Carolina General Statute \(53-12-309\), which deals with the automatic perfection of security interests in accounts arising from a sale of accounts. This automatic perfection is a crucial exception to the general rule that filing is required for perfection in most collateral types. The other options are incorrect because they either suggest a filing requirement where none exists for a true sale of accounts or misapply other perfection methods.

In North Carolina, under Article 9 of the Uniform Commercial Code, the perfection of a security interest in deposit accounts is a critical area. Unlike many other types of collateral, a security interest in a deposit account can only be perfected by control. Control is defined in North Carolina General Statute § 25-9-104 and generally means that the secured party is the bank in which the deposit account is maintained, or the debtor has agreed in writing that the bank will comply with instructions from the secured party directing the disposition of the funds in the deposit account, or the secured party becomes the assignee of the deposit account. If a secured party has a purchase-money security interest in a deposit account, and they fail to obtain control, their security interest remains unperfected. A subsequent lien creditor, such as a judgment creditor who levies on the account, would generally have priority over an unperfected security interest. Therefore, without control, the secured party’s claim to the deposit account is subordinate to the rights of a levying creditor.

In North Carolina, under Article 9 of the Uniform Commercial Code, the perfection of a security interest in a deposit account as original collateral requires the secured party to obtain control over the account. Control is achieved when the secured party is the bank in which the deposit account is maintained, or when the debtor agrees in writing that the bank will comply with the secured party’s instructions regarding the deposit account, and the bank acknowledges this agreement. This is outlined in NC Gen. Stat. § 25-9-104. Filing a financing statement is generally insufficient for perfecting a security interest in deposit accounts. The rationale behind this is that deposit accounts are considered cash proceeds of other collateral or are themselves instruments or investment property in certain contexts, but when taken as original collateral, the UCC prioritizes control to ensure the secured party can readily access the funds and prevent the debtor from unilaterally dissipating them. Therefore, the primary method for perfection, and indeed the only effective method for a deposit account as original collateral, is control.

In North Carolina, under Article 9 of the Uniform Commercial Code, a security interest in fixtures is perfected by filing a fixture filing in the real property records. A fixture filing is a UCC-1 financing statement that includes additional information, such as a description of the real property to which the goods are affixed and the name of the record owner of that real property. The filing must be made in the office where a mortgage on the real property would be recorded. This ensures that the secured party’s interest in the fixtures is prioritized over subsequent purchasers or encumbrancers of the real property. If the secured party fails to make a proper fixture filing, their security interest in the fixtures may be subordinate to the rights of those who acquire an interest in the real property without knowledge of the unperfected security interest. Therefore, the correct method for perfecting a security interest in goods that become fixtures in North Carolina is by filing a fixture filing in the appropriate real property office.

The core issue here revolves around the priority of security interests when a debtor defaults on multiple secured loans. In North Carolina, as under the Uniform Commercial Code (UCC) Article 9, the general rule for determining priority among competing secured parties is based on the time of filing a financing statement or the time of perfection, whichever occurs first. However, there are specific rules for purchase-money security interests (PMSIs). A PMSI in inventory has superpriority, but this priority is typically lost if the secured party fails to provide authenticated notification to any existing secured party of record whose security interest covers the inventory before the debtor receives possession of the inventory. In this scenario, Piedmont Bank has a perfected security interest in all of Equinox Manufacturing’s inventory, which was perfected by filing on January 15, 2023. This establishes Piedmont Bank as a secured party of record with a prior claim to the inventory. Carolina Credit Union then acquires a PMSI in the new widgets that Equinox is manufacturing, which also constitute inventory. For Carolina Credit Union’s PMSI to have priority over Piedmont Bank’s earlier perfected security interest in the same collateral, it must meet the requirements of UCC § 9-324. Specifically, for inventory, the PMSI holder must have perfected its security interest and, crucially, must have given authenticated notification to any other secured party of record whose security interest covers the inventory before the debtor receives possession of the inventory. Carolina Credit Union perfected its PMSI on March 1, 2023. However, it failed to send any notification to Piedmont Bank, the existing secured party of record for Equinox’s inventory, before Equinox received the widgets. Therefore, Carolina Credit Union does not satisfy the notification requirement for PMSI superpriority in inventory. Consequently, Piedmont Bank’s earlier perfected security interest has priority over Carolina Credit Union’s PMSI in the widgets. The amount of the debt is irrelevant to the priority determination itself, only to the extent of recovery. The question asks which secured party has priority in the widgets. Since Carolina Credit Union failed to meet the notification requirement for PMSI superpriority in inventory, Piedmont Bank retains its priority.

The scenario involves a debtor, “Coastal Carpets Inc.,” located in North Carolina, granting a security interest in its inventory to a secured party, “Atlantic Bank.” The security agreement clearly covers all inventory, including after-acquired inventory. Atlantic Bank properly perfects its security interest by filing a financing statement in North Carolina. Subsequently, Coastal Carpets Inc. obtains a new line of specialized weaving machines on a purchase money security interest (PMSI) basis from “WeaveWell Machines LLC.” WeaveWell Machines LLC also properly perfects its PMSI. The core issue is the priority between Atlantic Bank’s earlier, perfected general security interest in inventory and WeaveWell Machines LLC’s PMSI in the new weaving machines, which are now part of Coastal Carpets Inc.’s inventory. Under North Carolina General Statutes § 25-9-324, a perfected PMSI in inventory generally has priority over a conflicting security interest in the same inventory. This priority is contingent upon specific requirements being met. First, the PMSI must be perfected when the debtor receives possession of the inventory. Second, the secured party claiming PMSI priority must give an authenticated notice to any other secured party who has previously filed a financing statement covering the inventory. This notice must state that the secured party expects to acquire a PMSI in inventory and describe the inventory. This notice must be sent within five years before the debtor receives possession of the inventory. In this case, WeaveWell Machines LLC’s PMSI in the weaving machines, which are now inventory, is perfected. The crucial element for WeaveWell Machines LLC to maintain priority over Atlantic Bank’s earlier-filed security interest in inventory is whether WeaveWell Machines LLC sent the required notice to Atlantic Bank. If WeaveWell Machines LLC sent the authenticated notice to Atlantic Bank within the prescribed timeframe before Coastal Carpets Inc. received possession of the weaving machines, then WeaveWell Machines LLC’s PMSI in the weaving machines will have priority. The question asks about the outcome assuming WeaveWell Machines LLC *did* provide the required notice. Therefore, WeaveWell Machines LLC’s PMSI in the weaving machines has priority over Atlantic Bank’s security interest in the same inventory.

The core issue here is the priority of security interests when collateral is transferred and the secured party fails to refile in the new jurisdiction. Under North Carolina General Statute § 25-9-316(a)(2), if a security interest is perfected in one jurisdiction but then collateral is brought into North Carolina, the security interest remains continuously perfected for a period of four months. After this four-month period, the security interest loses its perfected status in North Carolina unless it can be perfected in North Carolina within that four-month window. Perfection in North Carolina would typically involve filing a financing statement. Since the four-month period has elapsed and no new filing was made in North Carolina, the original security interest held by Capital Bank is no longer perfected in North Carolina. Therefore, the unperfected security interest of Capital Bank is subordinate to the perfected security interest of Coastal Credit Union, which properly filed its financing statement in North Carolina. This is a fundamental application of the “last in time to file or perfect” rule for perfected security interests, and the concept of loss of perfection for those that fail to re-perfect after interstate collateral movement.

The question pertains to the perfection of security interests in fixtures under North Carolina’s Article 9 of the UCC. Perfection of a security interest in fixtures requires filing a fixture filing. A fixture filing is a UCC-1 financing statement that includes a description of the real property to which the goods are affixed and is filed in the office where a mortgage on the real property would be recorded. Under North Carolina General Statute \(§ 25-9-502(b)(3)\), a financing statement must sufficiently describe the collateral. For fixtures, this means describing the fixtures themselves and indicating they are or are to become fixtures. The filing must occur in the county where the real estate is located. The priority of a fixture filing is generally governed by the time of filing, but a fixture filing generally takes priority over conflicting interests in the real property from the time of filing, except for prior recorded interests in the real property. The scenario involves a security interest in a specialized industrial furnace attached to real property. The secured party filed a standard UCC-1 financing statement in the office of the Secretary of State of North Carolina. This is insufficient for perfection of a fixture filing. A fixture filing must be made in the local register of deeds office in the county where the real estate is located, and the financing statement must contain specific information regarding the real property. Therefore, the secured party’s interest is unperfected against subsequent purchasers of the real property for value, and also against subsequent lien creditors. The initial filing with the Secretary of State only perfects the security interest in the furnace as a general intangible or inventory if it had not yet become a fixture, but once it is affixed to the real property in a manner that makes it a fixture, a fixture filing is required for perfection against real property interests.

The scenario involves a purchase money security interest (PMSI) in inventory. Under North Carolina General Statute \( \text{§} 25-9-324 \), a PMSI in inventory has priority over a conflicting security interest in the same inventory, provided certain conditions are met. The lender, Piedmont Bank, perfected its security interest by filing a financing statement on January 15, 2023. The debtor, Carolina Furnishings LLC, then acquired new inventory financed by a PMSI from Artisan Goods Inc. Artisan Goods Inc. filed its financing statement on February 1, 2023. For Artisan Goods Inc.’s PMSI to have priority over Piedmont Bank’s earlier perfected security interest in the same inventory, Artisan Goods Inc. must have satisfied the requirements of \( \text{§} 25-9-324 \). Specifically, Artisan Goods Inc. needed to file its financing statement *before* Carolina Furnishings LLC received possession of the inventory, or within a specified grace period after the debtor received possession. Since Piedmont Bank’s filing predates Artisan Goods Inc.’s filing, and the question implies Carolina Furnishings LLC has possession of the inventory, Artisan Goods Inc.’s PMSI would generally be subordinate to Piedmont Bank’s interest unless Artisan Goods Inc. met the specific requirements for PMSI priority in inventory. The key is that for inventory, the PMSI holder must file *before* the debtor receives possession of the inventory to gain superpriority over a prior perfected security interest. In this case, Piedmont Bank’s earlier filing establishes its priority. Therefore, Piedmont Bank retains its priority.

The core issue here revolves around the perfection of a security interest in a deposit account. Under North Carolina General Statutes Section 25-9-304(a), a security interest in a deposit account as original collateral can only be perfected by control. Control is defined in North Carolina General Statutes Section 25-9-104. For a deposit account, control is typically achieved when the secured party is the bank with which the deposit account is maintained, or when the secured party obtains the bank’s agreement to comply with instructions directing the disposition of the funds in the account. In this scenario, while Amelia has a written security agreement and possession of the original certificate of deposit, neither of these methods perfects a security interest in the deposit account itself. A certificate of deposit is a deposit account. Perfection by possession of a tangible CD is generally for instruments, not deposit accounts. Therefore, Amelia’s security interest is unperfected. When a security interest is unperfected, a subsequent lien creditor, such as the IRS levying on the account, generally has priority. The IRS levy creates a lien on the debtor’s property, and an unperfected security interest is subordinate to such a lien.

The core issue here revolves around the perfection of a security interest in deposit accounts. Under North Carolina General Statute \(55-9-304\), a security interest in a deposit account can only be perfected by control. Control is achieved when the secured party is the bank in which the deposit account is maintained, or when the secured party obtains the bank’s agreement to comply with the secured party’s instructions regarding the deposit account. In this scenario, Acme Bank has a perfected security interest in the deposit account of Coastal Properties LLC because Acme Bank is the bank where the account is held, thus satisfying the control requirement under \(55-9-304\). The filing of a financing statement is generally sufficient for perfection of security interests in most types of collateral, including general intangibles and equipment, but it is explicitly stated in \(55-9-304\) that filing is not effective for perfection of a security interest in deposit accounts. Therefore, even though Acme Bank also filed a financing statement, the perfection of its security interest in the deposit account stems solely from its control over the account. The filing of a financing statement by the Bank of Raleigh is irrelevant to the perfection of Acme Bank’s security interest in the deposit account, as it does not grant them control.

Under North Carolina General Statute § 25-9-317, a buyer of goods takes free of a security interest that is perfected only by filing if the buyer receives delivery of the collateral without knowledge of the security interest and for value. This is often referred to as the “buyer in ordinary course of business” exception. However, this exception does not apply if the buyer has knowledge of the security interest. Knowledge, in the context of the Uniform Commercial Code, generally means actual knowledge. Therefore, if the buyer of the inventory at the auction in North Carolina knew about the perfected security interest held by Piedmont Bank, they would not take free of that security interest. The perfection of Piedmont Bank’s security interest by filing in North Carolina is a critical factor. A buyer in ordinary course of business is defined in NCGS § 25-1-201(b)(9) as a person that buys goods in good faith, without knowledge that the sale violates the rights of the person holding the security interest, and such goods are not all of a sale of a major part of the business of the seller. The auction scenario, especially if the auctioneer is selling off a significant portion of the debtor’s assets, could raise questions about whether the sale is in the ordinary course of business for the seller, but the buyer’s knowledge is the primary determinant for taking free of a perfected security interest under § 25-9-317.

The scenario involves a debtor, Piedmont Manufacturing Inc., located in North Carolina, who has granted a security interest in its inventory and equipment to Secure Lending Corp. Piedmont Manufacturing Inc. later files for bankruptcy. A crucial aspect of Article 9 of the Uniform Commercial Code, as adopted in North Carolina, concerns the priority of security interests when a debtor files for bankruptcy. In bankruptcy proceedings, the trustee generally has the status of a hypothetical lien creditor as of the commencement of the case. Under North Carolina General Statute § 25-9-317(a)(2), an unperfected security interest is subordinate to the rights of a lien creditor. Therefore, if Secure Lending Corp. failed to perfect its security interest in the inventory and equipment prior to Piedmont Manufacturing Inc.’s bankruptcy filing, its security interest would be subordinate to the rights of the bankruptcy trustee, who acts as a lien creditor. Perfection typically occurs through filing a financing statement under North Carolina General Statute § 25-9-310(a) or by possession under North Carolina General Statute § 25-9-313. Without evidence of perfection, the trustee can avoid the unperfected security interest. The question tests the understanding of perfection requirements and the priority rules in bankruptcy, specifically how a lien creditor’s rights (represented by the trustee) impact an unperfected security interest under North Carolina law.

The core issue here is the priority of security interests when collateral is transferred and the secured party’s knowledge of that transfer. Under North Carolina General Statute \( \text{§} 25-9-316 \), a security interest perfected in one jurisdiction that continues to be perfected in a second jurisdiction remains perfected even if the perfection in the first jurisdiction lapses. However, this protection has limits, particularly concerning transferees in the ordinary course of business. When collateral is sold or transferred, the buyer generally takes the collateral subject to a perfected security interest unless the buyer qualifies for a special exception. In North Carolina, as in most jurisdictions following the Uniform Commercial Code, a buyer in the ordinary course of business (BIOC) takes free of a security interest created by the seller, even if the security interest is perfected, if the buyer does not know that the sale is in violation of the security agreement. This is codified in North Carolina General Statute \( \text{§} 25-9-320 \). In this scenario, Vance Corp. has a perfected security interest in the specialized milling equipment. The equipment is then sold by a dealership, “Precision Tools Inc.,” to a manufacturing firm, “Apex Manufacturing.” Apex Manufacturing is not a consumer and is likely acquiring the equipment for its own use, not for resale. The critical factor is whether Apex Manufacturing is a buyer in the ordinary course of business from Precision Tools Inc. If Precision Tools Inc. is in the business of selling such equipment, and Apex Manufacturing purchases it in the ordinary course of that business, then Apex would take the equipment free of Vance Corp.’s security interest, provided Apex had no knowledge that the sale violated Vance Corp.’s security agreement. The fact that Vance Corp. filed its financing statement in North Carolina establishes perfection against subsequent purchasers generally. However, the BIOC exception is a significant carve-out. The question hinges on whether Apex Manufacturing’s purchase from Precision Tools Inc. constitutes a purchase in the ordinary course of business from a seller who is in the business of selling goods of that kind. If Apex is such a buyer, and it acquired the goods without knowledge that the sale was prohibited, Vance Corp.’s security interest would be cut off. The UCC’s definition of “buyer in the ordinary course of business” generally excludes buyers of farm products from a farmer and buyers of goods from a person engaged in farming operations, but this scenario involves specialized milling equipment sold by a dealership, fitting the typical BIOC context. The knowledge requirement is subjective: did Apex know the sale violated Vance’s rights? Without evidence of such knowledge, the BIOC exception would likely apply.

In North Carolina, under Article 9 of the Uniform Commercial Code, the perfection of a security interest in certain types of collateral, particularly fixtures, requires specific filing procedures. Fixtures are goods that have become so related to particular real property that an interest in them arises under real property law. When a secured party has a security interest in a fixture, perfection is generally achieved by filing a financing statement in the real property records of the county where the relevant real estate is located. This filing must also comply with the requirements for recording a mortgage. The financing statement must identify the debtor and the secured party, indicate the collateral, and, crucially for fixtures, provide a sufficient description of the real property to which the goods are affixed. Furthermore, NCGS § 25-9-334(d) specifies that a perfected security interest in fixtures is subordinate to a conflicting interest of an encumbrancer or owner of the real property if the fixture filing is not made before the interest of the encumbrancer or owner is established. The question revolves around the timing and method of perfection for a fixture filing to maintain priority against a subsequent real property encumbrancer. A fixture filing made after the establishment of the conflicting real property interest would generally be subordinate. Therefore, to have priority over a subsequently recorded mortgage on the real property, the fixture filing must precede the mortgage’s recording. If the fixture filing occurs on the same day as the mortgage recording, the priority depends on the specific timing within that day and any local recording office rules, but generally, the earlier filing prevails. In this scenario, the fixture filing on October 15th is earlier than the mortgage recording on October 17th. This earlier filing establishes the secured party’s priority.

Under North Carolina General Statute \( \text{§} 25-9-310 \), a perfected security interest generally has priority over conflicting unperfected security interests and over most lien creditors. However, Article 9 of the UCC provides for purchase-money security interests (PMSIs) in inventory to gain superpriority if certain conditions are met. Specifically, for a PMSI in inventory to have priority over a prior perfected security interest in the same inventory, the secured party must have perfected its PMSI in the inventory, and any secured party of record whose security interest is senior to the PMSI in the inventory must have received an authenticated notification of the PMSI in inventory at least twenty days before the debtor receives possession of the inventory. This notification requirement ensures that prior secured parties are aware of the incoming PMSI and can take action if they deem it necessary. If these notification requirements are not met, the PMSI in inventory will not achieve superpriority over the previously perfected security interest in the inventory. In this scenario, the Bank had a prior perfected security interest in all of Debtor’s inventory. The Vendor obtained a PMSI in new inventory delivered to Debtor. For the Vendor’s PMSI to have priority over the Bank’s prior perfected security interest in that same inventory, the Vendor must have perfected its PMSI and provided the required notification to the Bank at least twenty days before Debtor received possession of the inventory. Since the Vendor failed to provide this notification, its PMSI in the inventory does not have priority over the Bank’s security interest. Therefore, the Bank’s prior perfected security interest remains superior.

The core issue here is determining the priority of competing security interests in collateral. North Carolina’s Article 9 of the Uniform Commercial Code governs secured transactions. The general rule for priority is established by the first-to-file or first-to-perfect rule. Perfection is typically achieved by filing a financing statement or, in certain cases, possession or control. In this scenario, Creditor A has a perfected security interest in the inventory by filing its financing statement on January 15th. Creditor B’s security interest in the same inventory is perfected on February 1st through possession. Under NC GS § 25-9-322(a)(1), a perfected security interest generally has priority over another perfected security interest if it is the first to file or be perfected. However, there is a crucial exception for buyers of goods. NC GS § 25-9-320(a) provides that a buyer in the ordinary course of business takes free of a security interest created by the seller even if the security interest is perfected and even if the buyer has knowledge of the perfection. “Buyer in the ordinary course of business” is defined in NC GS § 25-1-201(9) to mean a person that buys goods in good faith, without knowledge that the sale violates the rights of the secured party, and from a person in the business of selling goods of that kind. Since “Artisan’s Emporium” is in the business of selling handcrafted furniture and sold the credenza to Ms. Albright in the ordinary course of its business, Ms. Albright, as a buyer in the ordinary course of business, takes the credenza free of Creditor A’s perfected security interest. Creditor B’s perfection by possession is irrelevant to Ms. Albright’s status as a buyer in the ordinary course. Therefore, Creditor A’s security interest is cut off by Ms. Albright’s purchase.

The core issue here revolves around the perfection of a security interest in accounts. Under North Carolina General Statute \( \text{§} 25-9-301(1)(a) \), a security interest is generally perfected when a financing statement has been filed. However, North Carolina General Statute \( \text{§} 25-9-309(2) \) provides an exception for security interests in accounts, stating that such a security interest is automatically perfected upon attachment. Attachment occurs when the secured party gives value, the debtor has rights in the collateral, and a security agreement is in place that describes the collateral. In this scenario, the agreement between Piedmont Ventures and Coastal Manufacturing clearly establishes a security interest in Coastal’s accounts. Piedmont provided value by extending credit, Coastal has rights in its accounts as they are generated, and a security agreement exists. Therefore, Piedmont’s security interest in the accounts is perfected automatically upon attachment, without the need for filing a financing statement. This automatic perfection is a key characteristic for certain types of collateral, including accounts, under Article 9 of the Uniform Commercial Code as adopted in North Carolina. The question tests the understanding of automatic perfection for accounts and the interplay between general perfection rules and specific exceptions.

The core issue here is the priority of security interests when collateral is possessed by a third party, specifically a bailee. In North Carolina, under UCC § 9-313, perfection by control over a bailee’s possession is a key method for establishing priority. When a secured party obtains control over collateral in the possession of a bailee, that secured party generally has priority over other unperfected security interests and, in many cases, over perfected security interests that do not have control. In this scenario, Atlantic Bank properly perfected its security interest in the specialized manufacturing equipment by taking possession of the warehouse receipt issued by Coastal Warehousing, thereby gaining control over the collateral as defined by UCC § 9-106. This control establishes Atlantic Bank’s priority. Before this, Piedmont Bank had a perfected security interest by filing under UCC § 9-310. However, UCC § 9-324(a) generally grants priority to a purchase-money security interest (PMSI) in inventory if it is perfected when the debtor receives possession and the secured party gives notice to any other secured party who has a perfected security interest in the collateral. Piedmont Bank’s security interest in the inventory was perfected by filing. Atlantic Bank’s security interest was perfected by control over the warehouse receipt. While Piedmont had a PMSI in inventory, the collateral here is described as specialized manufacturing equipment, not inventory in the traditional sense. Even if it were considered inventory, the critical factor is the perfection method and the timing of notice. Atlantic Bank’s perfection by control, achieved by taking possession of the warehouse receipt, is a stronger form of perfection for this type of collateral held by a bailee. Under UCC § 9-334(c), if goods are in the possession of a bailee that has issued a negotiable document of title, a security interest in the goods may be perfected by perfecting a security interest in the document. UCC § 9-334(d) further states that a security interest in goods in the possession of a bailee that has not issued a negotiable document of title may be perfected by obtaining an acknowledgment by the bailee of the secured party’s right to possession. Atlantic Bank’s perfection via control of the warehouse receipt, which is a document of title, preempts Piedmont Bank’s earlier filing, especially since the equipment is not standard inventory and the perfection method by control is superior in this bailee situation. The scenario does not suggest Piedmont Bank provided any notice regarding its PMSI in inventory, which would be a requirement for PMSI priority over a prior perfected security interest in inventory under UCC § 9-324(b). However, the primary basis for Atlantic Bank’s priority is its perfection by control over the document of title representing the collateral held by the bailee.

The scenario involves a purchase money security interest (PMSI) in inventory. Under North Carolina General Statutes Section 25-9-324, a PMSI in inventory has priority over a conflicting security interest in the same inventory if certain conditions are met. Specifically, the PMSI holder must have perfected its security interest by filing a financing statement and must have given new value to the debtor. Furthermore, the PMSI holder must have given an authenticated notification to any holder of a conflicting security interest who has filed a financing statement covering the collateral before the date of the filing of the PMSI holder’s financing statement. This notification must be given before the debtor receives possession of the inventory. In this case, “Coastal Capital” has a prior perfected security interest in all of “Oceanic Enterprises'” inventory. “Seaside Loans” is attempting to take a PMSI in new inventory. For Seaside Loans to have priority over Coastal Capital’s existing security interest, Seaside Loans must perfect its PMSI by filing a financing statement and must send an authenticated notification to Coastal Capital before Oceanic Enterprises receives the new inventory. The question states that Seaside Loans filed its financing statement and provided notice to Coastal Capital after Oceanic Enterprises received the inventory. This timing is critical. According to NCGS § 25-9-324(b), the notification must be received by the holder of the conflicting security interest before the debtor receives possession of the inventory. Since Oceanic Enterprises received the inventory before Seaside Loans provided notice, Seaside Loans’ PMSI in the inventory will not have priority over Coastal Capital’s prior perfected security interest. Therefore, Coastal Capital retains its priority.

The core issue here is determining the proper place to file a financing statement for collateral that is a general intangible and also has a location component. North Carolina General Statute \(55-9-301(1)(a)\) dictates that for a general intangible, perfection is achieved by filing a financing statement in the jurisdiction where the debtor is located. North Carolina General Statute \(55-9-307(b)\) further specifies that for a registered organization, its location is the state under whose law it is organized. In this scenario, “Carolina Craftsmen LLC” is registered in North Carolina. Therefore, the financing statement must be filed in North Carolina to perfect the security interest in the general intangible, which is the exclusive right to distribute the artisanal pottery in the Southeastern United States. The fact that the pottery itself is physically located in South Carolina or that the distribution territory is geographically diverse does not alter the filing location requirement for a general intangible, which is tied to the debtor’s location.

In North Carolina, under Article 9 of the Uniform Commercial Code, the perfection of a security interest in certain types of collateral, such as accounts, chattel paper, documents, general intangibles, and investment property, is typically achieved by filing a financing statement. However, for specific types of collateral, such as goods in the possession of the secured party, negotiable documents, or negotiable instruments, possession by the secured party can also serve as a method of perfection. The question revolves around the priority of security interests when a debtor defaults and the collateral is possessed by a third party who is not the secured party. Specifically, it examines the situation where a secured party has a perfected security interest in inventory, and a third party subsequently obtains possession of that inventory under circumstances that do not automatically perfect their interest. Consider a scenario where a lender, FirstCarolina Bank, has a perfected security interest in all of the inventory of a North Carolina furniture manufacturer, “Carolina Craftsmanship.” The security agreement and financing statement were properly filed. Later, Carolina Craftsmanship enters into a consignment arrangement with “Coastal Furnishings,” a retailer located in South Carolina, to sell the inventory. Coastal Furnishings takes possession of the furniture. Neither party files a financing statement related to this consignment, nor does Coastal Furnishings establish a possessory security interest in the inventory. When Carolina Craftsmanship defaults on its loan, FirstCarolina Bank seeks to repossess the inventory from Coastal Furnishings. Under North Carolina General Statute § 25-9-310(b)(3), a possessory security interest in collateral perfected by possession generally takes priority over a previously perfected security interest in the same collateral if the secured party has notice of the prior interest. However, this exception applies to the perfection of the *secured party’s* interest by possession. In this case, Coastal Furnishings does not have a security interest; it merely possesses the collateral as a bailee under a consignment. Therefore, FirstCarolina Bank’s prior perfected security interest in the inventory continues to be effective against Coastal Furnishings, as Coastal Furnishings does not have a superior claim through possession as a secured party. The key is that Coastal Furnishings’ possession is not for the purpose of perfecting its own security interest, but rather as a bailee. Thus, FirstCarolina Bank’s perfected security interest remains superior.

The scenario involves a purchase money security interest (PMSI) in inventory. Under North Carolina General Statute § 25-9-324(b), a PMSI in inventory has priority over a conflicting security interest in the same inventory, provided certain conditions are met. These conditions include: (1) the PMSI lender must have perfected its security interest in the inventory by filing a financing statement before the inventory is delivered to the buyer; and (2) the PMSI lender must have given an authenticated notification to any prior secured party whose security interest covers the inventory before the delivery of the inventory to the buyer. In this case, Apex Bank has a prior perfected security interest in all of “The Gadget Emporium’s” inventory. “Innovate Solutions Inc.” provides new smartwatches to The Gadget Emporium under a PMSI. To gain priority over Apex Bank’s existing security interest, Innovate Solutions Inc. must file its financing statement and notify Apex Bank before the delivery of the smartwatches to The Gadget Emporium. The facts state that Innovate Solutions Inc. filed its financing statement on June 1st and sent the notification to Apex Bank on June 3rd. The smartwatches were delivered to The Gadget Emporium on June 5th. Since the notification was sent after the filing but before the delivery, and the filing itself occurred before delivery, Innovate Solutions Inc. has satisfied the requirements of NCGS § 25-9-324(b). Therefore, Innovate Solutions Inc.’s PMSI has priority over Apex Bank’s prior perfected security interest in the smartwatches.

In North Carolina, when a secured party has a perfected security interest in collateral and that collateral is sold, exchanged, or otherwise disposed of in a transaction not authorized by the secured party, the security interest generally continues in the collateral under North Carolina General Statute § 25-9-315(a)(1). This means that the buyer or transferee takes the collateral subject to the existing perfected security interest unless one of the exceptions applies. One significant exception is found in North Carolina General Statute § 25-9-315(a)(2), which states that a security interest does not continue in proceeds of collateral unless the security interest is perfected in the proceeds. However, this question focuses on the collateral itself, not proceeds. Another key exception is when the secured party authorizes the disposition free of the security interest, or when the buyer qualifies as a buyer in the ordinary course of business under North Carolina General Statute § 25-9-320(a) and the collateral is of a type typically sold in the business of the seller. In this scenario, the collateral is specialized industrial machinery, not typically consumer goods sold in ordinary retail. The debtor’s sale to an entity that is not a buyer in the ordinary course of business, without authorization from the secured party, means the security interest remains attached to the machinery. Therefore, the secured party retains the right to repossess the machinery from the new owner.

The scenario involves a purchase money security interest (PMSI) in inventory. Under North Carolina General Statutes § 25-9-324, a PMSI in inventory has priority over a conflicting security interest in the same inventory, provided certain conditions are met. These conditions include the PMSI being perfected when the debtor receives possession of the inventory, and the secured party giving an authenticated notification to any other secured party whose previously filed financing statement covers the inventory. The notification must be sent within five years before the debtor receives possession of the inventory. In this case, First National Bank filed its financing statement on January 15, 2022, covering all of Apex Manufacturing’s inventory. On March 1, 2023, Capital Finance perfected a PMSI in new inventory acquired by Apex. Capital Finance sent its notification to First National Bank on February 10, 2023, which is within the five-year window prior to Apex receiving the new inventory on March 1, 2023. Therefore, Capital Finance’s PMSI has priority over First National Bank’s earlier-filed general security interest in the new inventory. The notification requirement is a crucial step for PMSI holders in inventory to gain superpriority over prior perfected security interests.

The scenario involves a purchase money security interest (PMSI) in equipment. Under North Carolina General Statute § 25-9-317(a)(2), a security interest is subordinate to the rights of a buyer of goods who gives value and receives delivery of the collateral without knowledge of the security interest and before its perfection. However, this general rule has an exception for PMSIs. Specifically, under North Carolina General Statute § 25-9-324(a), a perfected PMSI in equipment has priority over a conflicting security interest in the same equipment if the PMSI is perfected when the debtor receives possession of the collateral or within 20 days thereafter. In this case, the PMSI in the specialized welding equipment was perfected on July 15th, which is within 20 days of the debtor, Forge & Fabricate LLC, receiving possession of the equipment on July 1st. Therefore, the PMSI held by Capital Equipment Finance is perfected and has priority over the earlier, unperfected security interest held by Business Lending Associates. The key is the timely perfection of the PMSI in equipment.

The core issue here pertains to the perfection of security interests in fixtures under North Carolina law, specifically Article 9 of the Uniform Commercial Code. Perfection of a security interest in fixtures is generally accomplished by filing a financing statement in the real property records, as opposed to the UCC filing system. However, Article 9 provides an exception for purchase-money security interests in fixtures. Under NCGS § 25-9-334(d), a perfected purchase-money security interest in fixtures has priority over conflicting interests in the real property. The statute specifies that such a security interest has priority if it is perfected by a fixture filing before the goods become fixtures or within twenty days thereafter. In this scenario, the security interest in the specialized brewing equipment was a purchase-money security interest, and it was perfected by a fixture filing in the Vance County Register of Deeds office on July 15th. The equipment was installed and became fixtures on July 10th. Since the fixture filing occurred within twenty days of the equipment becoming fixtures, the purchase-money security interest is perfected and takes priority over the pre-existing mortgage holder’s interest in the real property, assuming the mortgage holder’s interest arose before the fixture filing and was not otherwise perfected against fixtures. The key is the timely fixture filing for a PMSI in fixtures.

The core issue here is the priority of security interests when a debtor defaults on a loan secured by inventory and then files for bankruptcy. Under North Carolina General Statutes Chapter 25, Article 9, a purchase-money security interest (PMSI) in inventory generally has priority over a prior perfected security interest in the same inventory. For a PMSI in inventory to have priority, specific notification requirements must be met. The secured party claiming the PMSI must have given an authenticated notification to any secured party whose security interest has been perfected in the same collateral. This notification must state that the secured party expects to acquire a purchase-money security interest in inventory of the type the debtor acquires, including proceeds. This notification must be sent within a reasonable time before the debtor receives possession of the inventory. In this scenario, the initial secured party, Carolina Capital, has a perfected security interest in all of Piedmont Manufacturing’s inventory. When Apex Financial acquires a PMSI in the new raw materials inventory, it must notify Carolina Capital to maintain its priority. Since Apex Financial sent its notification to Carolina Capital on March 1st, and Piedmont Manufacturing received the raw materials on March 5th, the notification was sent within a reasonable time before the debtor received possession. Therefore, Apex Financial’s PMSI in the raw materials inventory will have priority over Carolina Capital’s prior perfected security interest in that same collateral.

The scenario involves a purchase money security interest (PMSI) in inventory. In North Carolina, as in most jurisdictions under Article 9 of the UCC, a PMSI in inventory requires a specific type of perfection to gain priority over other secured creditors, particularly those who have already filed a financing statement covering after-acquired inventory. For a PMSI in inventory, the secured party must: 1. File a financing statement before or within a specified period after the debtor receives possession of the inventory. North Carolina follows the general UCC rule, which requires filing to be effective against a buyer of inventory in the ordinary course of business. However, to gain priority over a prior perfected security interest in the same inventory, the PMSI holder must also satisfy notice requirements. 2. Send an authenticated notification to any secured party who has previously filed a financing statement covering the same type of goods, and whose filing has not lapsed. This notification must be sent within a specific timeframe before the debtor receives possession of the inventory. In North Carolina, this notification must be sent within the five years before the debtor receives possession of the inventory. The notification must state that the sender has or expects to acquire a PMSI in inventory of the debtor and describe the inventory. In this case, “Farm Equipment Inc.” has a prior perfected security interest in all of “AgriGrow LLC’s” inventory, including after-acquired inventory. “Tractor Corp.” subsequently sells tractors to AgriGrow LLC on credit, retaining a PMSI in those tractors. Tractor Corp. files its financing statement on October 1st, after AgriGrow LLC received the tractors. Crucially, Tractor Corp. did not send the required notification to Farm Equipment Inc. before AgriGrow LLC received the inventory. Because Tractor Corp. failed to send the required authenticated notification to Farm Equipment Inc., its PMSI in the tractors is subordinate to Farm Equipment Inc.’s prior perfected security interest in after-acquired inventory. Farm Equipment Inc.’s security interest attaches to the tractors as soon as AgriGrow LLC acquires rights in them, and its prior filing provides notice to subsequent creditors. Tractor Corp.’s failure to comply with the notification requirement means it cannot achieve superpriority status for its PMSI against Farm Equipment Inc. Therefore, Farm Equipment Inc. has priority.

The core issue in this scenario revolves around the priority of security interests when a debtor defaults and collateral is involved. Article 9 of the Uniform Commercial Code, as adopted in North Carolina, establishes a comprehensive framework for perfecting and enforcing security interests. When a secured party has properly filed a financing statement and the collateral is inventory, subsequent purchasers of that inventory take subject to the perfected security interest, unless an exception applies. In this case, “Coastal Crafts” has a properly perfected security interest in “Artisan Goods Inc.’s” entire inventory. When “Bayside Imports” purchases a portion of this inventory, they are considered a buyer in the ordinary course of business (BIOC). However, for a BIOC to take free of a security interest, the security interest must have been created by the seller’s *immediate* seller, and the BIOC must not know that the sale violates the security agreement. Here, the security interest was created by Artisan Goods Inc. itself, not by a prior seller of the inventory to Artisan Goods Inc. Furthermore, Bayside Imports’ knowledge of the security agreement’s existence, even if not its specific terms, is sufficient to prevent them from taking free of Coastal Crafts’ perfected security interest. Therefore, Coastal Crafts retains its rights against the inventory purchased by Bayside Imports.