ON MOTION FOR REHEARING
In its motion for rehearing, Massey-Ferguson makes several contentions that merit further discussion: (1) that no sale was made to Smith because of the absence of an explicit agreement that title should pass without moving the goods; (2) that Massey-Ferguson’s security interest was prior because Borg-Wamer failed to plead and prove that Milam’s sale to Smith was authorized by Massey-Ferguson within section 9.306(b) of the Texas Business and Commerce Code3 or that the sale was made in the ordinary course of business within section 9.307, and (3) that Massey-Ferguson’s security interest was prior because it was first in time and Borg-Wamer failed to perfect its security interest by filing a financing statement. We conclude that none of these contentions are well taken; accordingly, we overrule the motion for rehearing.
Passage of Title
The passage-of-title question turns on interpretation of section 2.401 (Vernon 1968). Massey-Ferguson contends that we erred in holding that title to the goods passed from Milam to Smith under section 2.401(c) without actual delivery because there is no evidence of an explicit agreement that delivery should be made without moving the goods. It argues that in the absence of such an agreement, the transaction is governed by section 2.401(b), which provides that unless otherwise explicitly agreed, title passes “when the seller completes his performance with reference to the physical delivery of the goods,” and that, because there is no evidence of delivery or of any explicit agreement that title should pass without moving the goods, no sale was made to Smith that would support the security agreement assigned to Borg-Wamer.
We conclude that we correctly applied section 2.401 in our original opinion. We read subsection (c) as applying to any sale where delivery is to be made without moving the goods “[ujnless otherwise explicitly agreed,” that is, unless the parties explicitly agree that delivery is to be made at a different time or place. On the other hand, when there is an explicit agreement for delivery at a different time or place, then subsection (b) applies and no title passes until “the seller completes his performance with reference to physical delivery of the goods.”
In the present case, since the parties made no agreement for delivery at a different time or place, and the goods were identified, title passed without physical delivery when the sales agreements were signed. Consequently, the security interest assigned to Borg-Wamer attached, and the question for our decision is priority between Borg-Wamer’s security interest and the previously perfected security interest of Massey-Ferguson, the inventory lender.
Sales in Ordinary Course of Business
Massey-Ferguson further contends that we erred in holding that it authorized sales of goods within Milam’s inventory and that, therefore, its security interest was extinguished under section 9.306(b). Massey-Ferguson argues that in order for Borg-Wamer to defeat Massey-Ferguson’s motion for summary judgment and prevail on Borg-Wamer’s own motion, Borg-Warner had the burden of pleading and proving by conclusive summary-judgment evidence either (1) that the purported sale from Mi-lam to Smith was made “in the ordinary course of business upon customary terms for value received,” as required by Massey-Ferguson’s security agreement, and thus *356“authorized” under subsection 9.306(b), or (2) that the sale was made to “a buyer in the ordinary course of business” within section 9.307(a). Massey-Ferguson insists that there was no such pleading and proof, but that, on the contrary, the evidence showed that the sales from Milam to Smith, its principal officer and stockholder, were a sham “double financing” of Milam’s inventory, since Smith’s affidavit reveals that he never took possession and the goods remained in Milam’s inventory.
We conclude that this issue is immaterial. We hold that even if Massey-Ferguson’s security interest continued because the purported sales were not made in the ordinary course of Milam’s business, and thus did not comply with either Massey-Ferguson’s security agreement or section 9.307(a), Borg-Warner has a security interest superior to that of Massey-Ferguson under section 9.306(e)(2). Subsection (e) provides:
If a sale of goods results in an account or chattel paper which is transferred by the seller to a secured party, and if the goods are returned to or are repossessed by the seller or the secured party, the following rules determine priorities:
(1) If the goods were collateral at the time of sale for an indebtedness of the seller which is still unpaid, the original security interest attaches again to the goods and continues as a perfected security interest if it was perfected at the time when the goods were sold.
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(2) An unpaid transferee of the chattel paper has a security interest in the goods against the transferor. Such security interest is prior to a security interest asserted under Subdivision (1) to the extent that the transferee of the chattel paper was entitled to priority under Section 9.308. [Emphasis added].
Section 9.308 provides:
A purchaser of chattel paper or an instrument who gives new value and takes possession of it in the ordinary course of his business has priority over a security interest in the chattel paper or instrument
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(2) which is claimed merely as proceeds of inventory subject to a security interest (Section 9.306) even though he knows that the specific paper or instrument is subject to the security interest.
In the present case, it is undisputed that Borg-Warner, in the ordinary course of its business, gave value and took possession of the chattel paper arising from the sales from Milam to Smith. Consequently, section 9.308 entitles Borg-Warner, as purchaser of the chattel paper, to priority over any claim by Massey-Ferguson to the paper as proceeds. Although Massey-Ferguson does not claim a security interest in the chattel paper, section 9.306(e)(2) gives the unpaid transferee of chattel paper the same priority with respect to goods repossessed by the inventory lender. Consequently, Borg-Warner, as a purchaser of the chattel paper for value in the ordinary course of its business, has priority over Massey-Ferguson’s perfected security interest in the inventory.
This interpretation of sections 9.306(e)(2) and 9.308 is supported by Borg-Warner Acceptance Corp. v. C.I.T. Corp., 679 S.W.2d 140, 142-43 (Tex.App.—Amarillo 1984, no writ). That case involved the question of priority between an inventory lender and a retail lender with respect to two tractors purportedly sold by a dealer to Deld Farms, an affiliated corporation. There was evidence that the down payment recited was not paid and that Deld Farms took possession of the tractors, but soon returned them to the dealer’s lot where they remained in the dealer’s inventory. The court of appeals affirmed a summary judgment for the retail lender on the ground that section 9.306(e), when read together with section 9.308(2), gave the retail lender priority in the goods as well as in the chattel paper resulting from sale of the goods. Because of this priority, the court regarded as immaterial the question whether the sale to Deld Farms was in the ordinary course of the dealer’s business.
*357It is arguable that sections 9.306(c) and 9.308(2) do not apply in the absence of a genuine sale of the goods, since section 9.306(e), by its terms, applies “[i]f a sale of goods results in ... chattel paper which is transferred by the seller to a secured party.” In Borg-Wamer, the court considered the sham-sale question, but held that the retail lender’s security interest attached by the terms of section 9.203, which provides that a security interest attaches when (1) the debtor has signed the security agreement, (2) value is given, and (3) the debtor has rights in the collateral. The evidence showed that Deld Farms signed the conditional sale-security agreement and that value was given to the dealer, although it was questionable whether the down payment had been made. The court held that evidence of possession of the tractors by Deld Farms, together with the duly executed security agreement, established an interest in Deld Farms sufficient to permit the attachment and enforcement of the dealer’s security interest under section 9.203. Thus the court found it unnecessary to determine whether the sale was authorized by the inventory lender or was made in the regular course of business. 679 S.W.2d at 143-44.
In the present case, the question remains whether Smith’s failure to take possession of the goods shows that he never acquired any rights in the collateral, and, therefore, that Borg-Wamer’s claimed security interest never attached. We conclude that so far as Borg-Wamer’s claimed security interest is concerned, the conditional sale-security agreements signed by Milam and Smith and transferred by Milam to Borg-Wamer are sufficient in themselves to establish “sales” of the goods within section 9.306(e), although these sales may not have been made in the ordinary course of Milam’s business.
This question is essentially the same as the passage-of-title question previously discussed. As we have already held, because the goods were identified and the contracts contained no explicit agreement for delivery at a different time or place, title passed when the conditional sales contracts were signed. We conclude that Borg-Wamer was entitled to rely on the conditional sales-security agreements assigned to it in the ordinary course of its business as establishing the passage of title to Smith, the attachment of Milam’s security interest, and the priority of that security interest over the security interest of Massey-Ferguson. Under the circumstances shown, Borg-Warner was not required to investigate and determine whether Smith had actually taken possession of the goods.
In reaching this conclusion, we are guided by the policy underlying sections 9.306 and 9.308. Modern commercial practices make it impracticable for a retail lender purchasing chattel paper in the ordinary course of its business to inquire into the factual circumstances surrounding the transactions on which the paper is based. The inventory lender, because of its continuing relationship with the dealer, is in a better position to protect itself against its borrower’s double dealing. Moreover, the inventory lender necessarily contemplates that its collateral will be sold and its security interest will then attach to the proceeds and to other goods. Consequently, as between the two innocent lenders, the loss should fall on the inventory lender. This policy is explained and applied to an admitted sham sale in the well-reasoned opinion in American State Bank v. Avco Financial Services, 71 Cal.App.3d 774, 782-87, 71 Cal.Rptr. 658, 663-66 (1977).
Perfection of Security Interest
Massey-Ferguson claims a prior security interest under section 9.312 because it perfected its security interest by filing a financing statement before Borg-Wamer, and because Borg-Wamer did not perfect its security interest with respect to some of the items in question. This contention, also, is without merit. Section 9.312, which states general rules of priority, expressly provides in subsection (a) that these mies are subject to the mies of priority stated in other sections of the same subchapter, which includes sections 9.306 and 9.308. *358Since we have concluded that Borg-Wamer has special priority under those sections, we hold that Massey-Ferguson’s earlier filing is immaterial. Section 9.312(a) and comment 1 (Vernon Supp.1986), section 9.312(a) and comment 1 (Vernon 1968). This holding is implicit in Borg-Wamer, where the perfected security interest of the retail lender was held prior to the earlier-perfected security interest of the inventory lender. 679 S.W.2d at 141-42. In other situations special priorities have been recognized as superior to earlier-perfected security interests. Ford Motor Credit Co. v. First State Bank, 679 S.W.2d 486, 487 (Tex.1984) (first-to-file priority applied as against holder of purchase-money security interest in absence of notice required by section 9.312(c)(2)); Gulf Coast State Bank v. Nelms, 525 S.W.2d 866, 870 (Tex.1975) (mechanic’s lien was prior to earlier-perfected security interest).
The motion for rehearing is overruled.
.All references to sections are to the Texas Business and Commerce Code Annotated (Tex. UCC) (Vernon Supp.1986), unless otherwise noted.