Michael and Debra Brown, doing business as D&M Enterprises, Inc., bought a retail electronics store under a franchise agreement from a national company, Radio Hut. The Browns borrowed from State Bank to pay for the business and signed loan documents and a financing statement, which identified the Browns as "Debtors." Elsewhere on the financing statement, the bank identified "D&M Enterprises, Inc., Radio Hut, Debra K. Brown, Michael C. Brown" as "Debtors." The statement covered, in part, the store inventory.

Three years later, the store closed. Radio Hut terminated the franchise and took possession of the inventory, claiming the Browns and D&M owed Radio Hut $6,394.73. State Bank filed a suit in a state court against Radio Hut, claiming a perfected security interest in the inventory with priority over Radio Hut's claim. Did the bank's security interest take priority over Radio Huts claim?

1. The borrower in this scenario is SelectD&M Enterprises, Inc.Michael and Debra Brown, Tri-B Enterprises, Inc.

2. State Bank is the lender, franchis or franchisee and is also referred to as the secured party or debtor

3. D&M Enterprises, Inc. is the secured party or debtor

4. Radio Hut is the lender, franchisor, franchisee

5. To create a security interest in personal property, there must be a written Selectfinancing statementinventory agreementsecurity agreementItem 1 that describes the personal property, also referred to as SelectcollateralinventoryItem 2 . The secured party must give the debtor something of value, and the debtor must have rights in the collateral. When this occurs, the creditor's rights SelectattachprioritizeperfectItem 3 to the collateral, which gives the creditor an enforceable Selectsecurity interestperfected security interestunsecured interestItem 4 .

6. To perfect a security interest in personal property, the lender must file a Selectfinancing statementsecurity agreementperfection agreementItem 1 . The purpose of this document is to give third parties SelectpublicprivateItem 2 notice of the security interest.

7. SelectAn unsecured A secured A perfected security Item 1 interest has a higher priority than Selectan unperfecteda PMSIItem 2 interest in relation to personal property.

8. State Bank had Selectno security interestan unsecured interesta secured interesta perfected security interestItem 1 in the inventory, whereas Radio Hut had Selectno security interestan unsecured interesta secured interesta perfected security interestItem 2 in the inventory.

9. Because of this, State Bank's claim Selectdiddid notItem 1 take priority over Radio Hut's claim.