Grimes purchased a new Dodge car from Hornish, a franchised Dodge dealer. The sa
ID: 2456350 • Letter: G
Question
Grimes purchased a new Dodge car from Hornish, a franchised Dodge dealer. The sale was made in the ordinary course of Hornish’s business. Grimes paid Hornish the purchase price of the car at the time of the sale. Hornish had borrowed money from Sterling Acceptance and had given it a perfected security interest in its inventory, including the car Grimes bought. Hornish defaulted on its loan to Sterling and Sterling then tried to recover the Dodge from Grimes. Was the car Grimes bought from Hornish still subject to Sterling Acceptance’s security interest?
Explanation / Answer
Yes, the car Grimes bought from Hornish still subject to Sterling Acceptance security interest because Sterling Acceptance has perfected security interest in the inventory which includes the car bought by Grimes.
When a security interest in property is superior to other interests and claims (third parties) to the property, it is said to be perfected. That means Sterling has superior right on the car and in case of default by Hornish it can claim the loan recovery from the car.
If a security interest has not been perfected, the secured party's claim to the collateral property may be subordinate to any number ofcreditors.But in this case sterling has security interest in the car so he would have right.
if any buyer knows that another party has a security interestin the property at the time the buyer made the purchases, the secured party(sterling)retains the first claim to the property and may keep the propertyout of that buyer's possession until the debt associated with the secured property is fully paid.
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