## Facts

- Inland Empire Distribution, LLC (Inland), a California company, bought three Bobcat utility vehicles in California in 2013.
- For each purchase, Inland executed promissory notes and security agreements in favor of Element Financial Corp. (Element), granting Element a security interest in the vehicles.
- Inland’s managing member, Omri Elkadar, personally guaranteed the loans.
- Elkadar moved the Bobcat vehicles to Florida and listed them for sale.
- The vehicles were sold by CM Global, Inc., d/b/a Inland Empire Distribution, Inc., a Nevada corporation, to Damage Services, Inc. (Damage).
- Damage later sold two of the Bobcats to Marcinkoski Gradall, Inc. (Marcinkoski).
- After the subsequent sales, Element sued Marcinkoski to enforce its security interest.
- Element filed UCC financing statements in California and Florida less than one year after the vehicles were moved to Florida.
- The trial court ruled for Marcinkoski on two grounds: (1) Element’s perfected security interest expired four months after the “debtor” moved to Florida, and (2) Marcinkoski was a buyer in the ordinary course of business who took free of Element’s security interest.

## Issues

1. Under the Florida/UCC continued-perfection statute, did Element’s perfection lapse four months after a change in the debtor’s location to Florida, or did Element have one year of continued perfection based on the interstate transfer/relocation of the collateral to a person who became a debtor in another jurisdiction?
2. Could Marcinkoski take the Bobcats free of Element’s security interest as a buyer in the ordinary course of business when the security interest was created by a prior party in the chain of title rather than by Marcinkoski’s immediate seller?

## Decision

- The appellate court reversed the trial court’s judgment for Marcinkoski.
- The court held that the four-month continued-perfection period tied to a debtor’s change of location did not apply on these facts; Element’s filing remained effective under the statute’s one-year continued-perfection rule applicable to an interstate transfer to a person who became a debtor in another jurisdiction.
- Because Element filed in Florida within the applicable one-year window, its security interest did not become unperfected.
- The court also held Marcinkoski was not protected by the buyer-in-the-ordinary-course rule because that protection applies only to a security interest “created by” the buyer’s seller, and Element’s security interest was not created by Marcinkoski’s seller.
- The case was remanded for further proceedings consistent with these rulings.

## Legal Principles

- For continued perfection after interstate events, the debtor whose “location” matters is the debtor tied to the secured obligation and the grant of the security interest; a guarantor’s residence or move does not, by itself, trigger the four-month change-of-location rule.
- When collateral is transferred and a transferee becomes a new debtor located in another jurisdiction, a perfected security interest may remain perfected for one year under the UCC’s interstate-transfer continued-perfection rule, and timely filing in the new jurisdiction preserves perfection.
- Buyer-in-the-ordinary-course protection cuts off only a security interest created by the buyer’s immediate seller; it does not eliminate a security interest created earlier in the chain of title by a different party.

## Conclusion

The court reversed because Element’s security interest remained perfected under the one-year continued-perfection rule applicable to the interstate transfer/relocation scenario and because Marcinkoski could not claim buyer-in-the-ordinary-course status to defeat a security interest that was not created by Marcinkoski’s own seller.


Element Financial Corp. v. Marcinkoski Gradall, Inc., 2017 WL 1175879 (2017)