In re Daniels

Bobby Lee Daniels (debtor) owned a business named Daniels Marine, Inc. Daniels obtained financing from ITT Diversified Credit Corporation (ITT) (creditor) to purchase boats, motors, and related accessories for Daniels Marine. To secure the financing, ITT took a security interest in certain inventory and equipment. ITT perfected its security interest by filing the requisite financing statements. Thereafter, the Small Business Administration through the American Bank of Commerce (creditors) loaned Daniels Marine money and took a purchase-money security interest in Daniels Marine’s inventory and equipment. The Small Business Administration and American Bank of Commerce sent a written notice regarding their conflicting interest to ITT. The notice stated that American Bank of Commerce had taken or planned to take an interest in certain inventory and equipment owned or thereafter acquired by Daniels Marine. However, the notice did not use the words “purchase money.” Daniels subsequently filed for bankruptcy. Per the bankruptcy court’s order, the Small Business Administration conducted a foreclosure sale in which certain property was sold that ITT claimed a superior interest in. Accordingly, ITT moved for a determination that it had priority over the conflicting interest and was, therefore, entitled to the proceeds of the items sold. ITT argued that the notice it had received was ineffective because it did not contain the words “purchase money.”