KRS 355.9-330: Priority of purchaser of chattel paper or instrument.

(1) A purchaser of chattel paper has priority over a security interest in the chattel paper

which is claimed merely as proceeds of inventory subject to a security interest if:

(a) In good faith and in the ordinary course of the purchaser's business, the

purchaser gives new value, takes possession of each authoritative tangible

copy of the record evidencing the chattel paper, and obtains control under

KRS 355.9-105 of each authoritative electronic copy of the record evidencing

the chattel paper; and

(b) The authoritative copies of the record evidencing the chattel paper do not

indicate that the chattel paper has been assigned to an identified assignee other

than the purchaser.

(2) A purchaser of chattel paper has priority over a security interest in the chattel paper

which is claimed other than merely as proceeds of inventory subject to a security

interest if the purchaser gives new value, takes possession of each authoritative

tangible copy of the record evidencing the chattel paper, and obtains control under

KRS 355.9-105 of each authoritative electronic copy of the record evidencing the

chattel paper in good faith, in the ordinary course of the purchaser's business, and

without knowledge that the purchase violates the rights of the secured party.

(3) Except as otherwise provided in KRS 355.9 -327, a purchaser having priority in

chattel paper under subsection (1) or (2) of this section also has priority in proceeds

of the chattel paper to the extent that:

(a) KRS 355.9-322 provides for priority in the proceeds; or

(b) The proceeds consist of the specific goods covered by the chattel paper or

cash proceeds of the specific goods, even if the purchaser's security interest in

the proceeds is unperfected.

(4) Except as otherwise provided in KRS 355.9 -331(1), a purchaser of an instrument

has priority over a security interest in the instrument perfected by a method other

than possession if the purchaser gives value and takes possession of the in strument

in good faith and without knowledge that the purchase violates the rights of the

secured party.

(5) For purposes of subsections (1) and (2) of this section, the holder of a purchase -

money security interest in inventory gives new value for chattel paper constituting

proceeds of the inventory.

(6) For purposes of subsections (2) and (4) of this section, if the authoritative copies of

the record evidencing chattel paper or an instrument indicate that the chattel paper

or instrument has been assigned t o an identified secured party other than the

purchaser, a purchaser of the chattel paper or instrument has knowledge that the

purchase violates the rights of the secured party.