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A security interest is a purchase money security interest to the extent that it is taken by a person who by making advances or incurring an obligation gives value to enable the debtor to acquire rights in or the use of collateral if such value is in fact so used. To meet these requirements the creditor must show: (1) that it gave value; (2) that the value given enabled debtor to acquire rights in the accounts receivable; and (3) that the accounts receivable qualify as collateral within the meaning of the statute. The value requirement is satisfied by any consideration sufficient to support a simple contract.
MBank Alamo National Association ("MBank") and E.I. DuPont de Nemours Company, Inc. ("DuPont") pressed this conversion action against Raytheon Company ("Raytheon"), claiming that Raytheon collected certain accounts receivable, in which MBank and DuPont had security interests superior to those of Raytheon. Raytheon's defense was that it had a purchase money security interest in the accounts receivable. Concluding that Raytheon had no purchase money security interest in the accounts, the district court held that Raytheon's security interests were subordinate to those of MBank and DuPont, and granted MBank's and DuPont's motions for summary judgment. Raytheon appealed the district court's determination that it did not have a PMSI in the accounts receivable. In the alternative, Raytheon contended that if our construction of the PMSI statutory provisions excludes the Raytheon -- Howe transaction, the ruling should not apply to this case under the doctrine of nonretroactivity. Raytheon also appeals the district court's finding that Raytheon failed to produce sufficient evidence of waiver to overcome MBank's motion for summary judgment.
Was advancing x-ray machines to a debtor on credit considered a PMSI?
The court affirmed holding that advancing x-ray machines to debtor on credit was not a PMSI, therefore the first-to-file priority rule applied, and waiver required relinquishment by intentional conduct. The court held that Raytheon failed to establish that the accounts receivable meet the statutory definition of a PMSI. To meet these requirements Raytheon must show: (1) that it gave value; (2) that the value given enabled Howe to acquire rights in the accounts receivable; and (3) that the accounts receivable qualify as collateral within the meaning of the statute. Since Raytheon did not have a PMSI in Howe's accounts receivable, the first-to-file priority rules govern. As the last to file, Raytheon's interest is subordinate to those of MBank and DuPont.