In re Michael R. Borden

Michael Borden and his wife (debtors) operated a farm. Borden and his wife borrowed money from Genoa National Bank (the lender) (creditor) and gave the lender a security interest in all of their machinery and equipment. The lender properly perfected its security interest. Borden subsequently took a cornhead and a tractor (the equipment) to Bellamy’s Inc (the artisan) (creditor) for repairs. Borden could not pay for the repair work, so the artisan kept possession of the equipment. Borden and his wife filed for bankruptcy while the artisan still had possession of the equipment. Thereafter, Borden took the equipment from the artisan without the artisan’s permission. After Borden performed some work with the equipment, Borden returned the equipment to the artisan. During bankruptcy proceedings, the lender moved for a determination as to whether its security interest had priority over the artisan’s lien arising by operation of law. The bankruptcy court found that Nebraska had not adjudicated a similar case in which the artisan lost possession of the goods due to the debtor’s actions and that courts in other jurisdictions had reached different conclusions. Ultimately, the bankruptcy court ruled in the lender’s favor and reasoned that an artisan must maintain continuous possession of the goods to assert the artisan’s lien. The artisan appealed.