## Facts

- Pinnacle Financial Services, Inc., a manufactured-home dealer, obtained floor-plan financing from Deere Credit Services, Inc.
- Deere took a purchase-money security interest in Pinnacle’s manufactured-home inventory and proceeds and perfected by filing a UCC-1 financing statement in April 1996.
- Pinnacle purchased a manufactured home using Deere’s financing and placed it on Pinnacle’s Tremonton, Utah land, where the home became affixed.
- Around the same time, Pinnacle executed a trust deed on the Tremonton property in favor of Sodberry Ltd. to secure a $35,000 loan.
- Pinnacle defaulted on both the Deere and Sodberry obligations.
- Sodberry’s trustee conducted a nonjudicial foreclosure sale of the real property, selling the land together with the affixed manufactured home.
- After paying foreclosure expenses and Sodberry’s debt, the trustee deposited excess sale proceeds with the district court due to competing claims.
- Karen H. Schriever obtained and recorded a judgment lien against Pinnacle’s real property and later purchased the property at the foreclosure sale.
- Deere, Schriever, and the Snowbird Trust (through its trustee, Tustian) asserted priority claims to the excess proceeds.
- The district court granted summary judgment to Deere, concluding Deere had priority in the excess proceeds whether the home was chattel or a fixture.
- On appeal, Deere did not pursue the theory that the home remained chattel; the case proceeded on the assumption the home was a fixture.

## Issues

1. Under former UCC Article 9, does a perfected security interest in a manufactured home that has become a fixture continue into excess proceeds from a real property foreclosure sale of the land to which the fixture is attached?
2. If not, does a judgment lien creditor have priority over the secured party in the surplus real estate foreclosure proceeds?

## Decision

- The Utah Supreme Court reversed the summary judgment for Deere and remanded.
- The court held that, under former Article 9, Deere’s security interest in the fixture did not continue into the proceeds of the real property foreclosure sale.
- Because Deere could not claim the foreclosure surplus as Article 9 “proceeds” of its collateral, Deere was not entitled to priority in the excess proceeds over Schriever’s judgment lien claim.

## Legal Principles

- Under former UCC Article 9, a security interest continues in “proceeds” of personal property collateral, but that concept does not extend to surplus proceeds generated by a foreclosure sale of real property that includes fixtures.
- When collateral is treated as a fixture and is sold as part of a real property foreclosure, distribution of the foreclosure proceeds is governed by real-property foreclosure rules and priorities, not by Article 9’s personal-property proceeds provisions.
- A secured party’s fixture-related protection under former Article 9 lies in fixture priority and filing rules, not in an automatic claim to surplus proceeds from a real estate foreclosure sale.
- The applicable law is the version of Article 9 in effect when the security interest was created and perfected; the decision applies the former (pre-revision) Article 9.

## Conclusion

The Utah Supreme Court held that, under former Article 9, a secured creditor’s perfected interest in a manufactured home treated as a fixture does not attach to surplus proceeds from a foreclosure sale of the real property; the district court’s award of priority to the secured creditor in those proceeds was reversed and the case was remanded.


Tustian v. Schriever, 34 P.3d 755 (Utah 2001)