BUL 2241: Financial Court Case

3. BUL 2241- Module11 - Edward Olford
1. Yes and yes. The bank had a valid security interest in all of Able's equipment, including after-acquired equipment. After-acquired clauses are valid. The only question is whether the bank's security interest could attach to the backhoe. Attachment requires that the debtor has rights in the collateral. This doesn’t necessarily mean that the debtor must own the goods. Ablest had the lawful use and possession of the backhoe, based on his purchase agreement with Myers. He then would have had rights in the backhoe, and as soon as he took possession of it, the bank's security interest would be attached. Because of this, the bank will get the backhoe.
2. No. Northwest’s name was omitted from the financing statement. While small minor omissions are acceptable the court would have said that this was not minor. It’s important that any potential creditors should be able to learn and made aware of all existing creditors. This is especially true where one secured party, Northwest, has a close working relationship with the debtor’s officers, a relationship that may harm other creditors. Even though no one was deceived in this case, the financing statement was still misleading and because of this, Northwest has no security interest.
3. No Sears is not correct. A purchase
It would be reversed. Whayne Supply has a perfected purchase money security intrest in the equipment. UCC code gives Whayne superiority over all other security interests in the equipment, including prior filed security interests. While there is an exception to the general priority rule of UCC §9-312, which provides priority to the first security interest to file or perfect. No rational vendor would sell goods on credit if it were immediately to be relegated to an inferior lien status. There was a drill for the Revenue Cabinet to attempt to seize only because Whayne sold it on credit. Unless the priority is given to PMSI holders than the sales based on credit will