The core issue revolves around the perfection of a security interest in a deposit account. Under Texas Business & Commerce Code Section 9.312(p), a security interest in a deposit account can only be perfected by control. Control is achieved when the secured party is the bank in which the deposit account is maintained, or when the debtor has agreed to dispose of funds only on the secured party’s instruction. In this scenario, Artisan Bank has a security interest in the deposit account of “Crafty Creations LLC” maintained at “First National Bank.” Artisan Bank filed a financing statement, which is generally sufficient for perfection for many types of collateral. However, for deposit accounts, filing is not an effective method of perfection. The only way for Artisan Bank to perfect its security interest is to obtain control over the deposit account. This would typically involve becoming the bank of record for the account or entering into a control agreement with Crafty Creations LLC and First National Bank, whereby First National Bank agrees to follow Artisan Bank’s instructions regarding the account. Since Artisan Bank only filed a financing statement and did not obtain control, its security interest in the deposit account remains unperfected. Therefore, when Crafty Creations LLC defaults and files for bankruptcy, Artisan Bank’s unperfected security interest is subordinate to the rights of the bankruptcy trustee, who has the status of a hypothetical lien creditor under federal bankruptcy law.

In Texas, under Article 9 of the Uniform Commercial Code, the priority of security interests is generally determined by the order of filing a financing statement or, in certain cases, possession. When a buyer in the ordinary course of business purchases goods subject to a security interest, that buyer takes the goods free of the security interest created by their seller, even if the security interest is perfected. This is a fundamental protection afforded to such buyers to ensure the smooth flow of commerce. The scenario involves a purchase of inventory, which is precisely the type of collateral typically sold in the ordinary course of business. Therefore, the security interest held by Lone Star Bank, which was perfected by filing against the inventory of Texan Tools, would not be effective against a buyer in the ordinary course of business purchasing that inventory from Texan Tools. The existence of a prior perfected security interest does not alter this rule. The key is that the buyer is acting in the ordinary course of business, is not aware that the sale is in violation of the security agreement, and purchases the goods in good faith from a person in the business of selling goods of that kind.

The question revolves around the perfection of a security interest in a deposit account held by a debtor in Texas. Under Texas Business and Commerce Code Section 9.312(b), a security interest in a deposit account as original collateral can only be perfected by control. Control is defined in Section 9.104. Specifically, 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 and the deposit account is in the name of the debtor. The scenario states that “AgriCorp” has a security interest in “Ranching LLC’s” deposit account. AgriCorp files a UCC-1 financing statement covering the deposit account. Filing a financing statement is generally the method for perfecting security interests in collateral, but Section 9.312(b) explicitly states that for deposit accounts as original collateral, filing is not sufficient for perfection. Therefore, filing a UCC-1 financing statement does not perfect AgriCorp’s security interest in the deposit account. Perfection requires control. Without evidence of control, the security interest remains unperfected.

The core issue in this scenario is determining the priority of security interests when a debtor moves collateral from one jurisdiction to another. Texas Business and Commerce Code Section 9.316(a)(2) governs the effect of moving collateral to a jurisdiction other than that of perfection. If a security interest is perfected in a jurisdiction where the collateral was located when the security interest attached, and the collateral is thereafter moved to Texas, the security interest remains perfected in Texas for a period of four months after the collateral is brought into Texas. After this four-month period, the security interest ceases to be perfected in Texas unless the secured party has filed a new financing statement in Texas within that four-month window. In this case, the security interest in the drilling equipment was perfected in Oklahoma when it was attached. The equipment was then moved to Texas. Under Texas Business and Commerce Code Section 9.316(a)(2), the Oklahoma perfection is effective in Texas for four months after the equipment was brought into Texas. Since the financing statement in Texas was filed on the 150th day after the equipment was moved, this filing occurred well after the four-month grace period had expired. Therefore, the security interest is unperfected in Texas as of the filing of the Texas financing statement. Consequently, the perfected security interest of First National Bank of Dallas, which was properly perfected in Texas by filing a financing statement on the 30th day after the equipment was moved to Texas, has priority.

The core issue here revolves around the priority of security interests when a debtor defaults and multiple creditors have claims against the same collateral. In Texas, as governed by UCC Article 9, a purchase money security interest (PMSI) generally has priority over a conflicting security interest in the same goods if the PMSI requirements are met. For inventory, a PMSI holder must satisfy specific notification requirements to maintain priority over earlier perfected security interests. Specifically, Texas UCC § 9-324(b) requires that for inventory, the PMSI holder must have perfected its security interest when the debtor received possession of the inventory. Furthermore, the PMSI holder must send an authenticated notification to any secured party that previously filed a financing statement covering the inventory or was perfected by control, and that notification must state that the PMSI holder expects to acquire a PMSI in inventory of the type the debtor acquires. This notification must be sent within six months before the debtor receives possession of the inventory. If these conditions are met, the PMSI holder’s interest in the inventory will have priority over the earlier perfected security interest. In this scenario, Apex Corp’s security interest was perfected on January 15th. Zenith Corp acquired a PMSI in the same inventory and perfected it on February 1st. However, Zenith Corp failed to send the required notification to Apex Corp within the six-month window prior to the debtor receiving possession of the inventory. Therefore, Zenith Corp’s PMSI, despite being perfected later, does not achieve priority over Apex Corp’s earlier perfected security interest due to the lack of proper notification as mandated by Texas UCC § 9-324(b). The priority remains with the earlier perfected interest.

The scenario involves a buyer of goods in the ordinary course of business purchasing inventory from a seller who has granted a security interest in that inventory to a lender. Under Texas Business & Commerce Code Section 9.320 (formerly UCC 9-320), a buyer in the ordinary course of business takes free of a security interest created by the seller, even if the security interest is perfected and even if the buyer knows of its existence, unless the buyer knows that the sale is in violation of the security agreement. This protection is a fundamental aspect of Article 9, designed to facilitate commerce by ensuring that ordinary course buyers are not unduly burdened by unreleased security interests in inventory. The buyer’s knowledge that the sale is in violation of the security agreement is the critical exception. In this case, the buyer, “Prairie Goods,” is purchasing inventory from “Farmstead Supplies,” which has granted a security interest in its inventory to “AgriBank.” Prairie Goods is a retailer buying goods in the ordinary course of its business. AgriBank’s security interest is perfected. The key is whether Prairie Goods knew the sale was in violation of the security agreement. Absent any indication that Prairie Goods had such knowledge, it takes the inventory free of AgriBank’s security interest. Therefore, AgriBank cannot repossess the inventory from Prairie Goods. The calculation is not a numerical one but a legal determination based on the application of statutory exceptions. The core legal principle is the protection afforded to buyers in the ordinary course of business.

The question revolves around determining the proper place to file a financing statement for a security interest in a certificate of title, specifically for a motor vehicle. Texas law, as governed by Article 9 of the Uniform Commercial Code and related Texas statutes, dictates that for goods covered by a certificate of title, perfection of a security interest is generally achieved by notation on the certificate of title itself, not by filing a financing statement with the Secretary of State. Specifically, Texas Transportation Code §501.117 outlines the procedure for noting a lien on a certificate of title. Therefore, if a secured party fails to have the lien noted on the certificate of title, their security interest is unperfected against a buyer of the vehicle who gives value and receives delivery of the vehicle without knowledge of the security interest. This is a crucial exception to the general filing rules under UCC §9-311(a)(2) and Texas Business & Commerce Code §9.311(a)(2). The consequence of not following the certificate of title notation procedure means the security interest is subordinate to a subsequent buyer in the ordinary course of business who takes delivery of the vehicle without notice of the lien.

The core issue here revolves around the perfection of a security interest in a deposit account. Under Texas Business & Commerce Code Section 9.312(b)(1), a security interest in a deposit account as collateral can only be perfected by control. Control is defined in Section 9.104. For a deposit account, control is achieved when the secured party is the bank with which the deposit account is maintained, or when the secured party obtains the bank’s agreement to comply with instructions from the secured party with respect to the deposit account without the debtor’s consent. In this scenario, Sterling Bank has possession of the collateral (the truck) and has filed a financing statement, which would perfect a security interest in most types of collateral. However, the deposit account is a special class of collateral. Since Sterling Bank did not obtain control over the deposit account held at Capital National Bank, its security interest in the deposit account is unperfected. Capital National Bank, by having possession of the deposit account (through its status as the bank maintaining the account) and having the debtor’s account agreement, has achieved control. Therefore, Capital National Bank has the superior claim to the deposit account.

The core issue here is the priority of security interests when collateral is subject to multiple claims. Under Texas Business & Commerce Code Section 9.317, a buyer of goods takes free of a security interest that has attached to the goods if the buyer gives value and receives delivery of the collateral without knowledge of the security interest. However, this protection does not extend to a buyer of inventory who takes possession of the goods. In this scenario, “Artisan’s Alley” is a buyer of inventory from “Crafty Creations.” Artisan’s Alley received delivery of the handcrafted furniture, which constitutes inventory. While they gave value, their status as a buyer of inventory means they are not automatically protected from pre-existing perfected security interests, even if they lacked knowledge. The security interest granted to “Lender’s Bank” was perfected by filing a financing statement prior to Artisan’s Alley taking possession. Texas Business & Commerce Code Section 9.320 addresses buyers of goods, stating that a buyer in ordinary course of business takes free of a security interest granted by their seller even if the security interest is perfected and even if the buyer knows of its existence, unless the buyer also knows that the sale is in ordinary course of the disposition of collateral and constitutes a bulk transaction. However, this protection is specifically for buyers in the ordinary course of business. The question implies Artisan’s Alley is a retail establishment buying inventory for resale. Crucially, Texas Business & Commerce Code Section 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 and even if the buyer has knowledge of the terms of the security agreement. The key is whether Artisan’s Alley qualifies as a buyer in the ordinary course of business. Assuming Artisan’s Alley is a typical retail furniture store purchasing inventory for resale in the normal course of business from Crafty Creations, they would indeed be a buyer in ordinary course of business. Therefore, Artisan’s Alley takes the furniture free of Lender’s Bank’s security interest.

The core issue here is the perfection of a security interest in a deposit account. Under Texas Business & Commerce Code Section 9.312(b)(1), a security interest in a deposit account as original collateral can only be perfected by control. Control is defined in Section 9.104. For a deposit account, control is typically achieved when the secured party is the bank with which the deposit account is maintained, or when the secured party obtains the agreement of the bank with which the deposit account is maintained and the deposit account is in the name of the debtor. In this scenario, Acme Corp has a security interest in the deposit account of its customer, Brazos Holdings, held at Lone Star Bank. Acme Corp filed a financing statement. Filing is generally sufficient for perfection of security interests in most types of collateral, including accounts and general intangibles. However, Section 9.312(b) explicitly states that filing is not effective for perfection of a security interest in deposit accounts as original collateral. Therefore, Acme Corp’s filing alone is insufficient to perfect its security interest in Brazos Holdings’ deposit account. The proper method for Acme Corp to perfect its security interest would have been to obtain control over the deposit account, either by becoming the bank maintaining the account or by securing an agreement from Lone Star Bank that it would comply with Acme Corp’s instructions regarding the account, and that the account was in Brazos Holdings’ name. Since Acme Corp only filed, its security interest in the deposit account remains unperfected.

The question concerns the priority of security interests when a debtor defaults and multiple creditors have claims against the same collateral. In Texas, as under Article 9 of the UCC, the general rule for priority is first-in-time, first-in-right, which is established by the filing of a financing statement or possession of the collateral. However, purchase-money security interests (PMSIs) receive special priority under certain conditions. A PMSI is a security interest taken by a seller of collateral to secure its price, or by a person who gives value to enable the debtor to acquire rights in or the use of collateral if the value is in fact so used. For inventory, a PMSI has priority over a conflicting security interest in the same inventory if the PMSI is perfected when the debtor receives possession of the inventory, the secured party gives an authenticated notification to any prior secured party, and the prior secured party receives the notification within five years before the debtor receives possession of the inventory. In this scenario, Sterling Bank perfected its non-PMSI security interest in all of “The Gadget Emporium’s” existing and after-acquired inventory on January 15, 2023. On February 1, 2023, TechSource provided financing for new inventory, taking a PMSI in that specific inventory. TechSource perfected its PMSI on February 1, 2023, the same day the debtor received possession of the inventory. Crucially, TechSource also sent written notification to Sterling Bank on February 1, 2023, which Sterling Bank received. Since TechSource’s PMSI was perfected upon possession and it provided the required notification to the prior secured party (Sterling Bank) within the statutory timeframe, its PMSI takes priority over Sterling Bank’s earlier perfected non-PMSI security interest in the inventory acquired with TechSource’s financing. Therefore, TechSource has priority regarding the inventory it financed.

The scenario involves a dispute over the priority of security interests in a mixed collateral situation, specifically inventory and accounts. Under Texas Business & Commerce Code Section 9.324, a buyer of inventory generally takes free of a perfected security interest in that inventory if the buyer buys in ordinary course of business, unless the buyer has knowledge that the sale is not in ordinary course. However, this protection does not extend to a buyer of accounts, chattel paper, or general intangibles. In this case, the debtor, “Prairie Goods,” sold its entire inventory of handcrafted furniture to “Artisan Homes,” a retailer. Prairie Goods had granted a purchase-money security interest (PMSI) in its inventory to “First National Bank” (FNB), which was properly perfected. Artisan Homes purchased the furniture in the ordinary course of its business. The key issue is whether Artisan Homes takes the inventory free of FNB’s perfected PMSI. Texas Business & Commerce Code Section 9.320 governs buyers of goods in ordinary course of business. A buyer in ordinary course of business takes goods free of a security interest even if the security interest is perfected and even if the buyer knows of the perfection. The exception is when the buyer knows that the sale constitutes a bulk sale or is in satisfaction of or subject to a security interest or other claim. Artisan Homes purchased the furniture in the ordinary course of its business, and there is no indication that they had knowledge of any such exceptions. Therefore, Artisan Homes takes the inventory free and clear of FNB’s security interest. The fact that FNB also has a security interest in accounts generated from the sale of inventory is relevant to the priority of security interests between FNB and any other party claiming those accounts, but it does not affect Artisan Homes’ status as a buyer of goods in ordinary course. The security interest in accounts does not follow the inventory into the hands of a buyer of goods in ordinary course.

The core issue here is determining the proper place to file a financing statement when the collateral is an account and the debtor’s chief executive office is in Texas, but the accounts themselves are generated from business conducted in multiple states, including Oklahoma. Under Texas Business & Commerce Code Section 9.307(b), if the chief executive office of a debtor is in a jurisdiction, the law of that jurisdiction governs perfection and the effect of perfection or non-perfection of a security interest in general intangible, including accounts. The Uniform Commercial Code (UCC) generally follows a “last event” test for perfection for accounts unless the debtor’s chief executive office is in a jurisdiction that has adopted a specific rule for accounts. Texas, like many states that have adopted revised Article 9 of the UCC, follows the rule that for accounts, perfection is governed by the law of the jurisdiction where the debtor is located. Section 9.307(a) defines the location of a debtor. For a registered organization, it is the jurisdiction of organization. For an unregistered organization, it is the place of business or chief executive office. Since the debtor is a Texas corporation, its location is Texas. Therefore, the financing statement should be filed in Texas to perfect the security interest in the accounts. Filing in Oklahoma, where some of the accounts originate, would not be the correct location for perfection of a security interest in accounts under Texas law, as the debtor’s location dictates the filing jurisdiction for accounts.

The core issue here is the classification of the collateral and the proper perfection method under Texas’s Article 9. The debtor, “Galactic Gadgets,” is a manufacturer of specialized electronic components. The financing statement filed by “Stellar Systems Inc.” perfects a security interest in “all inventory and equipment” of Galactic Gadgets. The dispute arises when Galactic Gadgets defaults on a loan from “Cosmic Credit Union,” which claims a security interest in “all accounts receivable.” The critical question is whether the “component kits” sold by Galactic Gadgets to its customers constitute “inventory” or “accounts” at the time of Cosmic Credit Union’s attempted perfection. Under Texas Business & Commerce Code Section 9.102(a)(34), “inventory” means goods, other than farm products or consumer goods, which are leased by a person as lessor; which are held by a person for sale or lease or to be furnished under a contract of service; or which are raw materials, work in process, or materials used or consumed in a business. The component kits, being manufactured goods held for sale, clearly fall under the definition of inventory. Cosmic Credit Union’s financing statement perfects a security interest in “all accounts receivable.” Accounts are defined in Texas Business & Commerce Code Section 9.102(a)(2) as a right to payment for goods sold or leased or for services rendered, whether or not it has been earned by performance. When Galactic Gadgets sells its component kits to its customers, the right to payment for those kits becomes an account receivable. Stellar Systems Inc. filed a financing statement covering “all inventory and equipment.” This filing perfects their security interest in the component kits themselves while they are held by Galactic Gadgets as inventory. However, once those component kits are sold and the right to payment arises, the collateral transforms from inventory into an account receivable. Cosmic Credit Union’s security interest is in “all accounts receivable.” Therefore, their claim attaches to the rights to payment arising from the sale of the component kits. The perfection of a security interest in accounts is typically accomplished by filing a financing statement in the jurisdiction where the debtor is located, which is Texas in this case. The crucial point of conflict is the priority between the two secured parties. Stellar Systems Inc. has a perfected security interest in the inventory. Cosmic Credit Union has a security interest in the accounts. Under Texas Business & Commerce Code Section 9.322(a)(1), a perfected security interest in collateral that is sold or otherwise disposed of takes priority over a conflicting security interest in the proceeds of the collateral. However, the UCC also has specific rules regarding the priority of interests in accounts versus inventory. A security interest in accounts is generally prior to a security interest in inventory that produces those accounts if the account-securing party perfects its interest in the accounts. In this scenario, Stellar Systems Inc.’s security interest in inventory does not automatically extend to the accounts generated from the sale of that inventory unless their financing statement explicitly covered proceeds and they perfected their interest in those proceeds as accounts. Cosmic Credit Union’s security interest is specifically in accounts. When inventory is sold and becomes an account, the priority rules shift. A security interest in accounts generally has priority over a security interest in inventory that gives rise to those accounts, provided the security interest in accounts is properly perfected. Cosmic Credit Union’s security interest in “all accounts receivable” is perfected by filing. Therefore, Cosmic Credit Union has priority over the accounts receivable generated from the sale of Galactic Gadgets’ inventory. Stellar Systems Inc.’s perfection in inventory does not automatically grant them priority in the subsequent accounts unless their filing explicitly covered proceeds and they perfected in those proceeds as accounts, which is not stated. The question implies a conflict over the proceeds of the inventory. The correct answer is that Cosmic Credit Union, with its security interest in accounts, has priority over the accounts receivable generated from the sale of the component kits. This is because their security interest is directly in the accounts, and they have perfected their interest in those accounts. Stellar Systems Inc.’s interest is in the inventory itself. Once the inventory is sold, the collateral transforms, and the rules for accounts priority apply.

The core issue here revolves around the perfection of a security interest in a deposit account. Under Texas Business and Commerce Code Section 9.304, a security interest in a deposit account can only be perfected by control. Control is achieved when the secured party is the bank in which the deposit account is maintained, or when the secured party obtains the agreement of the bank in which the deposit account is maintained to comply with the secured party’s instructions concerning the deposit account. In this scenario, AgriCorp’s security interest is in the accounts receivable of Farmer Giles, which are evidenced by promissory notes held by a third-party bank, First State Bank. While AgriCorp has a security agreement with Farmer Giles covering these accounts, it has not taken steps to gain control over the deposit account where the proceeds of these accounts are likely deposited. Simply taking possession of the promissory notes does not equate to control over the deposit account itself. Therefore, AgriCorp’s security interest in the deposit account is unperfected. The Texas UCC prioritizes perfection for priority disputes. Without perfection, AgriCorp cannot claim priority over other potential secured parties or a bankruptcy trustee. The promissory notes themselves are instruments, and possession of an instrument can perfect a security interest in that instrument, but not necessarily in the underlying deposit account into which payments from the instrument are made. The question specifically asks about perfection of the security interest in the deposit account, not the accounts receivable or the promissory notes themselves.

The core issue here revolves around the priority of security interests when a buyer in the ordinary course of business purchases inventory from a seller who has granted a security interest in that inventory to a lender. Under Texas Business and Commerce Code Section 9.320, a buyer in the ordinary course of business takes free of a security interest created by the seller, even if the security interest is perfected and even if the buyer knows of its existence, unless the buyer knows that the sale is in violation of the security agreement. This protection is a fundamental aspect of facilitating commerce by ensuring that retail purchasers of inventory are not encumbered by the seller’s financing arrangements. The lender’s security interest in the inventory is a UCC Article 9 security interest. The buyer, purchasing goods in the ordinary course of business from a merchant dealing in goods of that kind, qualifies for the protection afforded by Section 9.320. The lender’s prior perfection of its security interest does not overcome this statutory protection for such a buyer. Therefore, the buyer takes the equipment free of the lender’s security interest.

The scenario involves a purchase money security interest (PMSI) in inventory. Under Texas Business and Commerce Code Section 9.324, a PMSI in inventory has priority over a conflicting security interest in the same inventory. To maintain this priority, the PMSI holder must satisfy specific notification requirements. First, the PMSI holder must have a perfected security interest in the inventory. Second, the PMSI holder must give an authenticated notification to any other secured party that has filed a financing statement covering the same inventory or goods. This notification must be received by the other secured party before the expiration of the twenty-day period specified in Section 9.312(a) (which refers to the period after a debtor receives possession of the collateral) or before the debtor receives possession of the collateral. The notification must state that the PMSI holder expects to acquire a PMSI in inventory of the debtor and must describe the inventory. In this case, “AgriFin” has a PMSI in the farming equipment. “FarmCorp” has a prior perfected security interest in all of “Ranchers’ Delight’s” inventory. AgriFin perfected its security interest by filing a financing statement. However, AgriFin failed to send the required notification to FarmCorp before Ranchers’ Delight received possession of the equipment. Therefore, AgriFin’s PMSI in the inventory does not have priority over FarmCorp’s prior perfected security interest. FarmCorp’s security interest remains superior because AgriFin did not comply with the notification requirements for PMSI in inventory.

The scenario involves a purchase money security interest (PMSI) in inventory. Under Texas Business and Commerce Code Section 9.324, a secured party with a PMSI in inventory has priority over a conflicting security interest in the same inventory. To maintain this priority, the PMSI holder must satisfy two conditions: (1) the PMSI must be perfected when the debtor receives possession of the inventory, and (2) the PMSI holder must give an authenticated notification to any other secured party who has previously filed a financing statement covering the same inventory. This notification must be sent before the expiration of the twenty-day period after the security statement is filed. In this case, “Farm Equipment Co.” perfected its PMSI in the tractors by filing a financing statement on January 15th. They then sent an authenticated notification to “AgriBank,” which had a prior filed financing statement covering “all farm equipment” on February 1st. Since AgriBank received the notification within the twenty-day period following Farm Equipment Co.’s filing (February 1st is within 20 days of January 15th), Farm Equipment Co.’s PMSI has priority over AgriBank’s conflicting security interest in the tractors. The notification requirement under Section 9.324(b) is crucial for a PMSI holder in inventory to gain priority over prior filed general security interests. The timing of the notification is key; it must be sent before the debtor receives possession of the inventory, and the notification itself must be received by the prior secured party before the debtor receives possession of the inventory. However, the statute clarifies that for inventory, the notification must be sent before the expiration of the twenty-day period after the filing of the financing statement. Here, the filing was on January 15th, and the notification was sent on February 1st, which is within the statutory window.

The core issue here is determining the priority of security interests when collateral is transferred. In Texas, as under the Uniform Commercial Code (UCC) Article 9, a buyer in the ordinary course of business (BIOC) takes free of a security interest created by the seller, even if the security interest is perfected, unless the buyer knows the sale is not in the ordinary course of business. However, this protection does not extend to a security interest created by a third party and merely comingled with the seller’s inventory. In this scenario, the security interest granted to Lone Star Bank was perfected by filing against all of “Galactic Goods Inc.’s” inventory. When “Galactic Goods Inc.” sold a batch of advanced sonic emitters to “Cosmic Collectibles,” a dealer in specialized electronics, Cosmic Collectibles qualified as a BIOC because it purchased the emitters in the ordinary course of Galactic Goods Inc.’s business and did not know that the sale violated Lone Star Bank’s security agreement. Therefore, Lone Star Bank’s security interest in the emitters, as created by Galactic Goods Inc., is generally subordinate to Cosmic Collectibles’ ownership. The complication arises because the sonic emitters were originally manufactured by “Nebula Innovations,” which retained a purchase money security interest (PMSI) in them. Nebula Innovations perfected its PMSI by filing a financing statement before Galactic Goods Inc. obtained possession of the emitters. Under UCC § 9-324, a perfected PMSI generally has priority over a conflicting security interest in the same collateral. When Galactic Goods Inc. purchased the emitters from Nebula Innovations, Nebula’s PMSI was already perfected. Therefore, Nebula’s security interest has priority over Lone Star Bank’s security interest, which was likely perfected after Galactic Goods Inc. acquired the collateral. When Galactic Goods Inc. sold the emitters to Cosmic Collectibles, the BIOC rule protected Cosmic Collectibles from Lone Star Bank’s security interest. However, it did not extinguish Nebula Innovations’ prior perfected PMSI. Thus, Cosmic Collectibles, as the buyer, takes the emitters subject to Nebula Innovations’ perfected PMSI. The question asks about the status of the security interest in the emitters *after* the sale to Cosmic Collectibles, implying the buyer’s position relative to existing security interests. Since Cosmic Collectibles is a BIOC, it takes free of Lone Star Bank’s security interest, but not Nebula Innovations’ perfected PMSI, which predates the sale and was granted by the manufacturer. Therefore, Nebula Innovations’ security interest remains attached to the sonic emitters in the possession of Cosmic Collectibles.

The question concerns the priority of security interests in inventory that is subject to a purchase money security interest (PMSI) and also collateral for a pre-existing non-PMSI loan. In Texas, as under the Uniform Commercial Code (UCC) Article 9, a PMSI generally has priority over a conflicting security interest in the same goods. However, for inventory, this priority is contingent upon the secured party satisfying specific notification requirements. Specifically, under Texas Business & Commerce Code § 9.324(b), a secured party with a PMSI in inventory must give an authenticated notification to any other secured party who has filed a financing statement covering the goods in which the PMSI party has a security interest. This notification must be received by the other secured party before the debtor receives possession of the inventory. If this notification is not sent or received in a timely manner, the PMSI holder loses its automatic priority over the previously filed security interest. In this scenario, ‘AgriBank’ has a PMSI in the farm equipment inventory. ‘Capital Finance’ has a prior perfected security interest in all of the debtor’s existing and after-acquired inventory. AgriBank filed its financing statement but failed to send the required notification to Capital Finance before the debtor received the equipment. Therefore, Capital Finance’s prior perfected security interest in the inventory will have priority over AgriBank’s PMSI. The value of the collateral is not directly relevant to the priority determination in this specific instance, nor is the fact that AgriBank filed first, as the notification requirement for PMSI in inventory is a critical step to maintain that priority against a prior secured party.

The scenario involves a purchase money security interest (PMSI) in inventory. Under Texas Business & Commerce Code Section 9.324, a secured party with a PMSI in inventory has priority over a conflicting security interest in the same inventory, provided certain conditions are met. These conditions include filing a financing statement before or within twenty days after the debtor receives possession of the inventory, and the secured party must have given new value to enable the debtor to acquire the inventory. Furthermore, for inventory, the PMSI holder must notify any other secured party who has filed a financing statement covering the same inventory or has filed a financing statement covering after-acquired inventory of the debtor, and this notification must be received by the other secured party before the debtor receives possession of the inventory. In this case, Sterling Bank’s PMSI in inventory is perfected by filing. PetroCorp also has a prior perfected security interest in all of the debtor’s inventory, including after-acquired inventory. Sterling Bank’s notification to PetroCorp was sent on July 1st, and the debtor received possession of the new inventory on July 5th. This timing means Sterling Bank’s notification was received by PetroCorp before the debtor received possession of the inventory, satisfying the notification requirement for PMSI in inventory. Therefore, Sterling Bank’s PMSI in the new inventory will have priority over PetroCorp’s prior perfected security interest in after-acquired inventory.

The core issue here is the perfection of a security interest in accounts that arise from the sale of goods by a merchant in Texas. Under Texas Business and Commerce Code Section 9.307(a), a buyer in ordinary course of business takes goods free of a security interest created by the seller even though the security interest is perfected and even though the buyer knows of its existence, unless the buyer knows that the sale is in ordinary course of business of the sale is in violation of a security agreement. In this scenario, “Artisan Appliances” is a merchant selling appliances in the ordinary course of its business. “Bayou Bank” has a perfected security interest in Artisan Appliances’ inventory, which would include the accounts generated from the sale of those appliances. However, “Coastal Electronics,” purchasing appliances for resale in its own ordinary course of business, is a buyer in ordinary course. The UCC prioritizes the buyer in ordinary course over a secured party with a perfected interest in inventory when the buyer purchases the goods themselves. Therefore, Coastal Electronics takes the appliances free of Bayou Bank’s security interest. The security interest attaches to the proceeds of the sale, which in this case are accounts receivable. However, the perfection of the security interest in the accounts is governed by the rules of perfection for accounts. Since Bayou Bank perfected its security interest in Artisan Appliances’ accounts by filing a financing statement, its interest in the accounts is generally superior to unperfected interests. However, the question is about the rights of the buyer of the goods that generated the accounts. The perfection of the security interest in the inventory means that Bayou Bank has rights in the proceeds of that inventory. When Artisan Appliances sells an appliance to Coastal Electronics, the security interest attaches to the appliance and then follows into the proceeds, which are the accounts receivable. However, the perfection of the security interest in the accounts is what determines priority against other creditors of Artisan Appliances. The UCC provides specific rules for when a security interest in inventory is automatically perfected in the proceeds. Under Texas Business and Commerce Code Section 9.315(d)(1), a security interest in collateral is automatically perfected in any identifiable proceeds of the collateral. Therefore, Bayou Bank’s perfected security interest in the inventory is automatically perfected in the accounts that arise from the sale of that inventory. This automatic perfection means that Bayou Bank’s security interest in the accounts is perfected without any further action. Consequently, Bayou Bank’s perfected security interest in the accounts receivable generated from the sale of appliances to Coastal Electronics remains effective and superior to any unperfected claims. The question asks about the perfection of Bayou Bank’s security interest in the accounts. Since Bayou Bank perfected its security interest in the inventory, and that security interest automatically extends to identifiable proceeds, which are the accounts, the security interest in the accounts is perfected by virtue of the filing related to the inventory. Therefore, Bayou Bank’s security interest in the accounts is perfected.

The question concerns the priority of security interests in inventory and the implications of a buyer in the ordinary course of business purchasing such collateral. Under Texas Business & Commerce Code Section 9.320, 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 and even if the buyer knows of its existence. This protection is fundamental to the smooth functioning of commerce, particularly in the sale of inventory. The security interest held by Lone Star Bank was perfected against the inventory of Texan Tech Gadgets. However, when Gadget Emporium, a retailer, purchased a consignment of smartphones from Texan Tech Gadgets in the ordinary course of its business, it acquired those smartphones free and clear of Lone Star Bank’s security interest. This is because Gadget Emporium fits the definition of a BIOC as it bought goods in good faith, without knowledge that the sale to it violated the security agreement, and from a person in the business of selling goods of that kind. The security interest of Lone Star Bank remains attached to any remaining inventory held by Texan Tech Gadgets and does not follow the goods into the hands of a BIOC. Therefore, Gadget Emporium’s purchase of the smartphones is not subject to Lone Star Bank’s security interest.

The core issue here revolves around the perfection of a security interest in accounts, specifically the interplay between Article 9 of the Uniform Commercial Code (as adopted in Texas) and the concept of “control” over deposit accounts. Under Texas Business and Commerce Code Section 9.104, a security interest in a deposit account as original collateral can only be perfected by control. Control is defined in Section 9.104(a) and generally means that the secured party is the bank in which the deposit account is maintained, or has agreed with the depositary bank that the depositary bank will comply with instructions from the secured party directing the disposition of the funds in the account without the debtor’s consent. In this scenario, “AgriCorp” has a security interest in “Bounty Farms'” accounts. Bounty Farms maintains its operating accounts at “First State Bank.” AgriCorp has filed a financing statement and taken possession of the original promissory note, but it has not obtained control over the deposit accounts themselves. Since AgriCorp did not achieve control over the deposit accounts at First State Bank, its security interest in those accounts is unperfected. A subsequent buyer of accounts, such as “Harvest Holdings,” who purchases the accounts for value, typically without notice of the unperfected security interest, and receives delivery of the accounts, takes free of the unperfected security interest. Therefore, Harvest Holdings’ claim to the accounts would likely prevail over AgriCorp’s unperfected security interest. The UCC emphasizes perfection for priority, and for deposit accounts, perfection is achieved solely through control. Filing a financing statement is generally sufficient for perfection in many types of collateral but is explicitly insufficient for deposit accounts as original collateral under Section 9.104.

The scenario involves a purchase money security interest (PMSI) in inventory. Under Texas Business & Commerce Code Section 9.324, a PMSI in inventory has priority over a conflicting security interest in the same inventory if certain conditions are met. These conditions include filing a financing statement before the delivery of the inventory to the debtor, sending authenticated notification to any prior secured party that has filed a financing statement covering the inventory, and the notification being received within five years before the delivery of the inventory. In this case, First National Bank perfected its security interest in all of Apex Corp’s inventory on January 15, 2023. CrediCorp, a PMSI lender, delivered new inventory to Apex Corp on March 1, 2023. CrediCorp filed its financing statement on February 1, 2023, and sent authenticated notification to First National Bank on February 15, 2023, which was received by First National Bank on February 20, 2023. The notification was sent and received well within the five-year period prior to the delivery of the inventory. Therefore, CrediCorp’s PMSI in the newly delivered inventory has priority over First National Bank’s earlier perfected security interest. The notification requirement is crucial for a PMSI holder to gain superpriority over a prior perfected security interest in inventory. The timing of the filing and notification relative to the delivery of the inventory is critical for establishing this priority. The law aims to facilitate financing for new inventory while protecting existing secured creditors through proper notice.

The core issue here is determining the proper method for perfecting a security interest in a deposit account under Texas UCC Article 9. Texas Business and Commerce Code Section 9.312(b) specifies that a security interest in a deposit account as original collateral can only be perfected by control. Control is defined in Section 9.104. For a deposit account, control is achieved when the secured party is the bank in which the deposit account is maintained, or when the debtor has agreed that the bank will comply with instructions from the secured party concerning the balance of the deposit account, and the bank has agreed to do so. Filing a financing statement is generally insufficient for perfecting a security interest in a deposit account as original collateral. The scenario describes a security interest granted in a deposit account held at a bank other than the secured party’s bank. Therefore, the secured party must obtain control through an authenticated agreement with the debtor and the depositary bank, where the bank agrees to follow the secured party’s instructions regarding the account. This agreement is often referred to as a “tri-party agreement” or a “control agreement.” The other options are incorrect because filing a financing statement is not the exclusive method for perfection for deposit accounts as original collateral, and possession is not applicable to intangible deposit accounts. While a control agreement is the primary method, simply having the deposit account at the secured party’s bank also grants control, but this is not the case here.

The scenario involves a purchase money security interest (PMSI) in inventory. In Texas, under Texas Business & Commerce Code § 9.324, a PMSI in inventory generally has priority over other security interests in the same inventory, provided certain conditions are met. These conditions include: 1) the PMSI must be perfected by filing a financing statement before the debtor receives possession of the inventory; 2) the secured party must send an authenticated notification to any prior secured party whose financing statement covers the inventory; and 3) the notification must be received by the prior secured party before or within ten days after the debtor receives possession of the inventory. The question states that “Lone Star Bank” filed its financing statement on January 15th and its security interest attached on January 20th when the debtor received the collateral. “First National Bank” perfected its interest on January 10th. Since First National Bank perfected its interest *before* Lone Star Bank filed its financing statement and before the debtor received possession, Lone Star Bank’s PMSI in inventory would not automatically have priority over First National Bank’s earlier perfected security interest. For Lone Star Bank to gain priority, it would have needed to file its financing statement *before* the debtor received possession and send the required notification to First National Bank within the specified timeframe. As the facts do not indicate these steps were taken by Lone Star Bank, its security interest in the inventory would be subordinate to First National Bank’s perfected security interest. Therefore, First National Bank would have priority.

The scenario involves a purchase money security interest (PMSI) in equipment. Under Texas Business and Commerce Code Section 9.317, a security interest is subordinate to the rights of a buyer of goods that receives delivery of the goods and gives value and receives notification of the existence of the security interest unless the secured party has perfected its security interest before the buyer receives delivery of the goods. In this case, AgroCorp has a perfected security interest in all of Farmstead’s equipment. When Farmstead sells the specialized harvester to Rancher Bob, Rancher Bob is a buyer in the ordinary course of business. However, Rancher Bob does not receive delivery of the harvester until after AgroCorp has already perfected its security interest by filing a financing statement. Therefore, AgroCorp’s perfected security interest continues in the harvester even after its sale to Rancher Bob, as Rancher Bob’s status as a buyer in the ordinary course of business does not cut off a previously perfected security interest. The perfection by filing occurred prior to Rancher Bob receiving delivery. The key is that AgroCorp’s security interest was already perfected before the sale and delivery to Rancher Bob. Rancher Bob, while a buyer in the ordinary course, takes the collateral subject to AgroCorp’s perfected security interest because the perfection predates his receipt of the goods.

The scenario involves a buyer of goods, “Magnolia Manufacturing,” who has purchased inventory from a seller, “Lone Star Supplies.” Magnolia Manufacturing has granted a security interest in its inventory to “First National Bank of Texas” to secure a loan. Lone Star Supplies has retained a purchase-money security interest (PMSI) in the inventory it sold to Magnolia Manufacturing. For Lone Star Supplies’ PMSI to be perfected and have priority over First National Bank of Texas’s earlier-filed general security interest in after-acquired inventory, Lone Star Supplies must satisfy specific requirements under Texas Business & Commerce Code Article 9. A PMSI in inventory is perfected by filing a financing statement before or within a specific timeframe after the debtor receives possession of the collateral. Crucially, for inventory, a secured party with a PMSI must also give notification to any previously secured party whose security interest covers the same inventory if that previously secured party has filed a financing statement covering the inventory. This notification requirement ensures that the prior secured party is aware of the PMSI and its potential priority. In Texas, the notification must be sent to the prior secured party within six months before the debtor receives possession of the inventory. If Lone Star Supplies fails to send this notification to First National Bank of Texas, its PMSI will not have priority over First National Bank of Texas’s earlier perfected security interest. Therefore, the critical step for Lone Star Supplies to achieve priority is the timely notification to the prior secured lender.

The core issue here is determining when a security interest attaches and becomes enforceable against a third party, specifically a buyer of inventory. Under Texas Business and Commerce Code Section 9.317(a)(1), a buyer in ordinary course of business of goods, other than a person buying farm products from a person engaged in farming operations, takes free of a security interest that attaches to the goods after the buyer obtains possession of the goods, unless the buyer also knows that the sale is in violation of the security agreement. In this scenario, Stellar Motors, a buyer in ordinary course of business, purchased the vehicles from Auto Wholesale Inc., which was in the business of selling vehicles. The security interest held by First National Bank attached to the inventory when Auto Wholesale Inc. acquired rights in the collateral, which was upon receipt of the vehicles from the manufacturer. However, Stellar Motors obtained possession of the vehicles *after* the security interest had attached. Therefore, Stellar Motors does not take free of the security interest based on the timing of possession relative to attachment. Furthermore, there is no indication that Stellar Motors had knowledge that the sale was in violation of the security agreement. Consequently, First National Bank’s security interest remains perfected and enforceable against Stellar Motors.