## Facts

- Pali Brothers Farms bought two combines in 1998 using New Holland Credit Company financing; New Holland obtained and perfected a purchase-money security interest (PMSI) by filing a financing statement.
- In 2000 and 2001, Pali Brothers borrowed from Lewiston State Bank and granted the Bank a security interest in all present and after-acquired equipment; the Bank perfected by filing financing statements.
- In January 2002, Greenline Equipment paid off Pali Brothers’ remaining debt to New Holland and received a lien release on the combines, but Greenline did not file to perfect any security interest in its own name tied to the payoff.
- In February 2002, two individual Pali brothers bought the combines from Greenline with financing from John Deere; John Deere filed a financing statement in March 2002.
- After defaults on the Bank loans and the John Deere obligation, John Deere repossessed the combines and, after receiving the Bank’s priority demand, assigned its security interest to Greenline.
- Greenline sold the combines without notifying the Bank or remitting sale proceeds.
- The Bank sued for return of the collateral or sale proceeds, asserting its perfected interest had priority; the trial court granted summary judgment for the Bank, and Greenline appealed. The Bank cross-appealed seeking attorney fees.

## Issues

1. Whether Greenline obtained a PMSI with priority over the Bank by paying off New Holland’s PMSI claim and characterizing the transaction as a “refinanced PMSI.”
2. Whether an assignment of John Deere’s later-perfected security interest to Greenline could elevate Greenline’s priority above the Bank’s earlier perfected blanket lien.
3. Whether the Bank, as prevailing party, was entitled to attorney fees under the governing agreements and Utah law.

## Decision

- The Utah Court of Appeals affirmed summary judgment for the Bank on priority.
- The court held Greenline did not hold a perfected PMSI (or other interest) with priority over the Bank’s earlier perfected security interest.
- The court ruled that Greenline’s payoff of New Holland and receipt of a lien release did not preserve New Holland’s PMSI superpriority for Greenline absent Article 9 perfection steps.
- The court held Greenline, as assignee of John Deere’s interest, took only the priority position John Deere had, which was subordinate to the Bank.
- The court upheld the Bank’s entitlement to recover the proceeds from Greenline’s sale of the combines.
- On cross-appeal, the court held the Bank was entitled to attorney fees and directed determination of the proper amount consistent with the opinion.

## Legal Principles

- PMSI “superpriority” exists only if the statutory requirements for attachment and perfection are satisfied; it does not transfer to a payoff party by implication.
- Article 9 is a notice-filing system; third parties may rely on the public record, and courts will not displace filing-based priority through nonstatutory “refinanced PMSI” or subrogation theories.
- When a secured party releases its lien and no successor perfects a continued or new security interest, the prior PMSI priority is lost as to later disputes.
- Absent a valid PMSI, priority between conflicting perfected security interests is generally governed by the first-to-file-or-perfect rule.
- An assignee of a security interest acquires no greater priority than the assignor possessed.
- A senior secured party may recover identifiable proceeds of collateral disposed of by a junior claimant when the disposition impairs the senior party’s interest.

## Conclusion

The court enforced Article 9’s filing-based priority scheme by rejecting Greenline’s claim that paying off a PMSI creditor preserved PMSI priority without proper perfection, holding the Bank’s earlier perfected blanket lien had priority and entitled the Bank to the combines’ sale proceeds and attorney fees.


Lewiston State Bank v. Greenline Equip., L.L.C., 147 P.3d 951 (Utah Ct. App. 2006)