## Facts

- James Lucius Manuel bought household furniture from Roberts Furniture Co. on credit and granted Roberts a purchase-money security interest in the furniture.
- Manuel later bought a television from Roberts on credit under a second agreement that rolled the remaining furniture balance into a single consolidated balance with the television debt.
- The second agreement extended the security interest across both purchases and broadly secured present and future debts; it did not allocate payments to particular items or specify payoff order.
- Roberts did not file a financing statement and did not perfect by possession.
- Manuel filed bankruptcy; Roberts asserted it held an automatically perfected purchase-money security interest in the consumer goods and filed a secured claim.

## Issues

1. Whether Roberts’ security interest in previously purchased furniture retained purchase-money status after an “add-on” agreement made the furniture collateral for the television debt and consolidated obligations, so that filing was unnecessary for perfection under Georgia UCC.
2. Whether the lack of filing left Roberts’ interest unperfected and subordinate to the bankruptcy trustee’s rights.

## Decision

- The Fifth Circuit affirmed.
- The court held Roberts’ security interest in the furniture lost its purchase-money character when the later agreement made the furniture secure debts beyond its own price.
- Because the interest was not a purchase-money security interest in consumer goods, it was not automatically perfected; absent filing or possession, it was unperfected.
- The unperfected interest was subordinate to the bankruptcy trustee, who could defeat Roberts’ claimed secured status in the furniture.

## Legal Principles

- A purchase-money security interest exists only to the extent the collateral secures its own price under Georgia’s UCC definition of a PMSI.
- Automatic perfection for consumer-goods PMSIs applies only while the security interest remains purchase-money in nature.
- An “add-on,” dragnet, or cross-collateralization clause that makes collateral secure obligations beyond its own price destroys purchase-money status at least as to the earlier-purchased goods.
- A non-PMSI security interest in consumer goods generally requires filing (or another permitted method of perfection); if unperfected, it is vulnerable to the bankruptcy trustee’s priority/avoidance powers.

## Conclusion

The court held that consolidating balances and cross-collateralizing prior consumer goods for later purchases caused the creditor’s security interest in the earlier furniture to cease being purchase-money, eliminating automatic perfection and leaving the interest unperfected and ineffective against the bankruptcy trustee.


In re Manuel, 507 F.2d 990 (5th Cir. 1975)