## Facts

- Joseph M. Palmer bought a compact utility tractor and front loader from a dealer in January 2005 under a retail installment contract and security agreement later assigned to Deere & Co.
- The contract, signed by Palmer, indicated the purchase was for “personal, family or household” use; the alternative business/commercial use section was not selected.
- Palmer had connections to a greyhound kennel operation, and the Chapter 7 trustee asserted the equipment was intended for business use in kennel activities.
- The debtors filed a Chapter 7 petition in August 2005, and the trustee filed an adversary proceeding seeking to avoid Deere’s security interest as unperfected.
- Perfection turned on collateral classification under Ohio U.C.C. Article 9: consumer goods would permit automatic perfection of a purchase-money security interest upon attachment; business equipment would require a filed financing statement.
- Deere moved for summary judgment, relying chiefly on the written consumer-use designation in the contract.
- The trustee opposed summary judgment with an affidavit recounting Palmer’s out-of-court statements about intended business use; the court treated those statements as inadmissible hearsay for summary-judgment purposes.

## Issues

1. Whether the tractor and loader were “consumer goods” or business equipment under Ohio Article 9, based on the debtor’s intended use at the time the security interest attached.
2. If the goods were consumer goods, whether Deere’s purchase-money security interest was perfected upon attachment without filing, defeating avoidance under 11 U.S.C. § 544(a).
3. Whether the trustee produced admissible evidence sufficient to create a genuine dispute of material fact regarding intended use or alleged mischaracterization/collusion.

## Decision

- The court granted Deere’s motion for summary judgment.
- On the summary-judgment record, the tractor and loader were treated as consumer goods when the security interest attached.
- Deere was entitled to rely on the debtor’s signed, written consumer-use designation absent competent evidence to the contrary.
- The trustee’s affidavit repeating the debtor’s statements about intended business use was inadmissible hearsay and did not create a triable factual dispute.
- Because Deere’s purchase-money security interest in consumer goods was perfected upon attachment without filing, the trustee could not avoid the lien under § 544(a).

## Legal Principles

- Collateral classification as “consumer goods” is determined at the time the security interest attaches, based on the debtor’s intended primary use at that time.
- Under Ohio Article 9, a purchase-money security interest in consumer goods is perfected upon attachment without the need to file a financing statement.
- A secured party may rely on the debtor’s signed written representation of consumer use when classifying collateral, absent admissible evidence of contrary intent or creditor participation in misclassification.
- At summary judgment, a nonmovant must present admissible evidence (or evidence reducible to admissible form); hearsay statements offered for their truth cannot create a genuine issue of material fact.

## Conclusion

The bankruptcy court held that, with no admissible evidence contradicting the debtor’s signed consumer-use designation, the tractor and loader were consumer goods at attachment and Deere’s purchase-money security interest was automatically perfected, so the Chapter 7 trustee could not avoid the lien under § 544(a).


In re Palmer, 365 B.R. 816 (Bankr. S.D. Ohio 2007)