## Facts

- Piknik Products Company, Inc. operated a plant in Montgomery, Alabama and filed a Chapter 11 bankruptcy case.
- Wachovia Bank, N.A. (as successor to the original lender) held a security interest granted in 1995 in essentially all of Piknik’s personal property, including equipment, and properly perfected and continued that interest.
- Crouch Supply Company proposed to sell and install a “Juicy Juice System” at Piknik’s plant for $369,865 plus additional costs, requiring a 35% down payment and stating the seller retained title until paid in full; the proposal selected Texas law.
- Piknik paid the 35% down payment ($129,452.75) on May 26, 2005.
- By July 2005, Crouch had delivered, assembled, and bolted most of the system to the floor at Piknik’s facility; the system was not fully operational when Piknik’s finances deteriorated.
- Piknik did not pay the remaining contract balance; Crouch later asserted rights based on retained title, a purchase-money security interest (PMSI), and mechanic’s/statutory lien theories.
- Crouch filed an adversary proceeding seeking a declaration that the system was not estate property due to retained title or, alternatively, that Crouch had a superior lien; Wachovia intervened asserting priority under its preexisting perfected lien.
- The parties filed cross-motions for summary judgment, and Piknik aligned with Wachovia.

## Issues

1. Whether Crouch’s contractual “retention of title” left Crouch as owner of the system or merely created a security interest under the governing law.
2. Whether Crouch had a PMSI in equipment that could take priority over Wachovia’s earlier perfected blanket lien, and whether Crouch timely perfected that PMSI.
3. When the debtor “received possession” of the equipment for purposes of starting the 20-day PMSI perfection period, given delivery, installation, and lack of full operability.
4. Whether Crouch held a valid mechanic’s or statutory lien under Texas or Alabama law that was prior to Wachovia’s perfected security interest.

## Decision

- Wachovia’s motion for summary judgment was granted; Crouch’s motion was denied.
- The system was property of the bankruptcy estate; Crouch’s title-retention clause did not preserve ownership after delivery.
- Crouch’s asserted PMSI did not achieve priority because Crouch did not perfect within 20 days after Piknik received possession.
- Crouch’s mechanic’s/statutory lien theories failed on statutory requirements and, in any event, did not defeat Wachovia’s earlier perfected security interest.

## Legal Principles

- Under the UCC as adopted in Texas, a seller’s retention or reservation of title in goods delivered to the buyer is limited to a reservation of a security interest; it does not keep the seller as owner after delivery.
- A PMSI in equipment obtains priority over a conflicting security interest only if the secured party perfects (typically by filing) within 20 days after the debtor receives possession of the collateral.
- For PMSI timing, the debtor receives possession when the goods are delivered and under the debtor’s control at its premises; completion, testing, or full operability is not required.
- Mechanic’s or statutory lien claimants must satisfy statutory prerequisites (including filing/notice/timing), and such liens do not displace a prior perfected Article 9 security interest absent controlling statutory priority.

## Conclusion

The court held that the seller’s title-retention language functioned only as a security interest, and because the seller did not timely perfect a PMSI (and did not establish a superior statutory lien), the bank’s earlier perfected blanket security interest had priority in the installed equipment.


In re Piknik Prods. Co., 346 B.R. 863 (Bankr. M.D. Ala. 2006)