Southtrust Bank v. Borg-Warner Acceptance Corp.
United States Court of Appeals for the Eleventh Circuit
760 F.2d 1240 (1985)
Southtrust Bank (plaintiff) held a perfected security interest in the inventory of four debtors, and Borg-Warner Acceptance Corporation (BWAC, defendant), which financed the debtors' inventory purchases, also held a perfected security interest in the same inventory under agreements including an after-acquired property clause and payment terms requiring debtors to pay a percentage of outstanding invoices monthly regardless of whether specific inventory sold. BWAC's financing statement was filed after the Bank's, but BWAC argued its interest should nonetheless have priority as a purchase-money security interest (PMSI); the district court granted the Bank summary judgment, finding the after-acquired property clause converted BWAC's interest into an ordinary (non-priority) security interest, and BWAC appealed.
Whether the inclusion of an after-acquired property clause into a security agreement otherwise qualifying as a purchase-money security interest converts that interest into an ordinary security interest.