Question

Carrie financed the purchase of a lawn mower from Riding Galore and signed a promissory note and security agreement covering the purchase. Riding Galore did not file a financing statement. Carrie, in need of money, had a garage sell. Mickey bought Carrie’s lawn mower. Mickey was unaware of the history, with respect to the security agreement, of the lawn mower.

Mickey also bought a big screen TV from Better Buy Store. The TV, while in inventory at Better Buy Store, was subject to a security interest in favor of City Bank. City Bank had perfected its security interest by filing. Mickey, by coincidence, knew of this security interest when he purchased the TV.

Neither Carrie nor Best Buy Store paid their secured creditors. Those secured creditors want to repossess the collateral that is now in the possession of Mickey. In a lawsuit between Riding Galore vs. Mickey, what is the likely outcome? In the lawsuit of City Bank vs. Mickey, what is the likely outcome?

Answer 1

Given that Carrie and Riding Galore, signed a promissory note and security agreement covering the purchase of a lawn mower, but they did not file the financing statement. In another case, Better Buy Store’s TV has subject to a security interest in favor of City Bank that is perfected the security interest by filing. When both the creditors wanted to repossess the collateral, it is the possession of Mickey.
In a lawsuit between Riding Galore and Mickey, Mickey will win the lawsuit as Riding Galore does not have any financing evidence as he did not fill the financing statement.
In the other case, in a lawsuit between City Bank and Mickey, City Bank will win the lawsuit as City Bank has the evidence of the security interest because it had perfected the security interest by filing.