The scenario describes a situation where a secured party, “Gritstone Manufacturing,” has a security interest in inventory and accounts receivable of a debtor, “Lakeside Artisans,” a Michigan-based company. Lakeside Artisans defaults on its loan. Gritstone Manufacturing seeks to repossess the collateral. Under Michigan’s Article 9 of the Uniform Commercial Code, a secured party’s right to repossess collateral upon default is governed by M.C.L. § 440.9609. This section permits a secured party to take possession of the collateral without judicial process if it can be done without breach of the peace. A breach of the peace is generally understood to occur when the secured party’s actions disturb public order or involve violence, threats of violence, or forceful entry into a dwelling. The key question is whether Gritstone’s proposed action of entering Lakeside’s unlocked business premises after hours to repossess the inventory constitutes a breach of the peace. Entering an unlocked commercial space without causing damage or confrontation is typically not considered a breach of the peace under Article 9. The UCC commentary and case law in various jurisdictions, including those interpreting Michigan law, emphasize that the secured party should avoid any action that could lead to violence or public disturbance. Therefore, entering an unlocked business premises, even after hours, to retrieve collateral, without force or confrontation, is permissible. The question tests the understanding of the “breach of the peace” standard in the context of self-help repossession under Michigan’s secured transactions law.

Under Michigan’s Uniform Commercial Code Article 9, when a secured party has a perfected security interest in collateral, and that collateral is sold in the ordinary course of business by the debtor to a buyer who is not aware that the sale is in violation of the security agreement, that buyer takes the collateral free of the security interest. This is known as the “buyer in ordinary course of business” rule, codified in MCL § 440.9320. The key elements are that the sale must be in the ordinary course of business, the buyer must not know the sale violates the security agreement, and the buyer must purchase for value and without notice of the security interest. In this scenario, the sale of the vintage automobile by “Auto Emporium” to Ms. Anya Sharma occurred in the ordinary course of Auto Emporium’s business as a dealership. Ms. Sharma, a consumer buyer, had no reason to know that the sale of a vehicle from a dealership’s inventory would violate a security agreement held by “Financier Corp.” unless she had actual knowledge or specific notice to the contrary. Since the facts state she purchased the vehicle without knowledge that the sale was unauthorized, her interest is superior to Financier Corp.’s unperfected security interest. Financier Corp.’s failure to perfect its security interest by filing a financing statement or taking possession of the vehicle before the sale means its security interest is unperfected against a buyer like Ms. Sharma. Even if it had been perfected, the buyer in ordinary course exception would still apply.

Under Michigan’s Uniform Commercial Code, Article 9, the priority of security interests in fixtures is determined by the timing of their attachment and perfection. A security interest in a fixture is generally subordinate to a prior recorded interest in the real property. However, Article 9 provides an exception for “purchase-money security interests” (PMSIs) in fixtures. A PMSI in a fixture is perfected by a fixture filing. If the PMSI is perfected by a fixture filing before or within twenty days after the goods become fixtures, it generally has priority over conflicting interests in the real property. This priority extends to the fixtures themselves, but not to the underlying real property. In this scenario, the bank’s mortgage is a prior recorded interest in the real property. The manufacturer’s security interest in the industrial ovens is a PMSI. The manufacturer filed a fixture filing on October 15th, which is within twenty days of the ovens becoming fixtures (assuming they became fixtures on or after September 25th). Therefore, the manufacturer’s PMSI, perfected by a fixture filing, has priority over the bank’s prior recorded mortgage concerning the ovens themselves. The bank’s mortgage retains its priority over the remainder of the real property.

The scenario describes a situation involving a purchase money security interest (PMSI) in inventory. Under Michigan’s Uniform Commercial Code (UCC) Article 9, a PMSI holder in inventory must satisfy specific perfection requirements to gain priority over other secured parties. Specifically, perfection must occur by filing a financing statement and, crucially, by giving any required notification to other secured parties with prior filings covering the same collateral. Michigan’s UCC § 9-324(b) outlines the requirements for PMSI priority in inventory. For a PMSI in inventory, the secured party must perfect its interest by filing a financing statement, and also, the PMSI holder must have given an authenticated notification to any prior secured party that had filed a financing statement covering the same inventory before the debtor received possession of the inventory. The question states that “Automotive Acceptance Corp.” had a prior perfected security interest in all of “Gale’s Garage’s” inventory. “Financing Solutions Inc.” then extended credit to Gale’s Garage for the purchase of new automotive parts, taking a PMSI in those parts. Financing Solutions Inc. filed its financing statement before Gale’s Garage received the parts. However, the critical missing step for Financing Solutions Inc. to maintain priority over Automotive Acceptance Corp. is providing the required notification to Automotive Acceptance Corp. prior to Gale’s Garage taking possession of the inventory. Without this notification, even with a timely filing, Financing Solutions Inc.’s PMSI in inventory will not have priority over Automotive Acceptance Corp.’s prior perfected security interest. Therefore, Financing Solutions Inc. will not have priority over Automotive Acceptance Corp.’s claim to the new automotive parts.

The core issue here revolves around the perfection of a security interest in a deposit account. Under Michigan’s Article 9, 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 debtor has agreed in writing that the bank will comply with the secured party’s instructions regarding the deposit account. In this scenario, the security agreement grants a security interest in the deposit account, and a financing statement is filed. However, filing a financing statement is generally not a method of perfection for deposit accounts. Since the secured party, First National Bank, did not obtain control over the deposit account by becoming the bank of deposit or by having the debtor agree in writing to its control, its security interest is unperfected. Therefore, when the debtor files for bankruptcy, the trustee, as a hypothetical bona fide purchaser for value, takes the collateral free of any unperfected security interest. This means First National Bank’s security interest is subordinate to the bankruptcy estate.

The core issue here revolves around the perfection of a security interest in accounts that are part of a sale of a business. Under Michigan’s Uniform Commercial Code Article 9, a security interest in accounts can be perfected by filing a financing statement. However, when accounts are sold as part of a sale of a business, this transaction is typically classified as a “sale of accounts” rather than a secured transaction for the purpose of attachment and perfection. A sale of accounts is generally considered an outright transfer of ownership, not a transaction creating a security interest that requires filing for perfection against third parties, unless the sale is intended to be a financing arrangement disguised as a sale. In this scenario, “The Gadget Grove,” a Michigan-based seller of specialized electronic components, sold its entire accounts receivable portfolio to “Financing Solutions LLC,” a Delaware entity, as part of a broader restructuring. Financing Solutions LLC did not file a UCC-1 financing statement in Michigan. The question asks about the perfection of Financing Solutions LLC’s interest in these accounts against a subsequent judgment creditor of The Gadget Grove. Under UCC § 9-109(a)(3), Article 9 applies to a sale of accounts. However, the commentary and case law often distinguish between a true sale of accounts and a secured loan where accounts are collateral. A true sale of accounts generally does not require a UCC filing for perfection against third-party claims, as the buyer takes ownership. Perfection in a sale of accounts context is often automatic. If the transaction were deemed a security interest *in* accounts, then filing would be the primary method of perfection. However, the specific wording “sale of accounts” as part of a business sale points towards a true sale. In such cases, perfection is often automatic upon attachment, meaning when the buyer gives value and the seller has rights in the collateral. The subsequent judgment creditor, who has not acquired rights in the specific accounts through a secured transaction or otherwise, generally takes subject to the prior perfected interest, which in a true sale of accounts is automatic. Therefore, Financing Solutions LLC’s interest is perfected without filing. The correct answer is that Financing Solutions LLC’s interest is perfected automatically upon the sale and transfer of the accounts, as a sale of accounts is not subject to the filing requirements for perfection against third-party claims in the same way as a security interest in accounts would be. This automatic perfection stems from the nature of a sale as a transfer of ownership.

The core issue here revolves around the perfection of a security interest in a deposit account under Michigan’s Article 9. Michigan, like many states, has specific rules for deposit accounts. Pursuant to M.C.L. § 440.9104(1)(a), a security interest in a deposit account as collateral can only be perfected by control. Control is defined in M.C.L. § 440.9104(2) and generally means that the secured party is the bank with which the deposit account is maintained, has agreed with the debtor and the bank that the bank will comply with instructions from the secured party directing disposition of the funds, or has itself become the bank with which the deposit account is maintained. In this scenario, the security agreement grants a security interest in the deposit account, and the financing statement is filed. However, filing a financing statement is generally ineffective for perfection in deposit accounts. The secured party has not obtained control as defined by the UCC. Therefore, the security interest remains unperfected against a buyer of the account that receives delivery, or a trustee in bankruptcy. The question asks about the status of the security interest against a hypothetical buyer of the account who receives delivery. Since the secured party has not established control, the security interest is unperfected and subordinate to a buyer of the deposit account who takes possession or control. The filing of the financing statement is irrelevant for perfection in this collateral type.

The core issue here revolves around the perfection of a security interest in a deposit account under Article 9 of the Uniform Commercial Code, as adopted in Michigan. Under Michigan law, 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 debtor has agreed to disposition of the funds in the account in favor of the secured party. In this scenario, “Capital Holdings LLC” is the debtor, and “First National Bank of Michigan” is the secured party. Capital Holdings LLC maintains its operating deposit account at “Midwest Trust Bank.” First National Bank of Michigan has filed a financing statement and has a security agreement with Capital Holdings LLC covering all of its assets, including deposit accounts. However, since First National Bank of Michigan is not the bank where the deposit account is held, and Capital Holdings LLC has not granted control to First National Bank of Michigan over the Midwest Trust Bank account, First National Bank of Michigan has not perfected its security interest in the deposit account. Perfection in deposit accounts is an exception to the general rule that filing is sufficient to perfect a security interest. Therefore, First National Bank of Michigan’s security interest in the deposit account is unperfected.

The core issue here is determining the proper place to file a financing statement to perfect a security interest in a motor vehicle that is subject to a certificate of title law in Michigan. Under Michigan Compiled Laws (MCL) § 440.9303, perfection of a security interest in goods covered by a certificate of title is generally achieved by compliance with the certificate of title statute. In Michigan, MCL § 257.233 outlines the requirements for noting a security interest on a vehicle’s certificate of title. This statute dictates that the secured party must deliver the certificate of title to the secretary of state, along with the application for a new certificate of title showing the security interest. The secretary of state then issues a new certificate of title that lists the secured party. Filing a financing statement with the register of deeds or the Michigan Secretary of State’s central filing office, as one might do for other types of collateral like equipment or inventory, is not the correct method for perfecting a security interest in a vehicle that requires a certificate of title in Michigan. Therefore, the secured party must ensure the security interest is noted on the certificate of title itself.

In Michigan, under Article 9 of the Uniform Commercial Code, the perfection of a security interest in a deposit account is achieved by control. Control over a deposit account is established when the secured party is the bank in which the deposit account is maintained, or when the secured party obtains the agreement of the bank in which the deposit account is maintained to comply with the secured party’s instructions regarding the account. This is governed by Michigan Compiled Laws (MCL) § 440.9104. A secured party who has control over a deposit account generally has priority over a secured party who does not. If multiple secured parties have control, priority is determined by the order in which control was obtained. In this scenario, Acme Bank obtained control by having the deposit account at its institution and by securing the agreement of the debtor, Zephyr Corp., that it would follow Acme Bank’s instructions. This directly aligns with the statutory definition of control. The other options describe situations that do not constitute control under Article 9 for deposit accounts. Filing a financing statement is generally ineffective for perfecting a security interest in deposit accounts, as control is the exclusive method. Obtaining a security agreement alone does not grant control. Similarly, merely being named as a beneficiary on the account does not equate to the control necessary for perfection under Article 9.

The core issue here revolves around the perfection of a security interest in accounts that are part of a sale of a business. Under Michigan’s Uniform Commercial Code (UCC) Article 9, specifically in the context of accounts, a security interest can be created and perfected. When a business sells its accounts, this transaction is typically characterized as a sale of chattel paper or a sale of accounts, not a secured transaction, unless the sale is intended to be a financing arrangement. However, Article 9 applies to sales of accounts and chattel paper. The critical point for perfection of a security interest in accounts is filing a financing statement. For accounts, the proper place of filing is the office of the Secretary of State, as specified in Michigan Compiled Laws (MCL) Section 440.9301 and 440.9307. While a security agreement is necessary to create the security interest, perfection is what provides priority against third parties. In Michigan, the general rule for perfection of security interests in accounts is by filing a financing statement. A possessory pledge of accounts is not a recognized method of perfection for accounts under Article 9. Therefore, the filing of a financing statement is the exclusive method to perfect a security interest in accounts. The scenario describes a situation where a Michigan-based lender takes a security interest in the accounts of a Michigan-based software company. To perfect this interest against other creditors or purchasers, the lender must file a UCC-1 financing statement with the Michigan Secretary of State. Without this filing, the security interest, while valid between the debtor and the secured party, is unperfected and subordinate to certain other interests, such as a buyer of the accounts, a lien creditor, or a trustee in bankruptcy. The question asks about the method of perfection.

The core issue here revolves around the perfection of a security interest in a deposit account. Under Michigan’s Uniform Commercial Code (UCC) Article 9, a security interest in a deposit account can only be perfected by control. Control is established when the secured party is the bank in which the deposit account is maintained, or when the debtor has agreed that the bank will comply with instructions from the secured party directing the disposition of the funds in the account. In this scenario, “Acme Bank” is the secured party and the debtor, “Bay City Manufacturing,” has its deposit account at “Acme Bank.” Therefore, Acme Bank has control over the deposit account by virtue of being the bank where the account is held. Filing a financing statement is generally not sufficient for perfection of security interests in deposit accounts, although it may be effective for other types of collateral. The agreement between Acme Bank and Bay City Manufacturing creating the security interest is a necessary step, but perfection requires control. Perfection is crucial for establishing priority against other creditors.

The scenario involves a dispute over the priority of security interests in a vehicle located in Michigan. Under Michigan’s Uniform Commercial Code (UCC) Article 9, the perfection of a security interest in a motor vehicle is typically governed by certificate of title statutes. Michigan Compiled Laws (MCL) § 440.9303 outlines when a security interest is perfected. For goods covered by a certificate of title, perfection is achieved by compliance with the certificate of title statute. In Michigan, MCL § 257.233 governs the perfection of security interests in vehicles by notation on the certificate of title. The first secured party, “AutoFin Inc.,” filed a financing statement on January 10th and also noted its lien on the vehicle’s certificate of title on January 15th. The second secured party, “WheelsLease Corp.,” perfected its interest by noting its lien on the certificate of title on February 1st. The general rule in UCC Article 9 is that the first to file or perfect has priority. However, when perfection is achieved by possession of a certificate of title, the UCC defers to state certificate of title law. Michigan’s certificate of title law, as referenced by UCC § 9-303, requires that a security interest in a vehicle be noted on the certificate of title to be perfected against third parties. In this case, AutoFin Inc. perfected its security interest by having its lien noted on the certificate of title on January 15th. WheelsLease Corp. perfected its security interest by having its lien noted on the certificate of title on February 1st. Since AutoFin Inc. was the first to perfect its security interest by notation on the certificate of title, it has priority over WheelsLease Corp. The earlier filing of the financing statement by AutoFin Inc. on January 10th is relevant for establishing its claim, but the critical act for perfection in a titled vehicle is the notation on the certificate of title. Therefore, AutoFin Inc. has priority.

The core issue in this scenario revolves around the perfection of a security interest in a deposit account. Under Michigan’s Uniform Commercial Code (UCC) Article 9, specifically MCL § 440.9301, a security interest in a deposit account can only be perfected by control. Control is defined in MCL § 440.9104 and generally means that the secured party is the bank with which the deposit account is maintained, or has agreed with the depositary bank that the bank will comply with instructions from the secured party directing the disposition of funds in the account. In this case, Sterling Bank has a purchase money security interest (PMSI) in the inventory of “Crafty Creations.” Sterling Bank also took possession of the certificate of deposit (CD) which represents the deposit account. However, mere possession of the CD does not automatically equate to control over the deposit account itself, especially when the CD is not directly linked to the account in a manner that grants the bank the ability to control its disposition. The UCC distinguishes between possession of an instrument and control over a deposit account. While possession of the CD might be a step towards control, it is not sufficient on its own. For Sterling Bank to have perfected its security interest in the deposit account, it would need to have obtained control as defined by MCL § 440.9104. This would typically involve becoming the bank maintaining the account and having the account holder agree that the bank will follow the secured party’s instructions, or by entering into a control agreement with the bank where the bank agrees to follow the secured party’s instructions. Since Sterling Bank only possesses the CD, and there is no indication of a control agreement or that Sterling Bank is the depositary bank with the requisite agreement, its security interest in the deposit account is unperfected. Therefore, when “Artful Accents” files a bankruptcy petition, Sterling Bank’s unperfected security interest in the deposit account is subordinate to the rights of the bankruptcy trustee, who has the status of a hypothetical lien creditor under federal bankruptcy law.

The core issue here is the priority of security interests when a debtor’s collateral is located in multiple jurisdictions. Under Michigan’s Uniform Commercial Code (UCC) Article 9, specifically section 9-301, the general rule for determining the location of collateral is where the debtor is located. However, for goods that are so related to another state that they become part of the “other state’s” realty, the UCC has specific rules. Section 9-301(4) of the UCC, as adopted in Michigan, addresses fixtures and other goods that become part of realty. When goods become fixtures, the law of the jurisdiction where the realty is situated governs. In this scenario, the industrial milling machinery, while originally located in Michigan, is permanently affixed to a building in Ohio. Therefore, for the purpose of perfection and priority of security interests in that machinery, Ohio law will govern. A security interest in fixtures is generally perfected by a fixture filing in the real property records of the jurisdiction where the realty is located. Since the security interest in the milling machinery was perfected in Michigan, which is not the jurisdiction where the realty is located, it may not be effective against parties who have an interest in the Ohio realty. The question asks about the status of the security interest in Michigan. While the perfection in Michigan is valid against certain parties in Michigan, the UCC’s choice of law rules for fixtures dictate that for priority purposes concerning the realty, the law of the situs of the realty (Ohio) controls. Therefore, the security interest perfected only in Michigan is likely subordinate to a properly perfected interest in Ohio that attaches to the fixtures. However, the question specifically asks about the security interest’s validity and priority *in Michigan*. Michigan’s UCC 9-301(4) states that perfection in the state where the goods are located at the time of attachment is effective. But when goods become fixtures, the UCC choice of law provisions shift to the location of the realty. The security interest in the milling machinery, by becoming a fixture in Ohio, is governed by Ohio law for perfection and priority purposes related to the realty. A security interest in fixtures is perfected by filing a fixture filing in the real property records of the state where the fixtures are located. Since the machinery is a fixture in Ohio, perfection in Michigan does not provide notice or priority against subsequent purchasers or encumbrancers of the Ohio real property. Therefore, the security interest, though perfected in Michigan, is not effective against a subsequent buyer of the Ohio real estate who has properly recorded their interest in Ohio. The question asks about its priority in Michigan, implying its effectiveness against parties who might assert rights in Michigan concerning the debtor or the collateral. However, the UCC’s choice of law for fixtures is paramount. The perfection in Michigan is valid for general collateral purposes in Michigan, but when the collateral becomes fixtures in another state, the perfection must be in that state to be effective against real property interests there. The question is subtly testing the interaction between general UCC perfection rules and the specific rules for fixtures and their choice of law provisions. The security interest remains perfected in Michigan under Michigan law as against parties who would be subject to Michigan perfection rules for general intangibles or equipment. However, its priority against interests in the Ohio realty is determined by Ohio law. The most accurate statement regarding its status *in Michigan* is that it is perfected in Michigan, but its effectiveness against parties claiming an interest in the Ohio realty is governed by Ohio law and would likely be subordinate if not perfected in Ohio. The question is about the security interest’s status in Michigan, and the perfection in Michigan is valid under Michigan’s Article 9 for collateral located in Michigan. The fact that it became a fixture in Ohio affects its priority against real property interests in Ohio, but the perfection in Michigan remains valid under Michigan law. The key is that perfection in Michigan is effective against purchasers of the collateral who are located in Michigan or whose rights arise under Michigan law, even if the collateral later becomes a fixture elsewhere. The security interest is perfected in Michigan.

The scenario involves a secured party, “Azure Auto Financing,” which has a properly perfected security interest in a motor vehicle owned by “Bayside Builders LLC.” Bayside Builders defaults on its loan. Azure Auto Financing has the right to repossess the collateral. Under Michigan’s Article 9 of the Uniform Commercial Code, specifically MCL 440.9609, a secured party may take possession of collateral without judicial process if it can be done without breach of the peace. The question hinges on what constitutes a “breach of the peace” in the context of repossession. A breach of the peace generally involves violence, threats of violence, or conduct that would likely disturb public tranquility. Simply entering an unlocked garage to retrieve a vehicle, without causing damage or confrontation, is typically not considered a breach of the peace under Michigan law. However, if the repossession involved breaking into a locked structure, or if it was conducted in a manner that created a disturbance or risked confrontation with the debtor or others present, it could be deemed a breach of the peace. The key is the method of repossession. Given that the vehicle is in an unlocked garage, the repossession itself, assuming no force or disturbance, is permissible. The subsequent sale must also comply with Article 9’s requirements for disposition of collateral, including providing notice to the debtor. The question asks about the secured party’s rights upon default. Azure Auto Financing has the right to repossess the vehicle. The method described, entering an unlocked garage, does not inherently constitute a breach of the peace. Therefore, Azure Auto Financing can repossess the vehicle.

The core issue here is determining the proper place to file a financing statement to perfect a security interest in a vehicle that is titled in Michigan. Under Michigan’s Article 9 of the Uniform Commercial Code, specifically MCL § 440.9303, perfection of a security interest in goods covered by a certificate of title is generally accomplished by complying with the certificate of title statutes of the relevant jurisdiction. Michigan’s certificate of title law, MCL § 257.210, designates the Secretary of State as the office where security interests in vehicles must be noted on the certificate of title. Therefore, to perfect a security interest in a vehicle titled in Michigan, the secured party must file a lien with the Michigan Secretary of State, not with the register of deeds in the county where the debtor resides or where the collateral is located. Filing with the register of deeds is the proper method for perfecting security interests in many other types of collateral, such as equipment or inventory, but not for titled vehicles. The UCC expressly defers to state certificate of title laws for perfection of security interests in such goods.

Under Michigan’s Uniform Commercial Code Article 9, when a secured party has a security interest in goods that become fixtures, the secured party may repossess the collateral. However, the secured party must repossess the fixtures without causing substantial harm to the other property. If substantial harm would result, the secured party must reimburse any person with an interest in the real property for the cost of the necessary repairs. This principle is established in MCL § 440.9313(8). The scenario involves a secured party repossessing a commercial refrigeration unit that has become a fixture to a restaurant building. The refrigeration unit is integral to the building’s structure. The secured party’s right to repossess is balanced against the potential damage to the real property. If the removal would cause substantial harm, the secured party has a duty to compensate the property owner for the repairs. The question probes the secured party’s obligation in such a situation, specifically concerning the reimbursement for damages. The correct answer reflects the statutory requirement for reimbursement when substantial harm occurs during repossession of a fixture.

The core issue in this scenario revolves around the perfection of a security interest in accounts, specifically those arising from the sale of goods by a seller located in Michigan, where the buyer is also located in Michigan. Under Michigan’s Uniform Commercial Code (UCC) Article 9, a security interest in accounts is generally perfected by filing a financing statement in the jurisdiction where the debtor is located. Michigan law specifies that for a registered organization, its location is its chief executive office. For an individual, it’s their principal residence. In this case, both the debtor, “Durable Goods Manufacturing Inc.,” and the collateral, “accounts arising from the sale of its manufactured goods,” are situated in Michigan. Durable Goods Manufacturing Inc. is a corporation, and its chief executive office is in Detroit, Michigan. Therefore, to perfect its security interest in these accounts, “Capital Lenders LLC” must file a financing statement in Michigan. Specifically, the UCC § 9-307(b) dictates that the location of the debtor governs perfection for accounts. Michigan’s UCC § 9-307(a) further clarifies that for a registered organization, its location is the state of organization, or if it has an office in more than one state, its chief executive office. Given Durable Goods Manufacturing Inc. has its chief executive office in Detroit, Michigan, filing in Michigan is the correct method of perfection. Filing in Indiana, where the buyer of the goods is located, would be incorrect as the perfection is based on the debtor’s location, not the location of the collateral or the account debtor. Filing a UCC-1 financing statement with the Michigan Secretary of State is the appropriate action.

The core issue here is the priority of security interests when collateral is transferred and the secured party’s interest continues in the collateral under Michigan’s Uniform Commercial Code (UCC) Article 9. When collateral is sold or otherwise disposed of, a security interest that is perfected continues in that collateral unless the secured party authorized the disposition free of the security interest or the buyer qualifies for protected buyer status under UCC § 9-317(a) or § 9-320. In this scenario, the debtor, “Artisan Alloys Inc.,” sold specialized metal fabrication equipment to “Precision Parts LLC.” Artisan Alloys Inc. had granted a purchase-money security interest (PMSI) in this equipment to “Capital Creditors Group.” Capital Creditors Group properly perfected its security interest by filing a financing statement in Michigan before the sale. Precision Parts LLC purchased the equipment. The question is whether Capital Creditors Group’s perfected security interest continues in the equipment after the sale to Precision Parts LLC. Under UCC § 9-315(a)(1), a security interest continues in collateral notwithstanding sale, lease, or other disposition thereof unless the secured party authorized the disposition free of the security interest. There is no indication that Capital Creditors Group authorized the sale free of its security interest. Furthermore, Precision Parts LLC does not qualify as a buyer in the ordinary course of business under UCC § 9-320(a) because the sale of specialized fabrication equipment by a company named Artisan Alloys Inc. does not typically constitute ordinary course of business for a manufacturer of metal fabrication equipment, and the UCC requires the buyer to take in good faith without knowledge that the sale violates the rights of the secured party. Even if it were considered an ordinary course sale, UCC § 9-320(a) only protects buyers in the ordinary course of business from a secured party who authorized the disposition *of goods* which are inventory. Specialized fabrication equipment is not typically classified as inventory in the ordinary course of business for a fabrication company. Therefore, Capital Creditors Group’s perfected security interest continues in the equipment in the hands of Precision Parts LLC. The correct answer is that the security interest continues in the collateral in the possession of Precision Parts LLC.

The core issue here is determining when a security interest attaches and becomes enforceable against a third-party purchaser of collateral that is a motor vehicle. Under Michigan’s Article 9, a security interest in a motor vehicle is generally perfected by notation on the certificate of title, not by filing a financing statement. However, the question presents a scenario where a buyer purchases a vehicle from a dealer that has a prior security interest. The UCC provides specific rules for buyers in the ordinary course of business. 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, unless the buyer knows that the sale is in violation of the security agreement. Here, the buyer, Mr. Henderson, is purchasing from a dealer, “Auto Emporium,” which is in the business of selling vehicles. Therefore, Mr. Henderson is presumed to be a buyer in the ordinary course of business. The prior secured party, “Capital Finance,” perfected its security interest in the vehicle by filing a financing statement with the Michigan Secretary of State. However, for a security interest in a motor vehicle to be perfected in Michigan, it must be noted on the certificate of title, as per Michigan Compiled Laws § 440.9311(2) and § 257.239. Filing a financing statement alone is insufficient for perfection of a security interest in a vehicle that requires notation on the certificate of title. Since Capital Finance’s security interest was not noted on the certificate of title before Mr. Henderson’s purchase, and Mr. Henderson purchased from a dealer in the ordinary course of business without knowledge that the sale violated Capital Finance’s security interest, his interest takes priority. The financing statement filing, while generally sufficient for perfection of many types of collateral, does not override the specific perfection requirements for motor vehicles in Michigan when it comes to the rights of a buyer in the ordinary course. Therefore, Capital Finance’s unperfected security interest (due to failure to note on the title) is subordinate to Mr. Henderson’s rights as a buyer in the ordinary course of business.

The scenario involves a purchase money security interest (PMSI) in inventory. Under Michigan’s Article 9, a PMSI holder in inventory must satisfy two primary requirements to maintain priority over a prior perfected secured party with a general security interest in the same collateral. First, the PMSI must be perfected by filing a financing statement before the debtor receives possession of the inventory. Second, the PMSI holder must give authenticated notification to any prior secured party who has filed a financing statement covering the same inventory, and this notification must be received by the prior secured party within five years before the debtor receives possession of the inventory. In this case, Aurora Auto Finance perfected its security interest in all of Vance’s inventory on January 15, 2023. On March 1, 2023, Zenith Motors, a manufacturer, sold vehicles to Vance under a PMSI. Zenith filed its financing statement on March 5, 2023, which was after Vance received possession. Therefore, Zenith’s PMSI is not perfected before possession. Zenith also failed to provide notification to Aurora Auto Finance. Consequently, Aurora Auto Finance’s prior perfected security interest in all of Vance’s inventory has priority over Zenith Motors’ unperfected PMSI. The notification requirement is crucial for PMSI holders in inventory to gain superpriority over existing secured creditors. Even if Zenith had filed before possession, the lack of notification to Aurora would still subordinate Zenith’s interest to Aurora’s prior perfected security interest.

The core issue in this scenario revolves around the perfection of a security interest in a deposit account under Michigan’s Article 9. Specifically, the question tests the understanding of when a security interest in a deposit account is deemed perfected. Under Michigan Compiled Laws (MCL) Section 440.9312(1), a security interest in a deposit account as original collateral is perfected only by control. Control is defined in MCL Section 440.9104, which generally requires the secured party to become the customer of the bank with respect to the deposit account, or to enter into a control agreement with the bank and the debtor. In this case, Sterling Bank has a purchase money security interest (PMSI) in the deposit account established by Aurora Enterprises. Sterling Bank achieved control by entering into a control agreement with Aurora Enterprises and the depositary bank, which explicitly stated that Sterling Bank had control over the account. This control agreement, being in writing and signed by the parties, satisfies the requirements for perfection by control under MCL Section 440.9312(1) and MCL Section 440.9104. Therefore, Sterling Bank’s security interest is perfected from the moment it obtained control. The filing of a financing statement is not sufficient for perfection of a security interest in a deposit account as original collateral; control is the exclusive method. The timing of the filing statement by Meridian Bank is irrelevant to the perfection of Sterling Bank’s prior perfected security interest.

The question concerns the priority of security interests when a debtor defaults and the collateral is inventory. Under Michigan’s Article 9 of the Uniform Commercial Code, a buyer in the ordinary course of business takes free of a security interest created by the seller, even if the buyer knows of the security interest, unless the buyer knows that the sale is in violation of the security agreement and that the sale is part of an bulk transaction not in ordinary course of business. In this scenario, Anya, a retailer in Michigan, purchases goods from “Global Distributors Inc.,” a supplier who has granted a security interest in its inventory to “First National Bank.” Anya is a buyer in the ordinary course of business because she is a merchant who buys goods in good faith, without knowledge that the sale to her is in violation of the security agreement, and from a person in the business of selling goods of that kind. Global Distributors Inc. is in the business of selling goods, and Anya is purchasing these goods for resale, fitting the definition of a buyer in the ordinary course of business. Therefore, Anya takes the inventory free of First National Bank’s security interest. The fact that the security agreement might prohibit such sales is generally irrelevant to Anya’s status as a buyer in the ordinary course, unless she has actual knowledge of the prohibition and that the sale is not in the ordinary course of business. Since the problem states Anya purchased the goods in the ordinary course of business and does not indicate she had knowledge of any violation of the security agreement or that the sale was outside the ordinary course, her interest is superior.

The core issue here revolves around the perfection of a security interest in a deposit account, specifically concerning a deposit account held at a bank in Michigan. Under Michigan’s Uniform Commercial Code (UCC) Article 9, a security interest in a deposit account can be perfected only by control. Control is established when the secured party has obtained the authenticated security agreement, the depositary bank has agreed to comply with the secured party’s instructions regarding the account, or the secured party becomes the customer with respect to the deposit account. In this scenario, the lender, First National Bank of Detroit, has a properly attached security interest in the debtor’s inventory, which includes proceeds. The debtor’s deposit account at Grand Rapids State Bank contains funds derived from the sale of that inventory. For First National Bank of Detroit to have a perfected security interest in the funds within the deposit account, it must have obtained control over that account. Merely having an attached security interest in the inventory and its proceeds is insufficient for perfection in the deposit account itself. Filing a financing statement does not perfect a security interest in a deposit account. The debtor’s agreement to the security agreement granting rights in the deposit account is a necessary step for attachment, but not for perfection. Perfection requires control. Since the facts do not state that First National Bank of Detroit has obtained control over the deposit account at Grand Rapids State Bank, its security interest in the deposit account remains unperfected. Therefore, the security interest in the deposit account is unperfected.

The question concerns the priority of security interests when a debtor moves collateral from one jurisdiction to another, specifically focusing on perfection and the effect of a lapse in perfection under Michigan’s Article 9. The core issue is the interplay between the initial perfection in a state and the subsequent perfection in a new state, and what happens when the initial perfection expires. Under UCC § 9-316(a), if a security interest is perfected in one jurisdiction and then the debtor moves the collateral to another jurisdiction, the perfection continues for a period of four months. If the security interest is perfected in the new jurisdiction within that four-month period, it remains continuously perfected. However, if the security interest is not perfected in the new jurisdiction within the four-month period, it becomes unperfected in the new jurisdiction. In this scenario, Anya perfected her security interest in Illinois on January 1st. The collateral was moved to Michigan on March 1st. This means the four-month grace period for perfection in Michigan would extend until May 1st. Anya failed to re-perfect in Michigan by May 1st. Her perfection in Illinois would have lapsed on May 1st with respect to the collateral in Michigan. On June 1st, when Brian obtained his security interest and perfected it in Michigan, Anya’s security interest was no longer perfected in Michigan. Therefore, Brian’s subsequently perfected security interest has priority over Anya’s unperfected security interest in Michigan. This is a crucial aspect of cross-jurisdictional perfection under Article 9, designed to provide certainty for lenders in a mobile commercial environment. The perfection in Illinois is effective for a limited time in Michigan after the collateral is moved, and failure to re-perfect within that window results in a loss of priority against those who perfect in the new jurisdiction.

Under Michigan’s Uniform Commercial Code Article 9, when a secured party has a properly perfected security interest in collateral, and that collateral is sold in a transaction that does not constitute a disposition of collateral outside the ordinary course of business, the security interest generally continues in the collateral. This is known as the “same collateral” rule, codified in MCL 440.9315(1)(a). The buyer of the collateral takes it subject to the existing security interest unless one of the statutory exceptions applies. An exception exists for buyers in the ordinary course of business (BIOC) who purchase goods from a seller engaged in the business of selling goods of that kind, provided they purchase in good faith and without knowledge that the sale violates the security agreement. However, if the secured party has authorized the disposition of the collateral free of the security interest, the security interest also does not continue. In this scenario, the sale of specialized manufacturing equipment by “Precision Machining LLC” to “Advanced Fabrication Inc.” is described as a disposition of collateral. The key is whether this sale was in the ordinary course of Precision Machining LLC’s business and whether Advanced Fabrication Inc. qualified as a buyer in the ordinary course of business. Assuming Precision Machining LLC is in the business of selling such equipment, and Advanced Fabrication Inc. purchased in good faith without knowledge of the security interest, the security interest would generally not continue in the equipment in the hands of Advanced Fabrication Inc. This principle is fundamental to the smooth functioning of commerce, allowing buyers to acquire goods without being unduly burdened by undisclosed prior security interests, especially when the seller is in the business of selling those goods.

The core issue here is determining the proper place to file a financing statement when the debtor is a registered organization with its chief executive office in Michigan, but its principal place of business, as defined by UCC § 9-102(a)(61), is in Indiana. For a registered organization, its location is determined by its jurisdiction of organization, not its chief executive office or principal place of business. Michigan’s UCC § 9-307(e) specifies that for a registered organization, the location for perfection is the jurisdiction under whose law the organization is organized. Therefore, if the debtor is a Michigan corporation, perfection is achieved by filing in Michigan. The fact that its principal place of business is in Indiana is irrelevant for determining the location of filing for a registered organization. The question states the debtor is a Michigan corporation, making Michigan the correct jurisdiction for filing.

In Michigan, a purchase money security interest (PMSI) in consumer goods generally attains automatic perfection upon attachment. However, for a PMSI in inventory, perfection requires filing a financing statement before the debtor receives possession of the inventory. Additionally, a secured party with a PMSI in inventory must notify any other secured party who has previously filed a financing statement covering the same goods or has perfected a PMSI in the same goods. This notification must occur before the debtor receives possession of the inventory. In this scenario, AgriCorp has a PMSI in the farming equipment, which is not inventory but rather equipment used by the debtor. While AgriCorp’s PMSI in the equipment attached when the security agreement was signed and value was given, perfection would typically require filing a financing statement under Michigan law, as it’s not a consumer good. However, the question focuses on the priority of a PMSI in inventory. The scenario states that AgriCorp’s collateral is “new harvesting machinery,” which is best characterized as inventory for a dealer in farm equipment. Therefore, AgriBank’s PMSI in the inventory is perfected by filing. AgriCorp’s failure to file a financing statement before the debtor received possession of the inventory means its PMSI is unperfected. Under Michigan law, an unperfected security interest is subordinate to a perfected security interest. Furthermore, even if AgriCorp had a PMSI, its failure to provide the required notification to any prior secured party (like AgriBank, assuming AgriBank’s security interest predates AgriCorp’s) would also impact its priority. Since AgriBank perfected its security interest by filing, and AgriCorp’s PMSI in inventory is unperfected due to failure to file and potentially failure to notify, AgriBank’s perfected security interest takes priority over AgriCorp’s unperfected PMSI.

The scenario describes a situation where a secured party has a perfected security interest in inventory. When a buyer in the ordinary course of business purchases inventory from a debtor, that buyer takes the collateral free of the security interest created by the seller, even if the security interest is perfected. This is a fundamental principle of Article 9 of the Uniform Commercial Code, specifically Michigan’s adoption of it, designed to facilitate commerce by allowing ordinary course buyers to acquire goods without the burden of investigating prior security interests. The debtor in this case, “Artisan Woodworks,” is a merchant dealing in goods of the kind sold, and “Gallery Fine Arts” is a buyer that purchases in good faith, without knowledge that the sale violates the security agreement, and in the ordinary course of business from a person in the business of selling goods of that kind. Therefore, Gallery Fine Arts obtains title to the furniture free and clear of Artisan Woodworks’ security interest held by “Lender Corp.” This protection for buyers in the ordinary course is a crucial exception to the general rule that a security interest follows the collateral.