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Southtrust Bank v. Borg-Warner Acceptance Corp.

United States Court of Appeals for the Eleventh Circuit
760 F.2d 1240 (11th Cir. 1985)


Southtrust Bank (the Bank) (plaintiff) had a perfected security interest in the inventory of four debtors. Borg-Warner Acceptance Corporation (BWAC) (defendant) also had a perfected security interest in the same inventory. BWAC filed a financing statement after the Bank, but BWAC claims that its security interest is superior under the purchase-money security interest (PMSI) provisions of the Uniform Commercial Code (UCC). BWAC entered into security agreements with the debtors to finance the debtors’ purchases of inventory. These security agreements contained an after-acquired property clause. Under the financing arrangement between BWAC and the debtors, the debtors paid a percentage of the outstanding invoices each month, regardless of whether the inventory was sold. The Bank sued, seeking a declaratory judgment that the Bank’s security interest has priority. The district court granted summary judgment to the Bank, finding that the inclusion of the after-acquired property clause converted BWAC’s PMSI into an ordinary security interest. BWAC filed this appeal.

Rule of Law


Holding and Reasoning (Tuttle, J.)

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