Jim Frescent is the sole proprieter of “We’re Number One,” a business located in Columbia that is the largest manufacturer of novelty foam fingers in central Missouri. The surging Tigers have been great for business and Jim. In early October, Jim tripled his production. He was so confident that Mizzou would keep winning that his inventory far exceeded his available space and so on October 10th, Jim stored two truckloads of foam fingers, with a retail value of $50,000, at Anchor Storage, a large commercial warehouse in the area. Anchor Storage issued a negotiable warehouse receipt for the foam fingers.

Two days later, Jim panicked and decided that he needed to start producing KU foam fingers to hedge his bets. To obtain the funds to produce the KU merchandise, Jim borrowed $25,000 from Harvest Bank and turned over the negotiable warehouse receipt as security. Harvest Bank didn't file a financing statement. Shortly after Jim began production on the KU fingers, his primary machine broke down. To fix it, he borrowed $30,000 from Planters Bank on October 15th, providing them a security interest in “all his inventory, including after-acquired." Planters Bank promptly filed a financing statement covering all of the inventory.

On October 31st, Jim received a large order from a local vendor, so he requested that Harvest Bank allow him to remove the inventory from Anchor Storage so that he can fill the order. Harvest Bank provided him with the negotiable warehouse receipt. It is now November 1, and Jim has withdrawn the inventory but has not yet filled the order. Does Harvest Bank have priority over Planters Bank in the Mizzou foam fingers?

1. Yes, because its security interest remains temporarily perfected for the 20 days after Harvest Bank allowed Jim to obtain the inventory.

2. Yes, but only if Harvest Bank files a financing statement within 20 days after Jim takes possession of the foam fingers.

3. No, because Harvest Bank did not file a financing statement.

4. No, because Harvest Bank became unperfected as soon as it surrendered the negotiable document and Jim withdrew the inventory.