The core issue here is the priority of security interests when a buyer of inventory purchases goods in the ordinary course of business. Under Article 9 of the Uniform Commercial Code, as adopted in Illinois, a buyer in the ordinary course of business (BIOC) takes free of a security interest created by their seller, even if the security interest is perfected and the buyer knows of its existence, unless the buyer knows that the sale is in violation of the security agreement. The debtor, “Prairie Harvest Farms,” granted a security interest in its entire inventory of organic produce to “Agri-Lend Bank.” Agri-Lend Bank properly perfected its security interest by filing a UCC-1 financing statement in Illinois. “Green Grocer Inc.” is a retail grocery store that regularly purchases organic produce from various suppliers, including Prairie Harvest Farms. Green Grocer Inc. purchased a shipment of heirloom tomatoes from Prairie Harvest Farms in the ordinary course of Green Grocer Inc.’s business. There is no indication that Green Grocer Inc. knew that this specific sale was in violation of Agri-Lend Bank’s security agreement with Prairie Harvest Farms. Therefore, Green Grocer Inc. takes the heirloom tomatoes free and clear of Agri-Lend Bank’s security interest. The security interest held by Agri-Lend Bank remains attached to the proceeds of the sale, such as the cash received by Prairie Harvest Farms. The question tests the fundamental protection afforded to buyers in the ordinary course of business under UCC Article 9, specifically regarding inventory. This protection is a cornerstone of commercial transactions, ensuring the smooth flow of goods in the marketplace.

The core issue here revolves around the perfection of a security interest in a vehicle that is titled in Illinois. Under Article 9 of the Uniform Commercial Code, as adopted in Illinois, the perfection of a security interest in goods covered by a certificate of title is governed by the certificate of title statutes of the relevant jurisdiction. Illinois’ Certificate of Title Act specifies that a security interest in a vehicle subject to titling requirements is perfected by notation on the certificate of title. The filing of a UCC-1 financing statement with the Secretary of State of Illinois is generally for goods not covered by a certificate of title, or for fixtures. Since the collateral is a vehicle that requires titling in Illinois, the exclusive method for perfecting a security interest is through notation on the certificate of title by the Illinois Secretary of State. A UCC-1 filing alone does not perfect the security interest in such a vehicle. Therefore, the security interest remains unperfected against a buyer in the ordinary course of business.

Under Illinois’s Article 9 of the Uniform Commercial Code, when a secured party has a perfected security interest in collateral and that collateral is sold in the ordinary course of business to a buyer not in the ordinary course of business, the buyer takes the collateral subject to the perfected security interest unless the secured party has authorized the sale free of the security interest. This authorization can be express or implied. An implied authorization might arise from a course of dealing or usage of trade. However, a mere lapse in monitoring or failing to object to a single prior unauthorized sale does not automatically constitute implied authorization for future sales. The secured party’s continued perfection is generally maintained in the proceeds of the sale under UCC § 9-315. If the buyer is not in the ordinary course of business, they do not benefit from the protections afforded to such buyers. Therefore, the perfected security interest continues in the collateral even after the sale, and the secured party can enforce their rights against the collateral in the hands of the buyer. The Illinois UCC § 9-320 addresses buyers in ordinary course of business, but this question specifically deals with a buyer *not* in the ordinary course of business. The key is whether the secured party authorized the disposition of the collateral free of the security interest. Without such authorization, the security interest follows the collateral.

The Illinois Uniform Commercial Code (UCC) Article 9 governs secured transactions. When a buyer of goods in the ordinary course of business buys from a seller who is a merchant, and the buyer does not know that the sale is in violation of the security agreement, the buyer takes the goods free of the security interest. This principle is enshrined in UCC § 9-320, which is adopted in Illinois. Here, “Prairie Harvest Farms” is a merchant selling farm equipment. “AgriSolutions Inc.” has a perfected security interest in all of Prairie Harvest Farms’ inventory. “Caleb’s Crop Services,” a buyer in the ordinary course of business, purchases a combine harvester from Prairie Harvest Farms. Caleb’s Crop Services has no knowledge that the sale of this specific combine violates AgriSolutions Inc.’s security agreement. Therefore, Caleb’s Crop Services takes the combine free and clear of AgriSolutions Inc.’s security interest, regardless of AgriSolutions Inc.’s perfected status. The perfection of the security interest is relevant to priority disputes between secured parties or between a secured party and a buyer not in the ordinary course of business, but not to a buyer in the ordinary course of business who meets the statutory criteria.

The core issue here is determining the priority of security interests when a debtor defaults on a loan secured by a piece of equipment. In Illinois, as governed by Article 9 of the Uniform Commercial Code, a secured party’s rights upon default are generally superior to those of unsecured creditors. However, the question hinges on the perfection of the security interest. Aurora Equipment Leasing, Inc. properly perfected its security interest in the milling machine by filing a UCC-1 financing statement in Illinois on March 15, 2022. This filing establishes Aurora’s priority against subsequent claims, including those of an unsecured creditor like Prairie State Bank. Prairie State Bank, having no security interest, is an unsecured creditor. Unsecured creditors do not have a right to specific collateral; their recourse is against the debtor’s general assets. Therefore, Aurora’s perfected security interest in the milling machine gives it priority over Prairie State Bank’s claim to that specific piece of collateral. The fact that Prairie State Bank has a judgment against the debtor is relevant for its rights as a creditor generally, but it does not grant it a superior claim to collateral already subject to a perfected security interest. Aurora’s perfected security interest attaches to the milling machine and allows Aurora to repossess and sell the collateral to satisfy the debt, subject to the rules for disposition of collateral under Article 9. Prairie State Bank’s claim would be satisfied from any remaining proceeds after Aurora and any other secured creditors with prior claims are paid, or from other assets of the debtor not subject to a perfected security interest.

The scenario involves a purchase money security interest (PMSI) in inventory. Under Illinois’s Article 9 of the Uniform Commercial Code (UCC), a secured party can perfect a PMSI in inventory by filing a financing statement and by giving notification to any other secured party who has filed a financing statement covering the same goods. Specifically, Illinois UCC Section 9-324(b) provides that a PMSI in inventory has priority over a conflicting security interest in the same inventory if the PMSI holder satisfies certain conditions. These conditions include filing a financing statement before the debtor receives possession of the inventory, and sending an authenticated notification to any secured party whose previously filed financing statement covers the inventory. The notification must state that the PMSI holder expects to acquire a PMSI in inventory of the debtor and must describe the inventory. The notification is effective for five years. In this case, “AgriBank” filed its financing statement on January 15th, and “FarmCredit” filed its financing statement on February 1st. AgriBank’s security interest is perfected first. FarmCredit’s security interest is a PMSI in inventory. For FarmCredit’s PMSI to have priority over AgriBank’s prior perfected security interest, FarmCredit must have complied with the special PMSI notification requirements for inventory under UCC § 9-324(b). This requires FarmCredit to send an authenticated notification to AgriBank before AgriBank received possession of the inventory, and that notification must state that FarmCredit expects to acquire a PMSI in inventory of the debtor. Since the facts state FarmCredit sent the notification on January 20th, which was after AgriBank’s filing but before FarmCredit’s filing and before the debtor received possession of the inventory on February 15th, and assuming the notification met the description requirements, FarmCredit’s PMSI would have priority. The date of filing the financing statement is crucial, but the notification requirement for inventory PMSI is a distinct step to gain superpriority over a prior perfected general security interest. Therefore, FarmCredit, by filing and giving proper notification before the debtor received possession, establishes priority for its PMSI in the inventory.

The core issue in this scenario revolves around the perfection of a security interest in a deposit account. Under Article 9 of the Uniform Commercial Code, as adopted in Illinois, a security interest in a deposit account can only be perfected by control. Control is defined in Section 9-104 of the UCC. For a deposit account, control is typically achieved when the secured party is the bank with which the deposit account is maintained, or when the debtor has agreed that the bank will comply with the secured party’s instructions regarding the deposit account. In this case, Aurora Bank holds a security interest in the deposit account of Stellar Innovations, Inc. Aurora Bank is the bank with which the deposit account is maintained, thus satisfying the control requirement under Section 9-104(a)(1). Therefore, Aurora Bank has a perfected security interest in the deposit account. The filing of a financing statement is generally not sufficient for perfection of a security interest in a deposit account, although it may be necessary for other types of collateral. The notification to other creditors is also not the primary method of perfection for deposit accounts. The question tests the understanding of the exclusive perfection method for deposit accounts under Article 9.

The question concerns the perfection of a security interest in a deposit account. Under Article 9 of the Uniform Commercial Code (UCC), as adopted in Illinois (810 ILCS 5/9-104), a security interest in a deposit account can only be perfected by control. Control is defined in UCC Section 9-104. For a deposit account, control is achieved if the secured party is the bank with which the deposit account is maintained, or if the secured party obtains the agreement of the bank with which the deposit account is maintained to comply with the secured party’s instructions regarding the deposit account. In this scenario, the debtor, “Prairie State Enterprises,” maintains its operating account at “Midwest Bank.” “Agri-Financers Inc.” obtained a security interest in this deposit account. Agri-Financers Inc. did not file a financing statement because Article 9 generally exempts deposit accounts from the filing requirement for perfection (UCC Section 9-312(b)(1)). The critical step for perfection is control. Since Agri-Financers Inc. did not become the bank with which the account is maintained, it must obtain the agreement of Midwest Bank to comply with its instructions. This agreement is typically documented in a control agreement. Without such a control agreement, Agri-Financers Inc.’s security interest, while enforceable between Agri-Financers Inc. and Prairie State Enterprises, is unperfected and subordinate to the rights of a buyer of the account or a lien creditor. Therefore, the most effective method for Agri-Financers Inc. to perfect its security interest in the deposit account is to enter into a control agreement with Midwest Bank.

The scenario involves a purchase money security interest (PMSI) in inventory. Under Illinois’ version of UCC Article 9, a secured party claiming a PMSI in inventory must satisfy two primary requirements to maintain its perfected status against a buyer in the ordinary course of business. First, the security interest must be perfected when the buyer receives possession of the goods. Second, the secured party must have given an “advisement notice” to any other secured party or lienholder who had previously filed a financing statement covering the same inventory. This notice informs the prior secured party of the PMSI. In this case, Aurora Bank’s security interest in the farm equipment inventory was perfected by filing. However, the crucial element is the advisement notice to any previously perfected secured party. Since no prior secured party is mentioned as having filed a statement covering the same inventory, the absence of an advisement notice to such a party does not affect Aurora Bank’s priority over a buyer in the ordinary course of business. Therefore, Aurora Bank’s perfected PMSI in the inventory gives it priority over any buyer in the ordinary course of business, even if that buyer purchases the goods before Aurora Bank’s security interest is perfected, provided the PMSI is perfected before the buyer receives possession. The perfection of the PMSI is achieved by filing the financing statement. The question states Aurora Bank filed a financing statement covering the inventory. Thus, Aurora Bank’s perfected PMSI takes priority over a buyer in the ordinary course of business.

In Illinois, under Article 9 of the Uniform Commercial Code, when a secured party has a security interest in collateral that is also covered by a purchase-money security interest (PMSI) perfected by a proper filing, and a second secured party subsequently obtains a security interest in the same collateral, the priority between these two secured parties is determined by the rules of Article 9. Specifically, if the first secured party has a perfected PMSI, it generally has priority over a later-filed or unperfected security interest. However, if the second secured party also perfects its security interest and its security interest is not subordinate to the PMSI holder (e.g., by not being a purchase-money lender itself or by failing to meet PMSI requirements), then the general priority rules apply. Under UCC § 9-322, if both security interests are perfected by filing, priority is generally given to the secured party that first filed a financing statement covering the collateral. If one is perfected and the other is unperfected, the perfected security interest has priority. In this scenario, both parties have perfected their security interests by filing. Therefore, the priority is determined by the order of filing. The secured party that filed its financing statement first will have priority over the collateral. The fact that the first security interest was a PMSI is relevant to its initial perfection and potential superpriority against certain other interests, but once both are perfected by filing, the first-to-file rule generally governs the priority between them, unless specific exceptions apply which are not indicated in the problem.

The core issue here is the priority of security interests when collateral is transferred. Under Article 9 of the Uniform Commercial Code (UCC), as adopted in Illinois, a buyer of goods generally takes free of a security interest created by the seller if the buyer is a buyer in ordinary course of business (BIOC) and does not know that the sale is in violation of the security agreement. In this scenario, “Prairie Agricultural Supplies” (PAS) has a perfected security interest in all of Farmer McGregor’s farm equipment, including the combine harvester. Farmer McGregor, the debtor, sells the combine to “Cornfield Custom Harvesting LLC” (CCH). CCH is in the business of custom harvesting and purchased the combine for value, in good faith, and without knowledge that the sale to them was in violation of PAS’s security interest. Therefore, CCH is a BIOC. UCC § 9-320(a) provides that a buyer in ordinary course of business takes free of a security interest even if the security interest is perfected, unless the buyer also knows that the sale is in violation of some specific provisions of the security agreement. Since CCH meets the definition of a BIOC and there’s no indication they knew the sale violated PAS’s security agreement, CCH takes the combine free of PAS’s security interest. PAS’s recourse would be against Farmer McGregor for breach of the security agreement, not against CCH.

The scenario involves a secured party, Prairie Bank, and a debtor, AgriCorp, in Illinois. Prairie Bank has a perfected security interest in AgriCorp’s inventory, which includes harvested corn. AgriCorp then enters into a contract with Heartland Grain, a buyer of agricultural products, to sell a portion of this corn. Heartland Grain takes possession of the corn. The question asks about the priority of Prairie Bank’s security interest against Heartland Grain. Under Illinois’ version of UCC Article 9, specifically concerning agricultural liens and buyers of farm products, a buyer in the ordinary course of business (BIOC) of farm products takes free of a security interest created by the seller, even if perfected, unless the buyer has knowledge of the security interest and it is perfected by a method other than possession. However, Section 9-320(a) of the UCC, as adopted in Illinois, states that a buyer in ordinary course of business takes free of a security interest created by the seller even if the security interest is perfected. This protection extends to buyers of farm products from a farmer. Heartland Grain, by purchasing corn in the ordinary course of its business from AgriCorp, which is implied to be a producer or processor of agricultural products, qualifies as a buyer in the ordinary course of business. Therefore, Heartland Grain takes the corn free of Prairie Bank’s security interest.

The question revolves around the concept of attachment and perfection of a security interest in Illinois under Article 9 of the Uniform Commercial Code. For a security interest to be enforceable against third parties, it must first attach to the collateral. Attachment occurs when the secured party gives value, the debtor has rights in the collateral, and there is a security agreement authenticated by the debtor that describes the collateral. Perfection, on the other hand, is the process by which a secured party establishes priority over other claimants to the collateral. In Illinois, as in most states, perfection of a security interest in goods, other than inventory or equipment used in farming operations, is typically achieved by filing a financing statement. However, possession of the collateral by the secured party can also serve as a method of perfection for certain types of collateral, including goods. In the scenario presented, Aurora Corp. granted a security interest in its specialized manufacturing equipment to Prairie Bank. Prairie Bank took possession of the equipment on January 15th. Aurora Corp. later filed for bankruptcy on March 1st. A bankruptcy trustee, acting as a hypothetical lien creditor, has the rights of a creditor who obtains a lien on the collateral by legal or equitable process. Under Illinois law, a security interest is perfected when it has attached and all applicable perfection requirements have been satisfied. Possession of collateral by the secured party is a method of perfection. Therefore, Prairie Bank’s security interest in the manufacturing equipment became perfected on January 15th when it took possession. The bankruptcy filing on March 1st does not affect the perfection status achieved prior to the filing. Since the security interest was perfected before the bankruptcy petition date, the trustee’s rights as a hypothetical lien creditor are subordinate to Prairie Bank’s perfected security interest. Thus, Prairie Bank has priority over the bankruptcy trustee regarding the manufacturing equipment.

The core issue in this scenario revolves around the perfection of a security interest in deposit accounts under Article 9 of the Uniform Commercial Code, as adopted in Illinois. Under UCC § 9-312(b) and § 9-104, the exclusive method for a secured party to obtain control over a deposit account as collateral is by becoming the “bank’s customer” with respect to the deposit account, or by entering into a control agreement with the bank. A security interest in a deposit account can only be perfected by control. Filing a financing statement is generally insufficient for perfection of a security interest in a deposit account. Therefore, when Aurora Bank filed a financing statement but did not obtain control over the deposit account held at Zenith Bank, its security interest in the account remained unperfected. Consequently, when the debtor filed for bankruptcy, the trustee, as a hypothetical lien creditor under Bankruptcy Code § 544, could avoid Aurora Bank’s unperfected security interest. The security interest held by Sterling Credit Union, which did obtain control of the deposit account through a control agreement with Zenith Bank, is perfected. In a bankruptcy proceeding, perfected security interests are generally given priority over unperfected ones. Thus, Sterling Credit Union’s perfected security interest would take precedence over Aurora Bank’s unperfected interest in the deposit account.

The core issue here revolves around the perfection of a security interest in accounts. Under Article 9 of the Uniform Commercial Code, as adopted in Illinois, a secured party generally perfects a security interest in accounts by filing a financing statement. However, there is an exception for certain “assigments of accounts” where no filing is required if the assignment does not, by itself, constitute a “significant disposition of the assignor’s accounts” and the assignee receives notification of the assignment. This exception is often interpreted to cover situations where the assignment is merely incidental to a larger transaction or where the assignee is not primarily in the business of purchasing accounts. In this scenario, Aurora Bank’s security interest in all of Crimson Corp’s existing and future accounts was granted to secure a substantial loan. Crimson Corp’s subsequent assignment of a single, isolated account to a supplier, Meridian, for a relatively small amount, without any notification to Meridian of Aurora Bank’s prior perfected security interest, likely falls outside the scope of the filing exception. The assignment to Meridian, while an assignment of an account, is not a significant disposition of Crimson Corp’s overall accounts, and the lack of notification to Meridian is a key factor. However, the critical element is Aurora Bank’s prior perfected security interest. When Crimson Corp assigns an account that is already collateral for Aurora Bank’s loan, Meridian takes the account subject to Aurora Bank’s prior perfected security interest. Aurora Bank’s security interest in the account remains perfected because it was perfected by filing prior to Crimson Corp’s assignment to Meridian. Therefore, Aurora Bank has priority.

In Illinois, when a secured party has a security interest in goods that become affixed to real property so as to become a fixture, the secured party’s rights are governed by Article 9 of the Uniform Commercial Code, specifically concerning fixtures. Under UCC § 9-334, a perfected security interest in fixtures is generally subordinate to the conflicting interest of an encumbrancer or owner of the real property that has perfected its interest in the real property, unless certain exceptions apply. One significant exception is found in UCC § 9-334(d), which states that 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 in the fixtures is perfected before the real property interest is perfected. Another exception, relevant here, is UCC § 9-334(e), which provides that a secured party may, on default, repossess the collateral, including fixtures, provided that the secured party reimburses any encumbrancer or owner of the real property who has not authorized the debtor to encumber the real property for any diminution in value of the real property caused by the removal of the fixtures. The reimbursement amount is limited to the outstanding obligation secured by the real property at the time of removal. In this scenario, Aurora Bank perfected its security interest in the industrial milling machinery (fixtures) on January 15, 2023. Prairie State Bank, holding a mortgage on the real property, perfected its interest on February 1, 2023. Since Aurora Bank’s perfection predates Prairie State Bank’s mortgage perfection, Aurora Bank’s security interest in the fixtures has priority. Therefore, upon debtor’s default, Aurora Bank can repossess the machinery without reimbursing Prairie State Bank for any diminution in the real property’s value.

The scenario involves a secured party, Prairie Capital, attempting to perfect its security interest in a motor vehicle owned by a debtor, Riverbend Construction, located in Illinois. Article 9 of the Uniform Commercial Code, as adopted in Illinois, governs secured transactions. Perfection of a security interest in a motor vehicle typically requires notation on the certificate of ownership. In Illinois, this is governed by the Illinois Vehicle Code, which specifically addresses the perfection of security interests in motor vehicles. While filing a UCC-1 financing statement is the general method for perfecting security interests in personal property, motor vehicles are a statutory exception. The Illinois Vehicle Code mandates that a security interest in a vehicle subject to a certificate of title must be indicated on the certificate of title to be perfected. Therefore, Prairie Capital’s filing of a UCC-1 financing statement with the Illinois Secretary of State, while a valid step for other types of collateral, is insufficient for perfecting its security interest in the motor vehicle. The correct method for perfection in this instance is to have the security interest noted on the certificate of title issued by the Illinois Secretary of State. Consequently, Prairie Capital’s security interest is unperfected against a buyer in the ordinary course of business who takes possession of the vehicle without knowledge of the security interest.

Under Illinois’s Article 9 of the Uniform Commercial Code, when a secured party has a security interest in a deposit account, that security interest is generally perfected by control. Control over a deposit account is achieved when the secured party is the bank with 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 concerning the balance of the deposit account. This control provision is critical because it allows the secured party to access and apply the funds in the deposit account upon default. Illinois law, consistent with the UCC, emphasizes that perfection by control is the exclusive method for perfecting a security interest in a deposit account as collateral, other than in the case of deposit accounts that are part of a “special collateral” as defined in the UCC, or as proceeds of other collateral. Therefore, if a secured party fails to obtain control over a deposit account that serves as collateral, their security interest in that account remains unperfected, making it subordinate to the claims of lien creditors and other perfected secured parties. The scenario presented involves a secured party who financed the purchase of specialized industrial machinery for a manufacturing company located in Illinois. As part of the security agreement, the company granted the secured party a security interest in all of its assets, including its operating deposit accounts. The secured party filed a UCC-1 financing statement covering all assets. However, the secured party did not obtain control over the company’s primary operating deposit account, as defined by UCC § 9-104. Subsequently, another creditor obtained a judgment against the company and levied on the funds in the operating deposit account. In this situation, the judgment creditor’s lien on the deposit account would generally take priority over the unperfected security interest of the secured party. This is because perfection by control is the exclusive method for perfecting a security interest in deposit accounts under Illinois law, and filing a UCC-1 financing statement alone does not perfect a security interest in deposit accounts.

The core issue in this scenario revolves around the perfection of a security interest in a deposit account, which is a specific type of collateral governed by Article 9 of the Uniform Commercial Code, as adopted in Illinois. Under Illinois law, a security interest in a deposit account can only be perfected by control. Control is achieved 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 the secured party’s instructions concerning the account. Merely taking possession of the account statement or having a general lien on the depositor’s assets at that bank does not constitute control. In this case, Sterling Bank, by having the deposit account at its own institution and entering into a control agreement with Aurora Corp., has established control over the deposit account. This control is the exclusive method for perfecting a security interest in a deposit account under UCC Article 9, as interpreted by Illinois statutes and case law. Therefore, Sterling Bank’s security interest is perfected.

The question revolves around the perfection of a security interest in a motor vehicle titled in Illinois. Under Article 9 of the Uniform Commercial Code, as adopted in Illinois, a security interest in a vehicle that requires a certificate of title to be effective is generally perfected by compliance with the state’s certificate of title law. Illinois Vehicle Code, specifically 625 ILCS 5/3-201, dictates that a security interest in a vehicle subject to titling requirements is perfected when the secured party delivers the required documents to the appropriate public official for notation on the certificate of title. This delivery and notation process supersedes the general filing requirements of UCC § 9-310. Therefore, if the lender, “Prairie State Lending,” properly delivered the security agreement and other necessary documentation to the Illinois Secretary of State’s office for notation on the vehicle’s certificate of title, its security interest is perfected against subsequent purchasers and lienholders. The filing of a UCC-1 financing statement with the Secretary of State, while standard for many types of collateral, is not the exclusive or primary method of perfecting a security interest in a titled vehicle in Illinois. Such a filing would be considered ineffective for perfection purposes in this context, as the certificate of title mechanism is controlling.

The question concerns the perfection of a security interest in a deposit account under Illinois’ Article 9 of the Uniform Commercial Code. Under UCC § 9-312(b), a security interest in a deposit account as original collateral can only be perfected by control. Control is defined in UCC § 9-104. For a deposit account, control is achieved if the secured party is the bank with which the deposit account is maintained, or if the secured party obtains the bank’s agreement to comply with instructions from the secured party regarding the deposit account. In this scenario, Aurora Bank holds a perfected security interest in the deposit account because it is the bank with which the deposit account is maintained, thus satisfying the control requirement under UCC § 9-104(a)(1). The filing of a financing statement is not sufficient for perfection of a security interest in a deposit account as original collateral, as per UCC § 9-312(b)(1). Therefore, Aurora Bank’s security interest is perfected.

The scenario involves a purchase money security interest (PMSI) in inventory. Under Article 9 of the Uniform Commercial Code, as adopted in Illinois, a PMSI in inventory requires specific steps to achieve priority over other secured parties, particularly those with a prior perfected security interest in the same collateral. The general rule for PMSI priority in inventory is that the PMSI holder must satisfy two conditions: (1) the PMSI must be perfected by filing a financing statement, and (2) the PMSI holder must give an authenticated notification to any other secured party who has a prior perfected security interest in the same inventory. This notification must be sent before the debtor receives possession of the inventory, and it must state that the PMSI holder expects to acquire a PMSI in inventory of the debtor, including after-acquired inventory. In this case, “Agri-Finance Corp.” has a prior perfected security interest in “Farmstead Equipment LLC’s” entire inventory, including after-acquired inventory. “Harvest Capital Bank” then acquires a PMSI in new inventory sold to Farmstead Equipment LLC. To maintain priority over Agri-Finance Corp.’s earlier, broader security interest, Harvest Capital Bank must perfect its PMSI and provide the required notification. Filing a financing statement is a method of perfection. The notification requirement is crucial for PMSI priority in inventory. The notification must be sent to Agri-Finance Corp. before Farmstead Equipment LLC receives possession of the inventory. The prompt states Harvest Capital Bank filed its financing statement and sent notification to Agri-Finance Corp. *after* Farmstead Equipment LLC received the inventory. This timing is critical. Because the notification was sent after the debtor received possession of the inventory, Harvest Capital Bank’s PMSI in that inventory will not have priority over Agri-Finance Corp.’s prior perfected security interest. Agri-Finance Corp. will retain its priority. Therefore, if Agri-Finance Corp. were to repossess the inventory, it would have priority over Harvest Capital Bank’s security interest in that specific inventory.

In Illinois, when a secured party has a security interest in goods that become affixed to real property, the security interest is typically governed by Article 9 of the Uniform Commercial Code, specifically the rules concerning fixtures. A security interest in fixtures is perfected by filing a fixture filing in the real property records, which is generally in the office where a mortgage on the real property would be recorded. This filing must identify the collateral as fixtures and include a description of the real property. The filing must also satisfy the requirements for perfection of a security interest in personal property, such as proper identification of the debtor and secured party, and a description of the collateral. If the secured party fails to make a proper fixture filing, their security interest may be subordinate to subsequent purchasers of the real property for value without notice of the security interest. The UCC provides for a “grace period” for a purchase-money security interest in fixtures, allowing for perfection within twenty days after the collateral becomes a fixture. However, the question specifies that the filing occurred after the collateral became affixed to the real property and does not mention a purchase-money security interest or the twenty-day grace period. Therefore, a standard fixture filing in the appropriate real property records is required for perfection against subsequent purchasers of the real property.

The core issue here revolves around the perfection of a security interest in accounts that arise from the sale of goods by a seller who is located in Illinois, but the buyer is located in Indiana. Under Article 9 of the Uniform Commercial Code, as adopted in Illinois (810 ILCS 5/9-301 et seq.), the general rule for perfection of a security interest in accounts is that perfection is achieved by filing a financing statement in the jurisdiction where the debtor is located. For a registered organization, like a corporation, its location is determined by the law of the state under which it is organized. In this scenario, the debtor, “Prairie Goods Inc.,” is organized under the laws of Illinois. Therefore, to perfect its security interest in the accounts generated from its sales, Prairie Goods Inc. must file its financing statement in Illinois. The location of the collateral (the accounts) or the location of the buyer (Indiana) is generally not determinative for perfection of accounts, unlike certain other types of collateral. The security interest is in the accounts, which are intangible rights to payment. The UCC’s choice of law rules for accounts (810 ILCS 5/9-301) prioritize the debtor’s location for perfection. Filing in Indiana would be incorrect for perfecting a security interest in accounts where the debtor is located in Illinois.

The scenario involves a security interest in inventory that is subject to a purchase money security interest (PMSI) held by a supplier, “AgriSupplies Inc.” The debtor, “Prairie Farms LLC,” has granted a prior, perfected security interest to “First National Bank of Illinois” (FNBI) in all of its present and after-acquired inventory. AgriSupplies Inc. subsequently sells additional fertilizer to Prairie Farms LLC on credit, retaining a PMSI in that specific fertilizer. For AgriSupplies to have priority over FNBI’s prior perfected security interest in the same collateral (the fertilizer), it must satisfy the requirements of a PMSI in inventory under Illinois’ Article 9. This requires AgriSupplies to have perfected its security interest. Perfection for inventory typically involves filing a financing statement. Crucially, for a PMSI in inventory, the secured party (AgriSupplies) must also give notice to any other secured party who has previously filed a financing statement covering the same goods. This notice must be sent before the debtor receives possession of the inventory. The notice must state that the supplier expects to retain a security interest in the goods, describe the goods, and specify the amount of goods. Since AgriSupplies’ security interest is in inventory, and FNBI has a prior perfected security interest in all of Prairie Farms LLC’s inventory, AgriSupplies must file a financing statement and provide the required notification to FNBI before Prairie Farms LLC receives possession of the fertilizer to maintain its PMSI priority. Without this notification to FNBI, AgriSupplies’ PMSI would be subordinate to FNBI’s earlier perfected security interest. Therefore, AgriSupplies’ failure to notify FNBI before Prairie Farms LLC received the fertilizer means its security interest in that fertilizer is subordinate to FNBI’s.

The scenario involves a secured party, Prairie State Bank, that has a perfected security interest in all of the inventory of a debtor, Prairie Goods LLC, located in Illinois. The security agreement covers “all present and future inventory, accounts, and general intangibles.” Prairie Goods then enters into a transaction with a third party, Heartland Distributors, which supplies additional inventory to Prairie Goods. Heartland Distributors files a UCC-1 financing statement in Illinois covering the same inventory that Prairie Goods is selling. The core issue is the priority between Prairie State Bank and Heartland Distributors regarding the newly supplied inventory. Under Article 9 of the Uniform Commercial Code, as adopted in Illinois (810 ILCS 5/9-101 et seq.), the general rule for priority among competing security interests in the same collateral is based on the first to file or first to perfect rule (810 ILCS 5/9-322(a)(1)). However, there are specific rules for inventory. A buyer in the ordinary course of business (BIOC) takes free of a security interest created by its seller even if the security interest is perfected (810 ILCS 5/9-320(a)). Here, Prairie Goods is selling inventory, and Heartland Distributors is supplying inventory. The question is about the priority of the security interests in the inventory itself, not about a buyer of the inventory. Prairie State Bank has a security interest in all of Prairie Goods’ inventory, both present and future. Heartland Distributors also has a security interest in the inventory it supplies. For Heartland Distributors to have priority over Prairie State Bank’s earlier perfected security interest in future inventory, it would typically need to rely on a purchase-money security interest (PMSI) in inventory and follow specific notification rules. A PMSI in inventory generally has priority over a conflicting security interest in the same inventory if the PMSI is perfected when the debtor receives possession of the inventory and the secured party gives an appropriate notification to any other secured party whose security interest covers the inventory (810 ILCS 5/9-324(b)). In this case, Heartland Distributors is supplying inventory. If Heartland has a PMSI in the inventory it supplied and properly perfects it and notifies Prairie State Bank of its PMSI *before* Prairie Goods receives possession of the inventory, then Heartland’s PMSI would have priority over Prairie State Bank’s security interest in that specific inventory. However, the question states that Heartland files its financing statement *after* Prairie State Bank already has a perfected security interest in all present and future inventory. Crucially, for a PMSI in inventory to gain priority over a prior perfected security interest in after-acquired inventory, the PMSI holder must give notice to the prior secured party *before* the debtor receives possession of the inventory. If Heartland Distributors did not provide such notice to Prairie State Bank prior to Prairie Goods receiving the inventory, its PMSI, even if perfected, would not have priority over Prairie State Bank’s earlier perfected security interest in after-acquired inventory. Therefore, assuming Prairie State Bank’s security interest was properly perfected and covered after-acquired inventory, and Heartland Distributors did not provide the required pre-possession notice for its PMSI in inventory, Prairie State Bank’s security interest would have priority over Heartland Distributors’ security interest in the inventory supplied by Heartland. The general rule of first-in-time, first-in-right applies to the perfection of security interests in after-acquired property unless a specific statutory exception like the PMSI in inventory rules applies and is strictly followed. Without evidence that Heartland met the notification requirements for a PMSI in inventory, the earlier perfected security interest of Prairie State Bank prevails. The calculation, in this context, is not numerical but conceptual: 1. Identify the collateral: Inventory. 2. Identify the secured parties: Prairie State Bank and Heartland Distributors. 3. Determine the nature of their security interests: Prairie State Bank has a blanket security interest covering present and future inventory. Heartland Distributors has a security interest in inventory it supplies. 4. Apply the general priority rule: First to file or perfect (810 ILCS 5/9-322(a)(1)). Prairie State Bank perfected first. 5. Consider PMSI in inventory exception (810 ILCS 5/9-324(b)). This requires perfection and notice *before* debtor receives possession. 6. Evaluate if Heartland met the PMSI notice requirement: The facts do not state that Heartland provided the required notice *before* Prairie Goods received possession. 7. Conclusion: Absent proper PMSI notification, the earlier perfected security interest of Prairie State Bank has priority. Therefore, Prairie State Bank has priority.

The core issue in this scenario revolves around the perfection of a security interest in deposit accounts. Under Article 9 of the Uniform Commercial Code, as adopted in Illinois, a secured party can typically perfect a security interest in a deposit account 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 case, Aurora Bank perfected its security interest by obtaining control over the deposit account, as it is the bank where the account is held. When a senior secured party (Aurora Bank) has control over a deposit account, its security interest generally has priority over any subsequent security interest in the same deposit account, even if the subsequent secured party attempts to perfect by control or by filing. The filing of a financing statement is generally not sufficient to perfect a security interest in deposit accounts; control is the exclusive method. Therefore, Aurora Bank’s perfected security interest, established through control, takes precedence over the unperfected security interest claimed by Zenith Financial. Zenith Financial’s failure to obtain control means its security interest is subordinate.

The question concerns the priority of a security interest in a motor vehicle in Illinois. Under Article 9 of the Uniform Commercial Code, as adopted in Illinois, a security interest in a motor vehicle that is subject to a certificate of title statute is generally perfected by notation on the certificate of title, not by filing a UCC financing statement. Illinois has such a certificate of title statute. If a buyer in the ordinary course of business purchases a vehicle from a dealer, that buyer takes the vehicle free of a security interest created by the seller, even if the security interest is perfected, unless the buyer has knowledge of the security interest. However, this protection does not extend to a buyer who purchases from a person other than a dealer, or if the security interest is perfected by notation on the certificate of title. In this scenario, Aurora Bank’s security interest was perfected by notation on the certificate of title. Elara, purchasing from a private seller (not a dealer), is therefore subject to Aurora Bank’s perfected security interest. The UCC specifically addresses this in Section 9-320(a) and its comments, which clarify that a buyer in the ordinary course of business from a dealer takes free of a security interest granted by the seller, but this exception does not apply when the seller is not a dealer. Furthermore, Illinois’ certificate of title statute dictates the method of perfection for motor vehicles, and Aurora Bank followed this method. Therefore, Aurora Bank’s perfected security interest has priority over Elara’s purchase, even though Elara did not have actual knowledge of the security interest, because the perfection method for vehicles under Illinois law (notation on title) provides constructive notice.

In Illinois, when a secured party files a financing statement that lapses, the security interest generally remains perfected for a period of time. Article 9 of the Uniform Commercial Code, as adopted in Illinois, addresses the effect of lapse. Specifically, UCC § 9-515 (810 ILCS 5/9-515) governs the duration of perfection. A standard financing statement is effective for five years from the date of filing. If a continuation statement is filed within the six-month period before the expiration of the five-year period, the effectiveness can be extended for another five years. However, if no continuation statement is filed, the financing statement lapses and the security interest ceases to be perfected. This lapse is not immediate; the security interest generally remains perfected for a grace period, often interpreted as the remaining duration of the original filing term if it hadn’t lapsed, or as specified by other UCC provisions that might deem it temporarily perfected against certain parties. Crucially, UCC § 9-317 (810 ILCS 5/9-317) outlines the priority rules. If a financing statement lapses, the secured party’s security interest becomes unperfected. An unperfected security interest is subordinate to the rights of a buyer of collateral that receives delivery of the collateral without knowledge of the security interest, or a lien creditor, or a buyer of goods that uses them for farming operations. Therefore, after the lapse of the financing statement, the secured party loses its perfected status and its priority against these subsequent interests. The question hinges on the consequence of this lapse for the secured party’s priority against a subsequent buyer of the collateral. Since the financing statement lapsed, the security interest is unperfected. An unperfected security interest is subordinate to a buyer of collateral who buys without knowledge of the security interest and receives delivery of the collateral. Therefore, the subsequent buyer in Illinois would generally take free of the security interest.

The scenario involves a debtor, Aurora Manufacturing Inc., located in Illinois, granting a security interest in its inventory and equipment to Creditor Bank. Aurora Manufacturing Inc. later files for bankruptcy. A key issue in secured transactions is the perfection of a security interest. Under Article 9 of the Uniform Commercial Code, as adopted in Illinois, a security interest is generally perfected by filing a financing statement. However, for certain types of collateral, such as inventory and equipment, possession by the secured party is not the typical method of perfection, and filing is the primary means. Aurora Manufacturing Inc. initially granted the security interest to Creditor Bank, and Creditor Bank filed a UCC-1 financing statement in Illinois, properly identifying Aurora Manufacturing Inc. as the debtor and describing the collateral as “all inventory and equipment.” This filing perfects Creditor Bank’s security interest in the specified collateral. Subsequently, Aurora Manufacturing Inc. entered into a transaction with Supplier Solutions LLC, which also claims a security interest in the same collateral. Supplier Solutions LLC did not file a financing statement and instead took possession of a portion of Aurora Manufacturing Inc.’s inventory. In bankruptcy, the trustee has the rights of a hypothetical lien creditor. A perfected security interest generally has priority over an unperfected security interest and over a lien creditor. Creditor Bank’s security interest was perfected by filing prior to Supplier Solutions LLC’s possession. Therefore, Creditor Bank’s perfected security interest in the inventory and equipment will generally have priority over Supplier Solutions LLC’s unperfected security interest and the bankruptcy trustee’s status as a hypothetical lien creditor with respect to the collateral that Creditor Bank properly perfected its interest in. Supplier Solutions LLC’s possession of inventory, while potentially establishing a security interest, does not perfect it against a prior perfected secured party or a lien creditor if it fails to meet the specific requirements for perfection by possession or if another secured party has already perfected by filing. In Illinois, filing is the standard method for perfecting security interests in inventory and equipment.