## Facts

- Roy Dale Adkins and Beth Ann Adkins filed a Chapter 13 petition in May 2010.
- Before bankruptcy, Beth Ann Adkins financed the purchase of replacement windows for the debtors’ residence through Wells Fargo Financial National Bank.
- The retail charge slip identified the goods as “windows” and granted Wells Fargo a purchase-money security interest (PMSI) in the windows.
- The windows were installed and physically incorporated into the residence.
- Wells Fargo did not record a fixture filing or otherwise obtain a real-property lien.
- Wells Fargo filed a proof of claim for approximately $6,618.31 as a secured claim based on its asserted PMSI in the windows.
- The debtors objected, seeking reclassification to unsecured on the grounds that (a) the creditor agreed not to claim a lien in the residence and/or (b) the PMSI did not continue after installation because the windows became “ordinary building materials” under Ohio’s U.C.C. Article 9.
- After a hearing and supplemental briefing, the court addressed whether any perfected security interest continued after installation.

## Issues

1. Whether a PMSI in windows continues as a perfected security interest after the windows are installed in a residence under Ohio Rev. Code § 1309.334.
2. Whether installed windows are “ordinary building materials” such that any Article 9 security interest in the goods does not continue after incorporation into the structure.
3. Whether, absent a fixture filing or real-property lien, the creditor’s claim must be treated as unsecured in the Chapter 13 case.

## Decision

- The court sustained the debtors’ objection to Wells Fargo’s proof of claim.
- The court held that Wells Fargo’s PMSI did not continue after the windows were installed in the residence because they became ordinary building materials incorporated into an improvement on land under Ohio Rev. Code § 1309.334.
- Because Wells Fargo had no fixture filing or other real-property lien, it lacked a secured interest enforceable in bankruptcy.
- Wells Fargo’s claim was reclassified from secured to general unsecured.

## Legal Principles

- Under Ohio Rev. Code § 1309.334, a security interest may continue in goods that become fixtures, but it does not continue in “ordinary building materials” once incorporated into an improvement on land.
- When collateral becomes ordinary building materials integrated into real property, Article 9 treats the materials as part of the realty rather than separate goods collateral.
- A creditor financing home-improvement items that will be incorporated into a residence cannot rely solely on a PMSI in the goods to maintain secured status after installation; a fixture filing or other real-property lien is required to preserve enforceable secured rights against the real property.
- Contract language disclaiming any lien on the residence supports the conclusion that the creditor has no real-property secured interest.

## Conclusion

The bankruptcy court determined that installed replacement windows constituted ordinary building materials under Ohio’s U.C.C. fixture statute, extinguishing any continuing Article 9 PMSI after installation; without a fixture filing or real-property lien, the creditor’s proof of claim could not be allowed as secured and was treated as unsecured.


In re Adkins, 444 B.R. 374 (Bankr. N.D. Ohio 2011)