Since 1921 packers and stockyard men in interstate commerce have been subjected to remedial federal legislation and regulation. This appeal stems from the bankruptcy of one such regulated packer, Samuels & Co., Inc., of Dallas, Texas. The issues raised, however, all question the priority of liens between a class of cattle raisers who sold their cattle to Samuels & Co. and C.I.T. Corporation, which financed their purchase.
Prior to its filing a voluntary petition for an arrangement under Chapter XI of the Bankruptcy Act, 11 U.S.C. § 701 et seq., Samuels & Co. had purchased cattle under a “grade and weight basis,” and C.I.T. had financed those purchases secured by a floating lien on Samuels’s inventory and other property. The cattle thus sold were delivered to the bankrupt, who slaughtered the animals. The carcasses were permitted to cool and were then inspected, graded and weighed. Samuels would then issue its check for the purchase price and further process the meat into finished products. This system is common to the meat packing industry and its conditions are spelled out by regulation published in 9 Code of Federal Regulations. C.I.T. became insecure in this plan upon learning that Samuels intended to file a plan of arrangement under Chapter XI. Thus on May 23, 1969, it refused to advance additional funds for cattle purchased. On the same day Samuels filed its plan of arrangement which ultimately led to an adjudication of straight bankruptcy in April of 1970. Appellants, representing a class of cattle sellers whose cattle were delivered to Samuels before May 23, 1969, and who had received checks in payment therefor but whose checks were returned unsatisfied, filed claims for the amount of the purchase price with the bankruptcy court. That class of cattle sellers asserted a first priority lien and their position was opposed by C.I.T., asserting the superiority of its lien on Samuels inventory.
The bankruptcy court ordered a receiver to dispose of the easily spoiled meat and meat by-products but to hold the proceeds of sale pending resolution of the conflicting claims of the cattle sellers and C.I.T. The referee ultimately held the cattle sellers’ interests to be paramount and subordinated C.I.T.’s lien. C.I.T. sought review in the district court, which reversed the referee, holding:
(a) That C.I.T. had a perfected lien in Samuels’ inventory and other property;
(b) That the cattle delivered by May 23, 1969, and represented by the dishonored checks, were properly includable in Samuels’ inventory, i. e., that C.I.T.’s lien had attached.
(c) That the class of cattle sellers had delivered goods subject to a reservation of title which, under the Uniform Commercial Code as en- ' acted in Texas, was the mere reservation of a security interest which had not been perfected before C.I.T.’s lien attached. See Texas Business and Commercial Code § 9.312(c), V.T.C.A.
The class of cattle sellers appeal. We reverse.
The facts are undisputed. The question is one of law concerning priority of liens in bankruptcy established under the Uniform Commercial Code: Is the *560reserved purchase money security interest provision, Texas Business and Commercial Code (U.C.C.),* § 9 — 107(1) 1 applicable to what would otherwise have given Samuels voidable title under § 2.-403 of the Code,2 or do the regulations promulgated under the Packers and Stockyards Act, 7 U.S.C.A. § 181, et seq., comprise a course of dealing and usage of trade so as to modify the Code provisions and permit the reservation of title to have effect against C.I.T.’s lien without perfection by filing under the Code, § 9 — 301?
It is clear that between a party whose security interest has attached and been perfected and one whose security interest has merely attached, that the former lien takes priority. U.C.C. § 9 — 301(1)(a). The latter interest is also subordinate to the rights of a person who becomes a lien creditor before the interest is perfected, and who is without knowledge of the prior security interest. § 9 — 301(1)(b). A trustee in bankruptcy meets these requirements. 11 U.S.C. § 107(c)(1)(B); 11 U.S.C. § 110(c). Our concern is, however, for the proper rule to be afforded the remedial legislation of the Packers and Stockyards Act and the valid regulations issued thereunder. 7 U.S.C.A. § 181 et seq., 9 C.F.R. 201.43, 201.99.
Central to the district court’s decision was the belief that the appellants’ delivery of the animals while making a reservation of title acted solely as the taking of a purchase money security interest under § 9 — 107. This would create voidable title in Samuels. § 2— 403. Thus title to the property would be in Samuels’s hands at the time of bankruptcy leaving the unperfected security interest cut off by both C.I.T.’s lien on inventory and a trustee in bankruptcy’s power under §§67 and 70 of the Bankruptcy Act.3 Where this reasoning *561breaks down, however, is its failure to properly account for Regulations 201.43 and 201.99 promulgated under the Packers and Stockyards Act (9 CFR, §§ 201.-43 and 201.99). Regulation 201.43 requires a packer to make its payment to his cattle suppliers promptly:
Ҥ 201.43 ACCOUNTS AND RECORDS, PACKERS AND STOCKYARDS ACT 1921, AS AMENDED
(b) PURCHASERS TO PAY PROMPTLY FOR LIVESTOCK. Each packer, market agency, or dealer purchasing livestock shall, before the close of the next business day following the purchase of livestock and the determination of the amount of the purchase price, transmit or deliver to the seller or his duly authorized agent the full amount of the purchase price, unless otherwise expressly agreed between the parties before the purchase of livestock. Any such agreement shall be disclosed in the purchaser’s records and on the accountings or other documents issued by the purchaser relating to the transaction.”
Regulation 201.99 requires that until the packer pays for the carcasses the carcasses be identifiably held:
Ҥ 201.99 PURCHASE OF LIVESTOCK BY PACKERS ON A CARCASS GRADE, CARCASS WEIGHT, OR CARCASS GRADE AND WEIGHT BASIS.
(a) Each packer purchasing livestock on a carcass grade, carcass weight, or *562carcass grade and weight basis shall, prior to such purchase, make known to the seller, or to his duly authorized agent, the details of the purchase contract. Such details shall include, when applicable, expected date and place of slaughter, carcass price, condemnation terms, description of the carcass trim, grading to be used, accounting, and any special conditions.
(b) Each packer purchasing livestock on a carcass grade, carcass weight, or carcass grade and weight basis, shall maintain the identity of each seller’s livestock and the carcasses therefrom and shall, after determination of the amount of the purchase price, transmit or deliver to the seller or his duly authorized agent a true written account of such purchase showing the number, weight, and price of the carcasses of each grade (identifying the grade) and of the ungraded carcasses, an explanation of any condemnations, and any other information affecting final accounting. Packers purchasing livestock on such a basis shall maintain sufficient records to substantiate the settlement of each transaction.
(c) When livestock are purchased by a packer on a carcass weight or carcass grade and weight basis, purchase and settlement therefor shall be on the basis of carcass price. This paragraph does not apply to purchases of livestock by a packer on a guaranteed yield basis.
(d) Settlement and final payment for livestock purchased by a packer on a carcass weight or carcass grade and weight basis shall be on actual (hot) carcass weights determined before shrouding. The hooks, rollers, and gambrels or other similar equipment used at a .packing establishment in connection with the weighing of carcasses of the same species of livestock shall be uniform in weight. The tare weight shall include only the weight of such equipment.
(e) Settlement and final payment for livestock purchased by a packer on a USDA carcass grade shall be on an official (final, not preliminary) grade. If settlement and final payment are based upon any grades other than official USDA grades, such other grades shall be set forth in detailed written specifications which shall be made available to the seller or his duly authorized agent. For purposes of settlement and final payment for livestock purchased on a grade or grade and weight basis, carcasses shall be final graded before the close of the second business day following the day the livestock are slaughtered.”
These regulations had binding effect on Samuels, whose compliance therewith permitted it to continue its operations.
C.I.T. responds to appellants’ arguments under the Code, § 1 — 205,4 by ob*563serving that the regulations are not inconsistently applied and are but a means to implement a seller’s right of reclamation provided by U.C.C. § 2 — 702(b).
Like the district court’s conclusion on the application of § 9 — 107(b), C.I.T.’s argument misses the unique pattern of the Packers and Stockyards Act and Regulations. Meat and meat by-products of like grade and weight are, as the referee found, fungible goods:
“When the livestock has been graded and the yield determined the meat is processed, packaged and sold. After the livestock has been processed and packaged, it is impossible to trace or. identify any seller’s particular livestock.”
The Packers and Stockyards Act regulations are a recognition that once a check has issued from a packer, the carcass will be processed and its identity lost. Consequently, the “hot check” provision of U.C.C. § 2 — 403(a) (2) is an unavailable remedy. The Packers and Stockyards regulations and cases, therefore, consider the packer’s obligation to pay to be that of a fiduciary, Bowman v. U.S.D.A., 363 F.2d 81 (5th Cir., 1966), and the purpose of the act to be the protection of the producer’s and consumer’s purse. Bowman, supra; Glover Livestock Co. v. Hardin, 454 F.2d 109 (8th Cir., 1972); Bruhn’s Freezer Meats of Chicago, Inc. v. U.S.D.A., 438 F.2d 1332 (8th Cir., 1971); Swift & Co. v. United States, 393 F.2d 247 (7th Cir., 1968). The reasoning of these cases and the impact of the Packers and Stockyards Act convinces this court that more than an unperfected security interest subject to reclamation is reserved for the cattle seller. Not by contract but by statute and regulation a packer lacks full dominion over the carcasses until the seller has been paid. Where the packer defaults by the issu-anee of a bad check (and destroys the identity of the security by processing the carcasses into fungible meat products), the seller is the beneficiary of a trust imposed by remedial statute. This we must note was the very statute which permitted the bankrupt to engage as a meat packer in interstate commerce and it is clear that the Packers and Stockyards Act and Regulations 201.42 and 201.99 thereunder comprise a course of dealing and usage of trade known to both the bankrupt packer and C.I.T., which had financed it for an extended period.
The judgment of the district court is reversed and remanded with directions to reinstate the judgment of the referee.
Numerical citation conforms to Texas Business and- Commercial Code. Quotations are taken from 1962 official draft of U.C.C. and with some numerical changes have been adopted in Texas.
. “A security interest is a ‘purchase money security interest’ to the extent that it is (a) taken or retained by the seller of the collateral to secure all or part of its price . . . . ”
. “(1) A purchaser of goods acquires all title which his transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased.
A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase the purchaser has such power even though
(a) the transferor was deceived as to the identity of the purchaser, or
(b) the delivery was in exchange for a check which is later dishonored, or
(c) it was agreed that the transaction was to be a ‘cash sale’ . . . . ”
. Section 1 — 201(37) of the Uniform Commercial Code defines a security interest as follows:
“(37) ‘Security interest’ means an interest in personal property or fixtures which secures payment or performance of an obligation. The retention of reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer (Section 2 — 401) is limited in effect to a reservation of a ‘security interest’. The term also includes any interest of a buyer of accounts, chattel paper, or contract rights which is subject to Article 9. The special property interest of a buyer of goods on identification of such goods to a contract for sale under Section 2 — 401 is not a “security interest’, but a buyer may also acquire a ‘security interest’ by complying with Article 9. Unless a lease or consignment is intended as security, reservation of title thereunder is not a ‘security interest’ but a consignment is in any event subject to the provisions on consignment sales (Section 2 — 326). Whether a lease is intended as security is to be determined by the facts of each case; however, (a) the inclusion of an option to purchase does not of itself make the lease one intended for security, and (b) an agreement that upon compliance with the terms of the lease the lessee shall become or has the option to become the owner of the property for no additional consideration or for a nominal consideration does make the lease one intended for security.”
Its reference to § 2 — 401 includes a seller-’s reservation of title within the Code’s concept of attachment and perfection of *561security interests. See § 9 — 113. Section 2 — 401 provides in part:
“Each provision of this Article with regard to the rights, obligations and remedies of the seller, the buyer, purchasers or other third parties applies irrespective of title to the goods except where the provision refers to such title. Insofar as situations are not covered by the other provisions of this Article and matters concerning title become material the following rules apply:
(1) Title to goods cannot pass under a contract for sale prior to their identification to the contract (Section 2 — 501), and unless otherwise explicitly agreed the buyer acquires by their identification a special property as limited by this Act. Any retention or reservation by the seller of the title (property) in goods shipped or delivered to the buyer is limited in effect to a reservation of a security interest. Subject to these provisions and to the provisions of the Article on Secured Transactions (Article 9), title to goods passes from the seller to the buyer in any manner and on any conditions explicitly agreed on by the parties.”
Thus where goods are physically delivered but title is delayed past delivery, the Code treats the transaction as the seller’s retention of a purchase money security interest as defined by § 9 — 107(a), which must be perfected by filing before becoming superior to other later perfected liens. See § 9 — 312(c).
Section 2 — 401 (reservation of title) gives the buyer voidable title until the seller is paid. Section 9 — 113 provides:
“A security interest arising solely under the Article on Sales (Article 2) is subject to the provisions of this Article except that to the extent that and so long as the debtor does not have or does not lawfully obtain possession of the goods
(a) no security agreement is necessary to make the security interest enforceable ; and
(b) no filing is required to perfect the security interest; and
(c) the rights of the secured party on default by the debtor are governed by the Article on Sales (Article 2).”
Thus the seller’s remedy is to reclaim the specific goods under the provisions of § 2 — 702(b), which provides in part as follows :
“(2) Where the seller discovers that the buyer has received goods on credit while insolvent he may reclaim the goods upon demand made within ten days after the receipt, but if misrepresentation of solvency has been made to the particular seller in writing within three months before delivery the ten day limitation does not apply. Except as provided in this subsection the seller may not base a right to reclaim goods on the buyer’s fraudulent or innocent misrepresentation of solvency or of intent to pay.”
We need not however decide the merits of a conflict between a trustee in bankruptcy and a seller asserting a right of reclamation, cf. In re Kravitz, 278 F.2d 820 (3rd Cir., 1960), and Glessner v. Massey-Ferguson, Inc., 353 F.2d 986 (9th Cir., 1966), for we believe the custom and usage of the meat packing industry takes the asserted reservation of title from within the definition of a security interest.
. “(1) A course of dealing is a sequence of previous conduct between the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.
(2) A usage of trade is any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage are to be proved as facts. If it is established that such a usage is embodied in a written trade code or similar writing the interpretation of the writing is for the court.
(3) A course of dealing between parties and any usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware give particular meaning to and supplement or qualify terms of an agreement.
(4) The express terms of an agreement and an applicable course of dealing or usage of trade shall be construed wherever reasonable as consistent with each other; but when such construction is unreasonable express terms control both course of dealing and usage of trade and course of dealing controls usage of trade.
*563(5) An applicable usage of trade in the place where any part of performance is to occur shall be used in interpreting the agreement as to that part of the performance.
(6) Evidence of a relevant usage of trade offered by one party is not admissible unless and until he has given the other party such notice as the court finds sufficient to prevent unfair surprise to the latter.”