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A purchase-money security interest in consumer goods is perfected upon attachment. Under Ohio Rev. Code Ann. § 1309.310(A), the following security interests are perfected when they attach: (A) A purchase money security interest in consumer goods. "Consumer goods" are defined as goods that are used or bought for use primarily for personal, family, or household purposes. Ohio Rev. Code Ann. § 1309.102(A)(23). Thus, under Ohio law, a purchase-money security interest in consumer goods is perfected upon attachment, Ohio Rev. Code Ann. §§ 1309.309(A) and 1309.310(B)(2), and attachment occurs upon execution of the security agreement, Ohio Rev. Code Ann. § 1309.203.
Debtor, Joseph M. Palmer, executed a Retail Installment Contract – Lien Contract -- Security Agreement with Suburban Tractor Company ("Suburban") to finance the purchase of the Equipment. Suburban subsequently assigned the Contract to defendant Deere & Company ("Deere"). Deere was the current holder of the Contract. The debtor represented in the loan documents executed at the time of purchase that the purchased items were for personal consumer use only. A space for averring that the tractor would be put to commercial use was left blank. Neither Deere nor Suburban filed a financing statement with the Ohio Secretary of State with respect to the lien claimed on the Equipment. Debtor and his wife subsequently filed a joint Chapter 7 bankruptcy petition. Plaintiff, Thomas McK. Hazlett, applied for authority to retain himself as attorney for the Trustee, and that application was granted. Plaintiff brought an adversary proceeding against defendant, seeking to avoid the creditor's purchase-money security interest, pursuant to 11 U.S.C.S. § 544(a). His affidavit filed in support of the Response stated that debtor testified at the § 341 meeting of creditors that he had in fact used the equipment for commercial purposes in his business of racing greyhounds. Defendant moved for summary judgment.
Was the defendant creditor’s security interest properly perfected, notwithstanding the fact that it did not file a financing statement?
The court concluded that defendant creditor was entitled to rely on debtor's representation in the loan documents that the equipment he financed was going to be used for personal rather than commercial purposes, under Ohio Revised Code Ann. § 1309.310. Thus, it was unnecessary for creditor to file a financing statement in order to perfect its purchase-money security interest. The trustee's self-serving affidavit as to debtor's statements at the meeting of creditors was not proper summary judgment evidence. Accordingly, the court held that the creditor was entitled to summary judgment on the claims asserted by the trustee, as its security interest was properly perfected.