Brodie Hotel Supply, Inc. v. United States - 431 F.2d 1316 (9th Cir. 1970)

Rule:

Under section 9-312(5) (a) of the Code, the general rule of priority, if both interests are perfected by filing, is that the secured party who first files a financing statement (in this case SBA as assignee of the bank) prevails, regardless of when his security interest attached. However, there is a special exception for purchase-money security interests in collateral other than inventory. Under this exception, the purchase-money security interest prevails over conflicting interests in non-inventory collateral if "the purchase money security interest is perfected. Alaska Stat. § 45.05.754(e)(1).

Facts:

Brodie Hotel Supply, Inc. (Brodie) sold restaurant equipment to Standard Management Company, Inc. Standard Management went bankrupt. Brodie repossessed the equipment, but left it in the restaurant. James Lyon, the new tenant of the restaurant negotiated to purchase the equipment and received a mortgage from National Bank of Alaska. The bank assigned the mortgage to Brodie, who filed a financing statement thereafter. Brodie brought this action against the United States to determine which of the parties had priority, under their respective chattel mortgages, to the proceeds of the sale of certain restaurant equipment. The facts were stipulated and the property was sold and proceeds impounded by agreement. The district court granted summary judgment for Brodie and the United States appealed.

Issue:

Was Lyon considered as Brodie’s debtor with the power to mortgage the equipment?

Answer:

No.

Conclusion:

The court held that although Lyon might have been liable for the reasonable rental of the equipment or for its return to the owner, he did not owe performance of an "obligation secured" by the collateral in question until November 12, 1964, and therefore was not a "debtor."