## Facts

- Kathleen Wilson and Mark Conti entered into a security agreement granting Wilson a security interest in Conti’s property, including his “equipment.”
- In 1996, Wilson filed a UCC-1 financing statement indicating collateral that included Conti’s “equipment.”
- Between 1998 and 1999, Conti executed security agreements with the Joseph M. Silver Trust (Silver Trust) granting it a security interest in eleven paintings.
- Silver Trust took possession of the eleven paintings to perfect its security interest.
- In probate proceedings concerning the Estate of Joseph M. Silver, the probate court classified seven paintings as “equipment” and four paintings as “consumer goods” owned primarily for Conti’s personal use.
- Based on those classifications, the probate court ruled that Wilson’s earlier filing perfected her interest in (and gave her priority to) the seven paintings classified as equipment.
- The probate court further ruled that Wilson’s filing did not perfect an interest in the four paintings classified as consumer goods, and it awarded priority in those four paintings to Silver Trust, which had perfected by possession.
- Wilson and Conti appealed, arguing that the probate court misclassified the four disputed paintings as consumer goods because Conti testified they were bought for business use and were displayed in model homes and company offices rather than in his home.

## Issues

1. Did the probate court clearly err in finding that the four disputed paintings were “consumer goods,” rather than “equipment,” based on Conti’s primary use of them under Michigan’s UCC?
2. If the four paintings were properly classified as consumer goods, did Wilson’s financing statement describing collateral as “equipment” leave her unperfected as to those paintings, making Silver Trust’s possessory security interest senior?

## Decision

- The Michigan Court of Appeals affirmed the probate court.
- The court upheld the probate court’s classification of four paintings as consumer goods.
- Because Wilson’s financing statement indicated “equipment” (and did not indicate consumer goods), Wilson’s security interest was unperfected as to the four consumer-goods paintings.
- Silver Trust, having perfected its security interest by possession, had priority in the four paintings classified as consumer goods.
- Wilson remained senior as to the seven paintings classified as equipment.

## Legal Principles

- Article 9 classifies “goods” by the debtor’s primary use; the same type of item can be consumer goods in one setting and equipment in another.
- “Consumer goods” are goods used or bought primarily for personal, family, or household purposes; “equipment” generally covers business-use goods that are not inventory, farm products, or consumer goods.
- Collateral classification is a fact question, and an appellate court reviews that finding for clear error, giving deference to the trial court’s assessment of the record.
- A financing statement perfects only as to collateral it sufficiently indicates; a filing limited to “equipment” does not perfect an interest in goods properly classified as consumer goods.
- A security interest in goods may be perfected by possession, and a perfected security interest has priority over a competing interest that is unperfected as to the same collateral.

## Conclusion

In In Re Estate of Silver, the Michigan Court of Appeals affirmed a probate court’s allocation of priority in eleven paintings based on Article 9’s use-based collateral categories: Wilson’s earlier UCC filing covered the paintings treated as equipment, but she was unperfected as to the four paintings found to be consumer goods, so Silver Trust’s possession-perfected interest prevailed as to those four.


In Re Estate of Silver, 2003 Mich. App. LEXIS 1389, 50 U.C.C. Rep. Serv. 2d 1196 (2003)