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Rex Financial Corp. v. Mobile America Corp.
Citations: 580 P.2d 8; 119 Ariz. 176; 23 U.C.C. Rep. Serv. (West) 788; 1978 Ariz. App. LEXIS 480Docket: 1 CA-CIV 3385
Court: Court of Appeals of Arizona; March 14, 1978; Arizona; State Appellate Court
A dispute arose between Rex Financial Corporation and Mobile America Corporation concerning rights to a mobile home under Article 9 of the Uniform Commercial Code as adopted in Arizona. The trial court granted summary judgment to Mobile America, which was the successor to Great Western Bank's interest in a security agreement related to the mobile home. Rex Financial had financed inventory for Liberty Mobile Home Centers, which sold a mobile home to the Frazes under a purchase agreement and a security agreement that granted Liberty a purchase money security interest. Although the Frazes signed the security agreement, they did not take possession of the mobile home immediately. Liberty failed to repay Rex Financial, leading the latter to seize the mobile homes on Liberty's lot, including the Frazes' mobile home. The Frazes abandoned their rights after discovering the home was gone, and Mobile America ceased attempts to collect the purchase price from them. Mobile America sought to recover the unpaid amount from Rex Financial, asserting its interest in the mobile home as collateral. Rex Financial countered that its inventory financing agreement with Liberty provided a superior security interest and argued that the transaction with the Frazes did not create an enforceable purchase money security interest. On appeal, the court noted that Rex Financial's right to enforce its security interest would have been negated had Liberty resold the mobile home in the ordinary course of business. The parties agreed that for the security interest to attach, value must have been given, and the Frazes must have had rights in the collateral. Rex Financial's appeal against the summary judgment was denied. Rex Financial argues that the Frazes were not buyers in the ordinary course of business because they did not take possession of the mobile home or provide a down payment when the purchase money security agreement was executed. Consequently, they contend that a valid security interest did not attach under the agreement that Mobile America seeks to enforce as the assignee. This argument is countered by precedent from Chrysler Credit Corp. v. Sharp, where a New York court ruled that a buyer who executed a sales contract and security agreement remained a buyer in the ordinary course despite not making a down payment or taking possession. The court emphasized that the buyer's promise to pay sufficed to establish a security interest. A similar ruling was made by a Georgia court in International Harvester Credit Corp. v. Associates Financial Services Co. Inc. The appellant attempts to differentiate the Chrysler case by noting that the debtor had a trade-in vehicle, but this distinction is deemed insignificant. The court affirms that a good faith purchaser signing a purchase money security agreement should be recognized as a buyer in the ordinary course, regardless of technicalities regarding title transfer or possession timing. Furthermore, it rejects the appellant's claim that A.R.S. 44-3113 requires possession for a valid security interest, clarifying that this provision concerns sellers retaining possession and does not apply to the current creditor situation. The judgment is affirmed, with concurring opinions from DONOFRIO, P.J., and OGG, J.