Kunkel v. Sprague National Bank

The Morkens granted Sprague National Bank (defendant) a security interest in their inventory, which Sprague perfected by filing. Separately, Hoxie Feeders, Inc. (defendant) sold Morken cattle and reserved a purchase-money security interest (PMSI), which it perfected by taking possession of the cattle. When the Morkens entered Chapter 11 bankruptcy and Hoxie sold the cattle, bankruptcy trustee Kunkel (plaintiff) sued to determine who held priority to the sale proceeds. The bankruptcy court found both parties held perfected security interests but that Hoxie's PMSI carried superpriority, granting Hoxie summary judgment; the district court affirmed on alternative grounds, reasoning a PMSI holder perfecting by possession need not give notice, or alternatively that Morken lacked sufficient "rights in the collateral" to grant Sprague a security interest at all.