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Allowing Dual Status For Purchase-Money Security Interests In Consumer-Goods Transactions, Richard Nowka

Richard H. Nowka

This article advocates that courts should allow a purchase-money security interest in consumer goods to have dual status—part purchase-money and part nonpurchase-money—after the parties refinance the purchase-money obligation or after the secured party makes a future advance. Courts have struggled with this issue since the enactment of Article 9 because the definition of purchase-money security interest (U.C.C. 9-103) arguably permits a court to apply dual status or to hold that a refinancing or future advance “transforms” the purchase-money security interest into a nonpurchase-money security interest. Although Revised Article 9 adopts the dual status rule, a compromise among the drafting committee …