Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

تمرين 8

Citizens National Bank of Jessamine County v. Washington Mutual Bank
Court of Appeals of Kentucky, 309 S.W.3d 792 (2010).
FACTS Rose Day transferred land and a mobile home to Anthony and Kim Reynolds. The deed was duly recorded at the appropriate county office. The deed description did not mention the mobile home, but it was clear from the record that the Reynoldses were purchasing both from Day. The Reynoldses executed a mortgage conveying a security interest in the property to Washington Mutual Bank. There was no mention of the mobile home in the mortgage. Furthermore, the Reynoldses did not obtain a title certificate to the mobile home in their names. Because the mobile home was therefore not legally affixed to the real property, its character did not change from personal property to real property. Several years later, the Reynoldses obtained a second mortgage from Citizens National Bank of Jessamine County. Again, there was no description of the mobile home in the mortgage. When the Reynoldses subsequently defaulted on both loans, Washington Mutual filed a complaint, claiming lien priority on both the real estate and the mobile home. Citizens was listed as an interested party and was served with the complaint. After being served, Citizens and the Reynoldses executed a title lien statement regarding the mobile home, which was recorded in the county clerk's office. The trial court ruled that the filing of the complaint and notice of the lawsuit by Washington Mutual created a priority claim in the mobile home. Citizens appealed that decision. The sole issue to be decided in the appeal was the priority of competing liens in the mobile home.
ISSUE Did Citizens' security interest in the mobile home take priority over Washington Mutual's?
DECISION Yes. The state appellate court reversed the trial court's decision. Washington Mutual's filing of a complaint and a notice of a pending lawsuit did not create a priority lien on the mobile home but applied only to the interest in the real estate. Citizens' security interest in the mobile home had priority because it was perfected when Citizens recorded the title lien.
REASON The UCC explicitly "provides that the sole means of perfecting a security interest in personal property for which a certificate of title is issued is by placing a notation of the lien on the certificate of title." The court reasoned that Citizens (and the Reynoldses) had so perfected its lien, but Washington Mutual had not. "It is fundamental that unperfected security interests are subordinate to perfected security interests." It was irrelevant that Citizens had knowledge that Washington Mutual had filed a notice of a claim to both the real property and the mobile home. "Because Washington Mutual failed to perfect its lien under the mandates of the [UCC], its interest in the Reynoldses' manufactured [mobile] home must necessarily give way to Citizens' perfected claim."
WHAT IF THE FACTS WERE DIFFERENT? Suppose that the mobile home had been affixed to the land and was regarded as real property. In that situation, which of the two security interests would take priority? Discuss.