The core issue here revolves around the perfection of a security interest in collateral that is subject to a purchase-money security interest (PMSI). Under Kentucky’s version of UCC Article 9, a PMSI grants the seller or lender of purchase money priority over other secured parties if certain conditions are met. For inventory, this perfection requires both filing a financing statement and providing notification to any prior secured party who has filed a financing statement covering the same goods. The question specifies that “Agri-Finance Corp.” had a prior perfected security interest in “Farmer Giles’s” existing and after-acquired inventory of farm equipment. “Seed-to-Sale Loans, Inc.” then provided a PMSI to Farmer Giles for new inventory of specialized seed-planting machinery. To maintain its PMSI priority over Agri-Finance Corp. for this new inventory, Seed-to-Sale Loans, Inc. must satisfy the requirements of UCC Section 9-324(b), which applies to PMSIs in inventory. This section mandates that the PMSI holder must file a financing statement before or within a specified period after the debtor receives possession of the collateral, and importantly, must give notification in accordance with UCC Section 9-320(c) to any secured party whose filing indicates an interest in the collateral. UCC Section 9-320(c) requires that the notification be sent by the PMSI holder to the prior secured party, and that the notification state that the PMSI holder expects to acquire a PMSI in inventory of the debtor, describing the inventory by item or type. Without this notification, the PMSI in inventory does not have priority over a secured party who had previously filed a financing statement covering the same inventory. Therefore, the failure to provide the required notification to Agri-Finance Corp. means Seed-to-Sale Loans, Inc.’s security interest, despite being a PMSI, is subordinate to Agri-Finance Corp.’s prior perfected security interest in the new seed-planting machinery.

In Kentucky, under Article 9 of the Uniform Commercial Code, the perfection of a security interest in a deposit account is generally accomplished by control. Control over a deposit account is established when the secured party is the bank with which the deposit account is maintained. Alternatively, control can be achieved if the debtor has agreed in writing that the bank will comply with the secured party’s instructions regarding the deposit account. This is known as a “control agreement.” Without control, a security interest in a deposit account is unperfected, making the secured party vulnerable to claims from other creditors, especially in bankruptcy. The UCC prioritizes perfection through control for deposit accounts because they are highly liquid and easily accessible, necessitating a clear and unambiguous method of establishing priority. A mere written security agreement granting a security interest in the deposit account is insufficient for perfection; it only creates the security interest. Filing a financing statement is also not the proper method for perfecting a security interest in a deposit account. Therefore, for a secured party to have a perfected security interest in a deposit account held at a bank other than the secured party, a control agreement is essential.

The core issue in this scenario revolves around the perfection of a security interest in accounts, specifically in the context of interstate commerce and the filing requirements under Kentucky’s Article 9. When a debtor’s location is key for determining the proper filing office, and that location changes, the secured party must take steps to maintain their perfection. Kentucky’s UCC § 9-307(b) and § 9-316(a) are relevant here. Section 9-307(b) states that the law of the jurisdiction where the debtor is located governs perfection and priority of a security interest in a deposit account. For general intangible collateral, including accounts, the law of the jurisdiction where the debtor is located governs perfection. Kentucky’s UCC § 9-301(1)(c) dictates that the location of the debtor is generally the place of business, or if more than one, the chief executive office. When a debtor moves their chief executive office to a different state, the secured party has a grace period to file in the new jurisdiction to maintain perfection. Kentucky’s UCC § 9-316(a)(2) provides that if a security interest is perfected in one jurisdiction and the debtor moves to another jurisdiction, the security interest remains perfected for a period of four months after the change in location. If a financing statement covering the collateral is not filed in the new jurisdiction before the expiration of that four-month period, the security interest becomes unperfected as against a purchaser of the collateral that gives value and receives delivery of the collateral without knowledge of the security interest, and as against a creditor that becomes a secured party with respect to the collateral. In this case, the security interest in the accounts was perfected in Kentucky. When the debtor, “Bluegrass Widgets,” moved its chief executive office to Tennessee, Bluegrass Widgets became located in Tennessee. The secured party, “Lexington Lending,” had four months from the date of the move to file a financing statement in Tennessee to maintain its perfected status. Since Lexington Lending failed to file in Tennessee within this four-month period, its security interest in the accounts became unperfected as against subsequent good-faith purchasers and creditors. Therefore, the subsequent buyer in the ordinary course of business of those accounts in Tennessee would take them free of Lexington Lending’s security interest.

The core issue in this scenario revolves around the perfection of a security interest in a deposit account. Under Kentucky Revised Statutes (KRS) Chapter 355, 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 secured party obtains the bank’s agreement to comply with the secured party’s instructions regarding the deposit account. In this case, “Kentucky Bank” is the bank where the deposit account is held. The security agreement between “Agri-Corp” and “Farmhand Equipment” grants Agri-Corp a security interest in Farmhand Equipment’s assets, including its deposit account at Kentucky Bank. However, Agri-Corp only filed a financing statement and did not obtain control over the deposit account. “Harvest Finance” subsequently obtained a security interest in the same deposit account and, crucially, obtained control by having the account held in Harvest Finance’s name and by entering into an agreement with Kentucky Bank. Therefore, Harvest Finance has perfected its security interest first and has priority. The filing of a financing statement is generally sufficient for perfection of many types of collateral, but KRS 355.9-312(b) specifically states that perfection of a security interest in deposit accounts requires control. Since Agri-Corp failed to obtain control, its security interest, while attached, is unperfected with respect to the deposit account. Harvest Finance’s perfected security interest by control takes priority over Agri-Corp’s unperfected security interest.

Kentucky Revised Statute (KRS) § 355.9-317(1)(b) addresses the priority of certain unperfected security interests. Specifically, it states that an unperfected 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 it is perfected. In this scenario, Farmer McGregor granted a security interest in his tractor to AgriBank. AgriBank failed to file a financing statement or take possession of the tractor, meaning its security interest remained unperfected. Subsequently, Barnaby purchased the tractor from Farmer McGregor. Barnaby paid value for the tractor and took possession of it. Crucially, Barnaby had no knowledge of AgriBank’s unperfected security interest at the time of his purchase and delivery. Therefore, under KRS § 355.9-317(1)(b), Barnaby, as a buyer in ordinary course of business who received delivery without knowledge of the unperfected security interest and before perfection, takes the tractor free of AgriBank’s security interest. This principle is a fundamental aspect of secured transactions law, designed to protect good-faith purchasers who acquire goods in the ordinary course of business from unperfected security interests. The perfection process, typically through filing a financing statement or taking possession, serves as public notice of the security interest. Without this notice, a subsequent buyer without knowledge is generally protected.

The core issue here revolves around the perfection of a security interest in accounts that are part of a sale of a business. Under Kentucky Revised Statutes (KRS) Chapter 355, Article 9, a security interest in accounts is generally perfected by filing a financing statement. However, KRS 355.9-109(4)(d) specifies that Article 9 applies to a sale of accounts, chattel paper, payment intangibles, or promissory notes, and KRS 355.9-309(2) states that a security interest in a sale of accounts, chattel paper, payment intangibles, or promissory notes is perfected automatically without filing or possession. Therefore, when a business in Kentucky sells its accounts receivable to a factor, the factor’s security interest in those accounts is automatically perfected upon attachment. No further action, such as filing a UCC-1 financing statement, is required to establish priority against subsequent creditors or purchasers of those specific accounts. This automatic perfection is a crucial exception to the general filing rule for perfection of security interests in accounts.

In Kentucky, under Article 9 of the Uniform Commercial Code (UCC), a secured party’s rights upon default are governed by Part 6. Specifically, KRS 355.9-607 outlines the secured party’s right to collect and enforce obligations. When a debtor defaults on a secured loan, and the collateral includes accounts, chattel paper, payment intangibles, or promissory notes, the secured party has the right to notify the account debtors or other persons obligated on the collateral to make payment directly to the secured party. This right is often referred to as “strict foreclosure” in the context of collecting on intangible collateral. The secured party may also sell or otherwise dispose of the collateral in accordance with the rules for disposition of collateral. However, the question focuses on the direct collection from account debtors. The explanation here details the process of direct collection. If a secured party, after default, chooses to collect directly from account debtors, they must do so in a “commercially reasonable manner.” This means the collection efforts must be standard, acceptable, and fair within the industry. The secured party can also enforce the security interest in the collateral itself. The explanation of KRS 355.9-607(a) states that after default, a secured party may collect from account debtors and other persons obligated on collateral. KRS 355.9-607(b) clarifies that if the secured party collects in full, they must account for and pay any surplus to the debtor or other person entitled to it. If the secured party collects less than full amount, they must proceed under Part 6 regarding disposition of collateral. The scenario involves a default and the secured party’s intent to collect directly from the account debtors of the defaulting company. This action is permissible under Kentucky UCC Article 9. The key is that the secured party must act in a commercially reasonable manner when collecting. The question tests the understanding of this direct collection right and the associated standard of conduct.

The core issue here is the priority of security interests when collateral is transferred. Under Kentucky Revised Statutes (KRS) Chapter 355, Article 9, a buyer of goods takes the collateral free of a security interest if the buyer is a buyer in ordinary course of business (BIOC), unless the buyer has knowledge of the security interest. A BIOC is defined as 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. In this scenario, the farm equipment dealer, “Agri-Sales Inc.,” is in the business of selling farm equipment. Bartholomew, the farmer, purchased the tractor in good faith from Agri-Sales Inc. There is no indication that Bartholomew had any knowledge that the sale to him by Agri-Sales Inc. violated the security interest held by “First National Bank.” Therefore, Bartholomew, as a BIOC, takes the tractor free of First National Bank’s security interest. The perfection of First National Bank’s security interest by filing a financing statement is generally effective against subsequent purchasers, but the BIOC exception overrides this. The fact that First National Bank had a purchase-money security interest (PMSI) is relevant to its perfection, but not to Bartholomew’s status as a BIOC. The security interest of “Farm Credit Services” is also subordinate to Bartholomew’s interest as a BIOC, as Farm Credit Services’ interest would have been perfected against Agri-Sales Inc., but not against a BIOC purchasing from Agri-Sales Inc.

The core issue here revolves around the perfection of a security interest in accounts, specifically when the secured party has knowledge of other filings and the debtor’s location. Kentucky Revised Statute (KRS) § 355.9-307(1) states that a buyer of goods for value, who buys goods in the ordinary course of business from a seller who is in the business of selling goods of that kind, takes free of a security interest created by its seller even if the security interest is perfected and even if the buyer knows of the existence of the security interest. However, this provision applies to buyers of goods, not buyers of accounts. KRS § 355.9-317(1) outlines when a security interest is subordinate to the rights of certain buyers and lien creditors. Specifically, KRS § 355.9-317(1)(c) addresses buyers of accounts and other specified collateral. A buyer of an account takes free of a security interest if the buyer gives value and receives delivery of the collateral without knowledge of the security interest and before its effective financing statement has been filed. In this scenario, the lender perfected its security interest in all of Farmer McGregor’s accounts by filing a financing statement in Kentucky, where Farmer McGregor is located. Subsequently, AgriCorp, a buyer of accounts, purchases accounts from Farmer McGregor. AgriCorp’s knowledge of the lender’s prior perfected security interest is critical. If AgriCorp has knowledge of the lender’s security interest when it buys the accounts, it does not take free of that security interest under KRS § 355.9-317(1)(c). The fact that AgriCorp is a buyer of accounts in the ordinary course of business is irrelevant to its status vis-à-vis a prior perfected security interest in accounts, as KRS § 355.9-317(1)(c) does not contain an “ordinary course of business” exception for buyers of accounts that mirrors the exception for buyers of goods under KRS § 355.9-307(1). Therefore, since AgriCorp had knowledge of the lender’s perfected security interest, its claim to the accounts is subordinate to the lender’s perfected security interest.

In Kentucky, as under the Uniform Commercial Code (UCC) Article 9, a purchase money security interest (PMSI) in inventory generally requires both attachment and perfection to have priority over other secured creditors. Perfection is typically achieved by filing a financing statement in the appropriate jurisdiction, which in Kentucky is the Secretary of State’s office for most inventory. However, UCC § 9-324(b) provides a special rule for PMSIs in inventory. This rule states that a PMSI in inventory has priority over a conflicting security interest in the same inventory if the PMSI requirements are met. These requirements include: (1) the PMSI is perfected when the debtor receives possession of the inventory; (2) a secured party who has priority has sent an authenticated notification to the holder of the conflicting security interest that the secured party expects to acquire a PMSI in inventory of the type the debtor acquires; and (3) the notification states that the debtor expects to acquire inventory and describes the inventory by item or type. This notification must be sent within a reasonable time before the debtor receives the inventory. The question describes a scenario where “Acme Bank” has a prior perfected security interest in all of “Bluegrass Manufacturing’s” inventory. “Crescent Finance” subsequently acquires a PMSI in new inventory. For Crescent Finance’s PMSI to have priority over Acme Bank’s prior perfected security interest in the same inventory, Crescent Finance must satisfy the notification requirements of UCC § 9-324(b). The scenario explicitly states that Crescent Finance failed to send any notification to Acme Bank before Bluegrass Manufacturing received the new inventory. Therefore, Crescent Finance’s PMSI, despite being perfected, will not have priority over Acme Bank’s existing security interest in that inventory. The priority rule for inventory PMSIs is designed to balance the rights of existing secured parties with the ability of debtors to acquire new inventory on credit. Without the required notification, the prior perfected secured party’s interest remains superior.

The core issue here revolves around the perfection of a security interest in accounts, specifically under Kentucky’s Article 9 of the Uniform Commercial Code. Kentucky, like most states, follows Revised Article 9. Perfection of a security interest in accounts is typically achieved by filing a financing statement in the jurisdiction where the debtor is located. For a registered organization like a corporation, its location is its jurisdiction of organization, which is Delaware in this case. Therefore, a financing statement filed in Kentucky would not perfect a security interest in accounts owned by a Delaware corporation, even if the debtor’s chief executive office is in Kentucky. The UCC § 9-301(1) and § 9-307(e) govern the location of the debtor for purposes of perfection. For a registered organization, the location is its place of incorporation. Consequently, the security interest granted by the Delaware corporation to Louisville Bank would be unperfected in Kentucky if the financing statement was only filed in Kentucky. This means that if a bankruptcy proceeding were initiated, the trustee would have priority over Louisville Bank’s unperfected security interest. The filing in Delaware is the correct step for perfection.

The core issue here is the priority of security interests when a debtor defaults on multiple obligations secured by the same collateral. In Kentucky, as governed by UCC Article 9, a perfected security interest generally has priority over unperfected security interests. Furthermore, among perfected security interests, the first to file or perfect typically prevails. However, the scenario involves a purchase money security interest (PMSI) in inventory, which has special priority rules. Under Kentucky Revised Statutes (KRS) § 355.9-324, a PMSI in inventory generally has priority over a conflicting security interest in the same inventory if the PMSI holder meets specific notification requirements. The secured party with the PMSI in inventory must have perfected its interest when the debtor received possession of the inventory. Crucially, the PMSI holder must also give an authenticated notification to any other secured party that has filed a financing statement covering the inventory or goods of the same type before the date of the filing of the PMSI holder’s financing statement. This notification must state that the PMSI holder expects to acquire a PMSI in inventory of the debtor and describe the inventory. In this case, AgriBank perfected its security interest in all of Beatrice’s farm equipment and crops by filing a financing statement on January 15th. This created a general security interest. On March 1st, FarmCredit acquired a PMSI in Beatrice’s upcoming soybean crop. FarmCredit perfected its PMSI by filing on March 1st. However, FarmCredit failed to provide the required notification to AgriBank, which had a prior filed financing statement covering similar collateral. Because FarmCredit did not provide the requisite notification to AgriBank before the perfection of its PMSI in the soybean crop, its PMSI does not achieve superpriority over AgriBank’s prior perfected security interest in that crop. AgriBank’s earlier perfected security interest takes priority. Therefore, when Beatrice defaults, AgriBank has priority over the soybean crop. The calculation of the amount owed is not relevant to determining priority, only the perfection and timing of the security interests and compliance with specific statutory requirements like notification for PMSIs in inventory.

In Kentucky, under Article 9 of the Uniform Commercial Code, a purchase money security interest (PMSI) in consumer goods generally does not need to be filed to be perfected. KRS 355.9-309(1) explicitly states that a security interest in consumer goods is perfected automatically upon attachment. Consumer goods are defined in KRS 355.9-102(1)(a)(23) as goods used or bought for use primarily in personal, family, or household purposes. Therefore, if a lender takes a security interest in a refrigerator purchased by a consumer for their home, and that refrigerator is considered a consumer good, the lender’s security interest is automatically perfected without the need for filing a financing statement. This automatic perfection provides a significant advantage for PMSI holders in consumer goods, as it simplifies the perfection process and protects their interest against subsequent unperfected security interests and even most perfected ones, except in specific circumstances like a buyer in the ordinary course of business. The key is that the goods must be classified as consumer goods and the security interest must be a PMSI.

The core issue here revolves around the perfection of a security interest in a deposit account. Under Kentucky Revised Statutes (KRS) Chapter 355, 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 secured party obtains the bank’s agreement to comply with the secured party’s instructions concerning the deposit account. In this scenario, “Farm Fresh Produce, LLC” (Farm Fresh) has a security interest in the accounts receivable of “Bluegrass Growers Cooperative” (Bluegrass). Bluegrass has a deposit account at “Commonwealth Bank.” Farm Fresh attempts to perfect its security interest by filing a financing statement. However, filing is not a method of perfection for deposit accounts. The only effective method is control. Since Farm Fresh did not obtain control of the deposit account at Commonwealth Bank, its security interest in that specific asset remains unperfected. Therefore, if Bluegrass files for bankruptcy, a perfected secured party would have priority over Farm Fresh’s unperfected security interest in the deposit account. The filing of a financing statement is relevant for perfection of security interests in general intangibles and accounts (other than deposit accounts), but not for deposit accounts themselves. Thus, Farm Fresh’s security interest in the deposit account is unperfected.

The core issue in this scenario revolves around the perfection of a security interest in a deposit account. Under Kentucky Revised Statutes (KRS) Chapter 355, 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, the debtor has agreed to the bank’s disposition of the deposit account, or the secured party obtains the bank’s acknowledgment that it will act on the secured party’s instructions. In this case, “Agri-Finance Corp.” filed a financing statement, which is generally sufficient for perfection for many types of collateral. However, KRS 355.9-312(b) explicitly states that perfection of a security interest in deposit accounts can only be obtained by control. A filed financing statement is not effective to perfect a security interest in a deposit account. Therefore, Agri-Finance Corp.’s security interest, while attached, remains unperfected against a buyer of the account or a competing perfected secured party. “Farm Equipment Sales” has a perfected security interest in the same collateral because they obtained control by becoming the bank in which the deposit account is maintained. Consequently, Farm Equipment Sales’ perfected security interest takes priority over Agri-Finance Corp.’s unperfected security interest. The correct answer is the one that reflects Farm Equipment Sales’ superior perfected status.

The core issue in this scenario revolves around the perfection of a security interest in accounts that arise from the sale of goods by a merchant located in Kentucky. Under Kentucky Revised Statutes (KRS) Chapter 355, which mirrors Article 9 of the Uniform Commercial Code, a security interest in accounts is generally perfected by filing a financing statement in the appropriate jurisdiction. For accounts, the UCC specifies that the location of the debtor is the key factor for determining the proper filing office. Since “Artisan Appliances,” the debtor, is located in Kentucky, the financing statement must be filed in Kentucky. Specifically, under KRS 355.9-307, the location of the debtor determines the jurisdiction for perfection. KRS 355.9-501(1) mandates that the proper place to file a financing statement is generally the office designated by the filing-system statute, which for intangible collateral like accounts, is typically the Secretary of State. Therefore, Artisan Appliances’ security interest in its accounts is perfected by filing with the Kentucky Secretary of State. A filing in Indiana, where the buyer is located, would be incorrect for perfection of a security interest in accounts, as the location of the account debtor is irrelevant for perfection purposes under Article 9, though it is relevant for determining the applicable law governing the account itself. A purchase money security interest (PMSI) status is irrelevant to the perfection method for accounts. Lastly, possession of the accounts is not a method of perfection for this type of collateral.

The core issue here revolves around the perfection of a security interest in a deposit account. Under Kentucky Revised Statutes (KRS) Chapter 355, Article 9, perfection in deposit accounts is generally achieved by control. Control over a deposit account is established when the secured party is the bank with which the deposit account is maintained, or when the secured party obtains the agreement of the bank with which the deposit account is maintained to comply with instructions from the secured party directing the disposition of the funds in the deposit account. KRS 355.9-104 outlines the methods for obtaining control. In this scenario, Greenleaf Farms grants a security interest to Commonwealth Bank in its operating deposit account. Commonwealth Bank, being the bank where the account is held, automatically has control by operation of law, which is the most direct and effective method of perfection for a deposit account. Therefore, Commonwealth Bank’s security interest is perfected upon attachment, as control is established contemporaneously. The filing of a financing statement is not the exclusive method for perfecting a security interest in a deposit account, and in fact, control is the primary method. The scenario does not indicate any other party asserting a claim or filing a financing statement against Greenleaf Farms’ deposit account.

In Kentucky, under Article 9 of the Uniform Commercial Code, a purchase money security interest (PMSI) in consumer goods generally attains automatic perfection upon attachment. However, this automatic perfection is subject to specific limitations. While a PMSI in consumer goods does not require a financing statement to be filed for perfection against the debtor, it does not automatically grant priority over all other claims. Specifically, a buyer of consumer goods who buys them for personal, family, or household purposes takes the goods free of a security interest, even if that security interest is perfected, unless the buyer has knowledge of the security interest. This is a statutory exception to the general rule of perfection and priority. Therefore, even though a creditor may have a perfected PMSI in a washing machine purchased by a consumer for home use, a subsequent buyer of that washing machine from the consumer, who purchases it without knowledge of the security interest, will acquire the goods free of the creditor’s security interest. This principle is designed to facilitate commerce in the consumer goods market by protecting ordinary buyers from hidden security interests. The Kentucky UCC § 9-320(a) (similar to UCC § 9-320(a) in other states) addresses this buyer in ordinary course of business exception, but the specific protection for buyers of consumer goods from a consumer is found in UCC § 9-320(b) (similar to UCC § 9-320(b) in other states), which states that a buyer of a consumer good takes free of a security interest unless the buyer has knowledge.

Under Kentucky Revised Statutes (KRS) Chapter 355, Article 9, a security interest in fixtures is perfected by 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. KRS 355.9-502(b)(3) requires that the financing statement indicate that it covers fixtures. KRS 355.9-515(e) specifies that a fixture filing is effective for a period of twenty years from the date of filing, which is a departure from the standard five-year effectiveness of other UCC filings. This longer duration acknowledges the typical long-term nature of real estate encumbrances. Therefore, a fixture filing made on January 15, 2023, will remain effective until January 15, 2043. The initial filing is made in the county clerk’s office in the county where the real estate is located, as per KRS 355.9-501(a)(2).

Kentucky Revised Statute \(KRS\) 355.9-310 governs the perfection of security interests. Generally, a financing statement must be filed to perfect a security interest in most types of collateral. However, certain collateral, such as possession of the collateral by the secured party, or in the case of certain types of goods like motor vehicles, a certificate of title, may provide for perfection without filing. For inventory financing, which is the subject of this scenario, filing a financing statement is the primary method of perfection. The filing must be made in the appropriate jurisdiction, which for a debtor located in Kentucky is typically with the Secretary of State. Filing a financing statement provides public notice of the security interest. If a secured party fails to perfect its security interest by filing a financing statement, and another party later obtains a perfected security interest in the same collateral, or becomes a buyer in the ordinary course of business, that subsequent party will generally have priority over the unperfected security interest. The scenario describes a situation where a lender has a security interest in inventory but has not filed a financing statement. A subsequent lender then takes possession of the collateral. Possession of collateral can perfect a security interest in certain circumstances, but it does not automatically grant priority over a prior unperfected security interest that would have been perfected by filing. In this case, the first lender’s security interest, though unperfected by filing, is still valid between the debtor and the lender. However, when the second lender takes possession, their security interest is perfected. The priority between these two security interests is determined by the rules of Article 9, specifically concerning unperfected versus perfected security interests. An unperfected security interest is generally subordinate to a perfected security interest. Therefore, the second lender, who has perfected by possession, will have priority over the first lender’s unperfected security interest.

The core issue here is determining the proper place to file a financing statement for a security interest in a deposit account that is being used as collateral. Under Kentucky Revised Statutes (KRS) Chapter 355, 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. Alternatively, control can be achieved if the debtor has agreed in an authenticated record that the bank will comply with the secured party’s instructions concerning the balance of the account without further consent by the debtor. Filing a financing statement is not the method of perfection for deposit accounts. KRS 355.9-312(1) states that perfection of security interests in most collateral is achieved by filing a financing statement, but KRS 355.9-312(2) provides exceptions. Specifically, KRS 355.9-312(1) and KRS 355.9-312(2) together indicate that filing is not the exclusive method for perfection of a security interest in a deposit account. KRS 355.9-314(1) explicitly states that perfection of a security interest in a deposit account can only be achieved by control. Therefore, filing a financing statement in the jurisdiction of the debtor’s chief executive office or the jurisdiction where the collateral is located is ineffective for perfecting a security interest in a deposit account. The only effective method is control as defined in KRS 355.9-104.

The core issue here is the perfection of a security interest in a vehicle titled in Kentucky. Under Kentucky Revised Statutes (KRS) Chapter 186A, the perfection of a security interest in a motor vehicle that is required to be titled in Kentucky is accomplished by notation on the certificate of title. KRS 186A.190(1) states that a security interest in a vehicle subject to KRS Chapter 186A is perfected when the secured party has delivered the certificate of title and all other required documents to the county clerk for notation. Filing a UCC-1 financing statement with the Secretary of State, as is typical for other types of collateral, is generally not the proper method for perfecting a security interest in a titled motor vehicle in Kentucky. The certificate of title system preempts the general UCC filing rules for such vehicles. Therefore, even though Apex Bank filed a UCC-1 financing statement, its security interest in the truck would not be perfected against a subsequent buyer without knowledge of the security interest until the notation is made on the certificate of title. Since the truck was sold to a buyer in the ordinary course of business, and the security interest was not noted on the title at the time of sale, the buyer takes the vehicle free of Apex Bank’s security interest. The security interest remains unperfected until notation on the title.

The core issue here revolves around the perfection of a security interest in a motor vehicle, which is a specific type of collateral governed by special rules under Article 9 of the Uniform Commercial Code, as adopted and modified by Kentucky. Kentucky Revised Statutes (KRS) Chapter 186A details the procedures for titling and registering motor vehicles, and importantly, mandates that a security interest in a motor vehicle must be noted on the certificate of title to be perfected. KRS 186A.195 explicitly states that a security interest in a vehicle subject to a certificate of title statute is perfected by compliance with the certificate of title statute. Filing a UCC-1 financing statement with the Secretary of State, while generally the method for perfecting security interests in personal property, is insufficient for vehicles covered by a certificate of title statute in Kentucky. Therefore, even though Bluegrass Bank filed a UCC-1 financing statement, their security interest in the antique tractor is not perfected because the proper method for perfection in Kentucky for such titled vehicles is notation on the certificate of title. The filing of the UCC-1 is a nullity for perfection purposes in this specific context.

The core issue here is the perfection of a security interest in a deposit account. Under Kentucky Revised Statutes (KRS) Chapter 355, 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 secured party obtains the bank’s agreement to comply with the secured party’s instructions regarding the deposit account, or when the secured party becomes the assignee of the deposit account. In this scenario, AgriBank has a security interest in the deposit account held by First Commonwealth Bank. AgriBank’s filing of a financing statement is generally sufficient for perfecting security interests in most types of collateral, but it is explicitly stated in KRS 355.9-312(b) that filing is not effective to perfect a security interest in deposit accounts. Therefore, AgriBank’s security interest remains unperfected unless it obtains control. The prompt does not indicate that AgriBank has obtained control through any of the statutory means. Consequently, if a competing claim arises, such as from a bankruptcy trustee or another creditor who obtains control, AgriBank’s unperfected security interest would be subordinate. The question tests the specific perfection requirements for deposit accounts under Article 9, which deviate from the general filing rule. The correct answer reflects the necessity of control for perfection in this specific asset class.

The core issue here revolves around the perfection of a security interest in accounts. Under Kentucky Revised Statutes (KRS) Chapter 355, Article 9, a security interest in accounts is generally perfected by filing a financing statement. However, KRS 355.9-310(3) provides an exception for certain assignments of accounts that do not involve a significant disposition of the assignor’s outstanding accounts. Specifically, an assignment of a single or a few accounts in an isolated transaction does not require filing for perfection if the assignment does not involve a significant disposition of the assignor’s outstanding accounts. This exception is often referred to as the “isolated transaction” or “casual and isolated” exception. In this scenario, Ms. Gable’s assignment of a single account to Mr. Henderson, arising from an isolated sale of a specialized piece of industrial equipment, fits this exception. The assignment did not involve a bulk sale or a significant portion of her accounts receivable. Therefore, Mr. Henderson’s security interest in the account is automatically perfected upon attachment, without the need for filing a financing statement in Kentucky. The fact that Mr. Henderson did not file a financing statement is not a deficiency in this specific context due to the nature of the assignment.

The core issue here is the priority of security interests when a buyer in the ordinary course of business purchases goods from a seller who is in the business of selling goods of that kind. Under Kentucky Revised Statutes (KRS) Chapter 355, Article 9, 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 the buyer knows of its existence. This is a fundamental principle designed to facilitate commerce by allowing ordinary course buyers to purchase goods without the burden of investigating every prior security interest. The security interest held by First National Bank of Louisville, which was perfected by filing against “all inventory,” would typically attach to the farm equipment. However, the UCC’s provisions for buyers in the ordinary course override this. The scenario specifies that Agri-Solutions, Inc. is a dealer in farm equipment and that Silas, the farmer, is purchasing the tractor from Agri-Solutions in the ordinary course of Agri-Solutions’ business. Silas’s knowledge of the bank’s security interest is irrelevant to his status as a buyer in the ordinary course who takes free of that interest. The security interest of Second State Bank, which is likely a purchase money security interest (PMSI) taken by the lender of the funds used to acquire the tractor for Silas, would be a separate matter. However, the question asks about the priority of the bank’s interest against Silas. Since Silas is a buyer in the ordinary course of business, he takes the tractor free of First National Bank of Louisville’s security interest.

The core issue here revolves around the perfection of a security interest in accounts, specifically in the context of a multi-state transaction governed by Kentucky’s Article 9. Kentucky Revised Statutes (KRS) § 355.9-307(1) states that a secured party may perfect a security interest in accounts by filing a financing statement. KRS § 355.9-316(1)(a) addresses the situation where a security interest has been perfected in one jurisdiction and then the collateral is moved into another. It provides that a security interest perfected under the law of the jurisdiction where the collateral was located when the security interest attached and before it is moved remains perfected for a period of four months after the collateral is moved into Kentucky, or until perfection ceases under the law of the first jurisdiction, whichever occurs first. If the secured party files a financing statement in Kentucky within that four-month period, the perfection continues uninterrupted. KRS § 355.9-301(1)(a) establishes that an unperfected security interest is subordinate to the rights of a person entitled to priority under KRS § 355.9-317. KRS § 355.9-317(1)(b) states that an unperfected security interest is subordinate to the rights of a buyer of accounts that buys for value, generally without knowledge of the security interest, and before the security interest is perfected. Since Bluegrass Bank & Trust perfected its security interest in Tennessee and the collateral (accounts) was located there at attachment, its perfection continued for four months after the accounts became subject to Kentucky law, or until its Tennessee perfection lapsed. If, during this period, a buyer of these accounts in Kentucky takes possession for value and without knowledge of the security interest before Bluegrass Bank & Trust files in Kentucky, that buyer will have priority. The question specifies that the buyer acquired its interest after the four-month period had expired and without filing in Kentucky. Therefore, Bluegrass Bank & Trust’s security interest, having been perfected in Tennessee and not having lapsed before the buyer’s acquisition (as the buyer acquired it after the four-month grace period expired without a Kentucky filing), would be superior to the buyer’s interest. However, the prompt implies the buyer acquired the accounts *after* the four-month period expired *and* without Bluegrass Bank & Trust filing in Kentucky. This means Bluegrass Bank & Trust’s perfection lapsed. Therefore, the buyer, who acquired the accounts after the perfection lapsed, would take free of the security interest. The critical detail is the timing of the buyer’s acquisition relative to the four-month period and the filing in Kentucky. If the buyer acquired the accounts after the four-month period expired without a Kentucky filing, the security interest is no longer perfected. KRS § 355.9-317(1)(b) protects a buyer of accounts who gives value and receives delivery of the collateral without knowledge of the security interest and before the security interest is perfected. In this scenario, the buyer acquired the accounts after the four-month grace period expired and without Bluegrass Bank & Trust filing in Kentucky. This means the security interest became unperfected upon the expiration of the four-month period. Consequently, the buyer, who acquired the accounts when the security interest was unperfected, takes free of that security interest.

The core issue here is the priority of a security interest in after-acquired inventory when a competing claim arises. Under Kentucky Revised Statutes (KRS) Chapter 355, Article 9, a security interest generally attaches to collateral and can cover after-acquired property if the security agreement so provides. Perfection is achieved by filing a financing statement. When a secured party perfects a security interest in inventory, that perfection extends to after-acquired inventory. Another secured party seeking priority in the same collateral must also perfect their interest. The general rule for priority between perfected security interests in the same collateral is the first-to-file or first-to-perfect rule, as outlined in KRS 355.9-322. In this scenario, “AgriBank” properly filed its financing statement covering all of “Farmstead’s” inventory, including after-acquired inventory, on January 15, 2023. This perfected AgriBank’s security interest. “GrainCo” later filed its financing statement on March 10, 2023, also covering inventory. Since AgriBank perfected its security interest first, its claim to the inventory acquired after the filing date has priority over GrainCo’s claim. The fact that the inventory was acquired after the initial filing does not diminish AgriBank’s priority. The security agreement and financing statement’s language is crucial; by covering “all inventory, including after-acquired inventory,” AgriBank secured its position for all inventory Farmstead possesses or acquires during the term of the agreement. Therefore, AgriBank has priority.

The core issue here is determining the priority of security interests when a debtor defaults. Kentucky law, following UCC Article 9, establishes a system of perfection and notice to govern priority. A purchase money security interest (PMSI) in equipment generally has priority over a prior perfected security interest in the same collateral if the PMSI is perfected within a specific timeframe. For equipment, this perfection period is twenty days after the debtor receives possession of the collateral. In this scenario, First National Bank of Kentucky perfected its security interest in all of AgroCorp’s existing and after-acquired equipment on January 15th. This created a perfected security interest in the new combine harvester once AgroCorp acquired rights in it. On February 1st, AgriFinance, Inc. extended new value to AgroCorp to purchase the combine harvester, thereby creating a PMSI in that specific piece of equipment. AgriFinance, Inc. filed its financing statement on February 10th. This filing occurred within the twenty-day grace period following AgroCorp’s receipt of the combine harvester on February 5th. Therefore, AgriFinance’s PMSI is deemed perfected as of February 5th, the date AgroCorp received possession. Because AgriFinance’s PMSI was perfected within the statutory twenty-day period, it has priority over First National Bank’s earlier, but not PMSI, perfected security interest in the same collateral. This priority is established by UCC § 9-324(a), which is adopted in Kentucky Revised Statutes Chapter 355, Article 9. The general rule of “first in time, first in right” for perfected security interests is subject to the special priority rules for PMSIs. The twenty-day period is crucial; if AgriFinance had filed after February 24th (February 5th + 20 days), its PMSI would likely have been subordinate to First National Bank’s prior perfected security interest. The fact that First National Bank’s interest attached to after-acquired property is relevant but does not overcome the superpriority granted to a properly perfected PMSI.

The core issue here is determining the priority of security interests when a debtor defaults on multiple secured loans, particularly concerning fixtures. In Kentucky, as under Article 9 of the Uniform Commercial Code, a security interest in fixtures is governed by specific rules to ensure that a secured party with an interest in the real property has priority over a secured party with an interest only in the goods that have become fixtures. Under KRS 355.9-334(3), a perfected security interest in goods that are or become fixtures is subordinate to the conflicting interest of an encumbrancer or owner of the real property if the encumbrancer or owner is a “subsequent” encumbrancer or owner and the goods are fixtures before they are affixed. However, KRS 355.9-334(4) provides an exception for “purchase-money security interests” in fixtures. A perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if the security interest is a purchase-money security interest in the fixtures, the security interest is perfected when the fixtures are first filed for record, and the debtor has an interest of record in, or is in possession of, the real property. In this scenario, Bluegrass Bank’s security interest in the printing press is a purchase-money security interest because it was taken by Bluegrass Bank to secure the price of the printing press. The printing press was delivered on June 1st and became a fixture shortly thereafter. Bluegrass Bank filed its financing statement on June 10th, which was after the printing press was affixed but critically, it was filed for record before the printing press was affixed, satisfying the requirement of KRS 355.9-334(4)(a) which states the security interest must be perfected when the fixtures are first filed for record. The key is that the filing for record must occur before the goods become fixtures or within a specified time after they become fixtures depending on the specific subsection. Here, the filing on June 10th is after the affixation on June 1st. However, the critical element for purchase-money security interest priority in fixtures under KRS 355.9-334(4) is that the security interest must be perfected when the fixtures are first filed for record, which implies the filing must precede or coincide with the affixation for this specific priority. If the filing is after affixation, the general rule of KRS 355.9-334(3) applies, making it subordinate to a subsequent real property encumbrancer. However, the question states Bluegrass Bank perfected its security interest on June 10th. If we interpret “first filed for record” in KRS 355.9-334(4)(a) to mean the initial filing that establishes perfection, and the affixation occurred before this filing, then the purchase-money security interest priority might not attach. But the more common interpretation of “first filed for record” in the context of fixtures and PMSI priority is that the filing must occur before the goods become fixtures, or at least before the competing interest attaches. Since Bluegrass Bank filed on June 10th, and the press became a fixture on June 1st, and Commonwealth Mortgage had its interest recorded on June 5th, Commonwealth Mortgage’s interest attached while the printing press was already a fixture. Commonwealth Mortgage’s interest is in the real property, and since it was recorded on June 5th, it is a subsequent encumbrancer to the affixation of the printing press. KRS 355.9-334(3) states that a perfected security interest in goods that are or become fixtures is subordinate to the conflicting interest of an encumbrancer or owner of the real property if the encumbrancer or owner is a subsequent encumbrancer or owner and the goods are fixtures before they are affixed. Commonwealth Mortgage’s interest is subsequent to the affixation. Therefore, Bluegrass Bank’s security interest, even though it’s a PMSI, is subordinate to Commonwealth Mortgage’s interest because the filing occurred after the goods became fixtures and after Commonwealth Mortgage’s interest in the real property was recorded. Let’s re-evaluate the timing for KRS 355.9-334(4)(a): “the security interest is perfected when the fixtures are first filed for record”. This phrase is crucial. If Bluegrass Bank filed on June 10th, and the press became a fixture on June 1st, and Commonwealth Mortgage recorded on June 5th, then Commonwealth Mortgage is a subsequent encumbrancer and its interest in the real property attached when the printing press was already a fixture. Therefore, Bluegrass Bank’s security interest is subordinate to Commonwealth Mortgage’s interest. The correct answer hinges on the interpretation of “first filed for record” in conjunction with the affixation date and the competing real property interest. Under KRS 355.9-334(3), a perfected security interest in goods that are or become fixtures is subordinate to a conflicting interest of an encumbrancer or owner of the real property if the encumbrancer or owner is a subsequent encumbrancer or owner and the goods are fixtures before they are affixed. Commonwealth Mortgage’s interest was recorded on June 5th. The printing press became a fixture on June 1st. Thus, Commonwealth Mortgage is a subsequent encumbrancer, and the goods were fixtures before their interest attached. Bluegrass Bank perfected its security interest on June 10th. Therefore, Bluegrass Bank’s security interest is subordinate to Commonwealth Mortgage’s interest. No calculation is required for this question; it is a conceptual application of priority rules.