SW Legal Educational Publishing

Mobile Goods May Be Moved Without Losing Perfected Security Interest
Description Landscaper had moved large equipment from Pennsylvania to New Jersey when it went bankrupt. Appeals court held that creditor's perfected security interest in the equipment in Pennsylvania was not lost by the move because the collateral consisted of "mobile goods."
Topic Negotiable Instruments/Commercial Paper
Key Words Secured Interest, Mobile Goods, Priority
C A S E   S U M M A R Y
Facts Varsity borrowed over $500,000 from PNC Bank to finance purchase of landscaping equipment (backhoes, etc.). The loan was made under Pennsylvania law, the equipment was collateral and the security interests were perfected. Varsity was to notify PNC if the equipment was moved out of state, but it did not. The equipment was in New Jersey when Varsity went bankrupt. The bankruptcy trustee asserted that because PNC did not perfect its security interest in New Jersey when the equipment was moved, then PNC it lost its perfected security interest (and would therefore get nothing). Bankruptcy court and district court agreed with that position. PNC appealed.
Decision Reversed. Under UCC 9-103(3), if collateral is deemed to be "mobile goods," then transporting the collateral to another state would have no effect on PNC's perfected security interest in Pennsylvania. Since Varsity engaged in large scale landscaping, its machinery was routinely moved from site to site by truck. Like road building and construction equipment, these are mobile goods. PNC's interest has priority over that of the bankruptcy trustee.
Citation In re Varsity Sodding Service, 1998 WL 107982 (3rd Cir.)
139 F.3d 154 (3rd Cir., 1998)

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