Sam purchased 50 new Samsung flat screen televisions for his electronics store. He financed this purchase through an agreement with Citizens’ Bank whereby Sam executed a valid security agreement in “all of Sam’s inventory, equipment, and consumer goods, including after-acquired.” Citizens’ Bank filed a UCC-1 in the proper office sufficiently describing the collateral on April 1.

Sam’s store saw an uncommon increase in sales during the second quarter; Sam sold all of the TVs that he had in stock and thus needed more. However, Samsung couldn't get him more TVs in time. So, Sam was forced to purchase some TVs at a slightly higher price from Alex, a local TV wholesaler. Alex sold Sam 20 Samsung TVs and Sam executed a security agreement granting Alex a valid purchase-money security interest in the TVs on July 1. One of these 20 TVs was a 3D TV; Sam liked it so much he told Alex that he was going to take it home for his personal use. Sam told Alex about his prior agreement with Citizens’ Bank, but nonetheless, Alex delivered the TVs to Sam the same day (July 1). On July 10, Alex filed a UCC-1 in the proper state office to perfect his security interest.

Assume Sam then defaulted on his loans from Citizens’ Bank and Alex, and assume that he still has all 20 TVs he acquired from Alex. Who has priority over these TVs?

1. Citizens’ Bank has priority over Alex with respect to all of them, including the 3-D TV.

2. Alex has priority over Citizens' Bank with respect to all of the TVs, including the 3-D TV.

3. Citizens’ Bank has priority over Alex for all of the TVs except the 3-D TV.

4. Alex has priority over Citizens' Bank for all of the TVs except the 3-D TV.