## Facts

- First Financial Bank, N.A. (First Bank) loaned money to Lakota Watersports, Inc. (Lakota), a marine-products dealer.
- Lakota granted First Bank a security interest in nearly all of Lakota’s assets, including inventory and proceeds, and First Bank perfected by filing a UCC financing statement on February 2, 2005 (later continued in 2010).
- In 2006, Lakota sought additional inventory financing from GE Commercial Distribution Finance Corp. (GE).
- Before entering the financing arrangement, GE conducted a UCC search, identified First Bank as an existing secured creditor, and sent First Bank a “Notification of Purchase Money Security Interest” dated November 28, 2006.
- The PMSI notice was on GE letterhead, identified GE by name and address, described the collateral as “new and used boats and various other types of marine products,” and was sent by certified mail with return receipt requested.
- GE and Lakota executed their financing agreement, and GE filed its financing statement on November 30, 2006.
- Using GE’s purchase-money financing, Lakota acquired additional inventory, including three boats that later became the subject of the dispute.
- Lakota eventually defaulted on obligations owed to both GE and First Bank.
- On August 27, 2010, Lakota gave GE possession of the three boats.
- GE notified Lakota’s existing creditors, including First Bank, that it intended to liquidate the boats by private sale.
- First Bank demanded that GE turn over the boats or the proceeds from any sale, asserting First Bank’s earlier blanket security interest had priority.
- GE refused, asserting that its purchase-money security interest (PMSI) in inventory had priority because GE satisfied Ohio’s PMSI notice and perfection requirements.
- First Bank sued in federal court, and both sides sought summary judgment on priority.

## Issues

1. Whether GE’s PMSI notification was ineffective because it was not “authenticated” due to the absence of a handwritten signature.
2. Whether GE’s PMSI notification sufficiently described the inventory to satisfy Ohio’s Article 9 requirement that the notice “describe the inventory” covered by the PMSI.

## Decision

- The court denied First Bank’s motion for summary judgment.
- The court granted summary judgment to GE.
- The court held GE’s PMSI notification was properly authenticated even without a signature.
- The court held the notice’s description of collateral (new and used boats and other marine products) reasonably identified the inventory and satisfied the statutory notice requirement.
- Because GE met the PMSI-in-inventory requirements, GE’s interest in the boats (and resulting proceeds) had priority over First Bank’s earlier perfected blanket lien.
- The case was dismissed, with costs taxed to First Bank.

## Legal Principles

- A PMSI in inventory can take priority over a conflicting, earlier-perfected security interest if (among other conditions) the PMSI secured party perfects before the debtor receives possession of the inventory and sends an authenticated notification to the holder of the conflicting interest before the debtor receives possession, and the notification states the secured party expects to acquire a PMSI in inventory and describes that inventory. (UCC § 9-324; Ohio Rev. Code § 1309.324.)
- “Authenticate” under Article 9 is broader than “sign” and does not require a handwritten signature; a record may be authenticated if the secured party executes, adopts, or otherwise accepts it with intent to adopt or accept the record. (UCC § 9-102; Ohio Rev. Code § 1309.102.)
- Whether a record is authenticated can be shown by objective indicators such as the form of the document (e.g., letterhead identifying the sender), inclusion of the sender’s name and address, and the manner of transmission (e.g., certified mail with return receipt).
- A collateral description in a PMSI notification is sufficient if it “reasonably identifies” what is described; description by category or type (such as boats or marine products) can be adequate and need not list serial numbers or item-by-item details. (UCC § 9-108; Ohio Rev. Code § 1309.108.)
- When a PMSI in inventory has priority in the inventory, that priority reaches identifiable proceeds of the inventory under Article 9’s proceeds rules. (UCC § 9-315 and § 9-324; Ohio Rev. Code §§ 1309.315, 1309.324.)

## Conclusion

The court held that GE’s certified-mail PMSI notice, though unsigned, was authenticated under Ohio’s Article 9 definition and adequately described the inventory as boats and related marine products; because GE also timely perfected, GE’s PMSI had priority over First Bank’s earlier blanket lien in the three boats and the proceeds from their liquidation.


First Financial Bank, N.A., v. GE Commercial Distribution Finance Corp., 2012 U.S. Dist. LEXIS 54674, 77 U.C.C. Rep. Serv. 2d 416 (2012)