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Click here for the full text of this decision FACTS:First National Bank in Munday and Lubbock Feeders, L.P., claim competing security interests in the same cattle. The trial court granted summary judgment to Lubbock Feeders, holding that it had a purchase money security interest in the cattle and the proceeds from the sales of the cattle with priority over the Bank’s security interest in the cattle. HOLDING:Affirmed. Lubbock Feeders met its summary judgment burden of establishing a superior purchase money security interest in the cattle and in the proceeds from the sales of the cattle. The trial court properly granted summary judgment to Lubbock Feeders. Lubbock Feeders had the summary judgment burden of establishing each of the following: 1. that it had a purchase money security interest in the subject cattle, 2. that it perfected its security interest in the cattle, and 3. that its security interest in the cattle had priority over the Bank’s security interest. Lubbock Feeders argues that it had a purchase money security interest in the cattle under �9.103 of the UCC. The timing of the loan does not determine whether the creditor receives a purchase money security interest in the collateral. Rather, the key consideration is whether the loan enables the debtor to acquire rights in the collateral. A creditor receives a purchase money security interest when the loan advance is “closely allied” with the debtor’s purchase of the collateral at issue. Cox purchased all of the subject cattle from third party vendors at sale barn auctions. Lubbock Feeders received delivery of the cattle at its feed yard. Cox never had possession of the cattle. Thus, the summary judgment evidence established that Lubbock Feeders perfected its security interest in the cattle by taking possession of the cattle. The court addresses whether the notification requirement in UCC �9.324(d) applies when the creditor maintains possession of the livestock. Kunkel v. Sprague Nat’l Bank, 128 F.3d 636 (8th Cir. 1997) involved facts similar to the facts in this case. A feedlot perfected a purchase money security interest in cattle by taking possession of the cattle. The issue was whether the feedlot’s purchase money security interest in the cattle had priority over a bank’s security interest in the same cattle. The Kansas UCC applied in Kunkel. Under the Kansas UCC, the subject cattle were classified as “inventory.” A creditor with a purchase money security interest in inventory could acquire priority lien status by sending notice of its security interest to holders of competing security interests within five years before the debtor received possession of the inventory. In Kunkel, the feedlot argued that the UCC’s notice provision did not apply to its purchase money security interest because the debtor never received possession of the collateral. Therefore, the feedlot asserted that it could maintain priority status without providing notice of its security interest to holders of competing security interests. The Eighth Circuit Court of Appeals interpreted the UCC’s notification requirement “to be triggered by actual possession of the inventory by the debtor.” Because the Kunkel debtor never obtained possession of the cattle, the feedlot could maintain its priority status without notifying the bank of its security interest. The court agrees with the reasoning of the Kunkel court. Section 9.324(d)(3) provides that the holder of the conflicting security interest must receive the notice of the purchase money security interest within six months before the debtor receives possession of the livestock. Cox never possessed the cattle. Because Cox never received possession of the cattle, the notification requirement in �9.324 was not triggered. Therefore, Lubbock Feeders was not required to give the Bank notice of its security interest to maintain priority status. OPINION:Terry McCall, J.; Wright, C.J., and McCall and Strange, JJ.

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