## Facts

- Harbor Federal Savings & Loan Association loaned money to Dubose Jewelry Company, Inc., taking a security interest in inventory and in then-existing and after-acquired accounts and chattel paper.
- Harbor Federal perfected its security interest by filing financing statements under Florida’s UCC Article 9.
- Blazer Financial Services, Inc. purchased a portfolio of Dubose Jewelry’s retail installment contracts/accounts (including chattel paper) with a face value of about $107,567.53 for $64,876.51.
- Blazer took possession of the chattel paper except for 29 contracts.
- Dubose Jewelry later filed for bankruptcy.
- Harbor Federal claimed its prior perfected security interest continued in the chattel paper and proceeds, and sued Blazer for conversion.
- Blazer asserted it qualified as a good-faith purchaser of chattel paper for new value, taking possession in the ordinary course and without knowledge that the purchase violated Harbor Federal’s rights, and therefore took free of Harbor Federal’s interest under UCC § 9-308.

## Issues

1. Under UCC § 9-308, does a qualifying purchaser of chattel paper take priority only up to the amount of “new value” paid, or priority in the entire chattel paper (including the right to collect its full face amount and proceeds) over an inventory financier’s proceeds-based security interest?

## Decision

- The appellate court reversed the damages judgment against Blazer.
- The court held that, if the purchaser meets UCC § 9-308’s requirements, the purchaser has priority in the chattel paper itself, not merely to the extent of the purchase price/new value advanced.
- Because Blazer’s priority was not capped at its discounted purchase price, Harbor Federal could not recover the difference between face value and the amount Blazer paid on a conversion theory.

## Legal Principles

- A purchaser of chattel paper who gives new value and takes possession in the ordinary course of business has priority over a security interest in that chattel paper claimed as proceeds of inventory, even if the purchaser knows the paper is subject to such a security interest.
- The “new value” requirement in UCC § 9-308 is a condition to obtain priority; it is not a limitation that caps the amount or scope of the purchaser’s priority once the statute applies.
- When UCC § 9-308 grants the purchaser priority in the chattel paper, that priority extends to the full rights represented by the chattel paper, including collection of the full obligation and related proceeds, defeating a prior secured party’s conversion claim premised on a superior interest in the paper.

## Conclusion

The court held that a chattel-paper purchaser who satisfies UCC § 9-308 takes priority in the entire chattel paper, not just up to the new value paid, and therefore reversed a damages award that treated the purchase discount as recoverable by the prior inventory lender under a conversion theory.


Blazer Fin. Servs., Inc. v. Harbor Fed. Sav. & Loan Ass’n, 623 So. 2d 580 (Fla. Dist. Ct. App. 1993)