Peoples Bank & Trust Co. v. Applewhite (In re 20th Century Enterprises, Inc.)

On August 18, 1989, Tishomingo County, by and through the Tishomingo County Board of Supervisors, entered into a memorandum agreement with 20th Century Enterprises, Inc. (20th Century) (debtor). Under the memorandum agreement, Tishomingo County agreed to purchase a manufacturing facility from a third party for $850,000, which included certain real property, buildings, and equipment. 20th Century agreed to lease the facility, including the equipment, from Tishomingo County and pay enough annual rent to repay Tishomingo County’s acquisition costs over a 15-year period, plus interest. After the 15 years, Tishomingo County agreed to sell the facility, including the equipment, to 20th Century for $100. On the same date, Tishomingo County purchased the manufacturing facility from the third party and entered into a lease-purchase agreement with 20th Century on the terms described in the memorandum agreement. In October of 1989, the lease-purchase agreement was recorded in the county land records. Tishomingo County never filed a Uniform Commercial Code (UCC) financing statement. In 1990, 20th Century obtained a loan from Peoples Bank and Trust Company (Peoples Bank) and executed a promissory note and security agreement. Peoples Bank filed UCC financing statements that covered the subject equipment. 20th Century subsequently filed for bankruptcy. Tishomingo County and Peoples Bank (creditors) both asserted security interests in the equipment and filed motions for summary judgment.