Okla. Stat. tit. 12A § 1-9-320

Current through Laws 2024, c. 453.

Section 1-9-320 - Buyer of goods

(a) Except as otherwise provided in subsection (e) of this section, a buyer in ordinary course of business, other than a person buying farm products from a person engaged in farming operations, takes free of a security interest created by the buyer's seller, even if the security interest is perfected and the buyer knows of its existence.

(b) Except as otherwise provided in subsection (e) of this section, a buyer of goods from a person who used or bought the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys:

(1) without knowledge of the security interest;

(2) for value;

(3) primarily for the buyer's personal, family, or household purposes; and

(4) before the filing of a financing statement covering the goods.

(c) To the extent that it affects the priority of a security interest over a buyer of goods under subsection (b) of this section, the period of effectiveness of a filing made in the jurisdiction in which the seller is located is governed by subsections (a) and (b) of Section 1-9-316 of this title.

(d) A buyer in ordinary course of business buying oil, gas, or other minerals at the wellhead or minehead or after extraction takes free of an interest arising out of an encumbrance.

(e) Subsections (a) and (b) of this section do not affect a security interest in goods in the possession of the secured party under Section 1-9-313 of this title.

Okla. Stat. tit. 12A, § 1-9-320

Added by Laws 2000 , SB 1519, c. 371, § 40, eff. 7/1/2001.

Oklahoma Code Comment

Prior to the original adoption of the UCC in Oklahoma in 1961, former 46 Okla. Stat. section 93 contained a similar provision to section 9-320 relating to inventory. It was, however, more expansive in that sales of "goods, wares and merchandise" were free of any lien no matter by whom the lien was created. Kroeger v. Gore, 422 P.2d 440 (Okl. 1967). The 1961 UCC at section 9-307 limited the protection to buyers in the course of business and cut off only those security interests created by the seller, thereby leaving intact perfected security interests created by prior parties. (As to unperfected security interests, see old section 9-301(1)(c) , and revised section 9-317 .)

Revised section 9-320 carries forward this rule of old section 9-307 , but there is a substantial change as to who is a buyer in the ordinary course of business. In Tanbro Fabrics Corp. v. Deering Milliken, Inc., 350 N.E. 2d 590 (N.Y. 1976) the buyer in the ordinary course did not take possession of the goods purchased. This was common in the industry. However, in this instance the goods were in the possession of the secured party. The court made no distinction between perfection by possession and perfection by filing. The buyer was protected and the secured party lost its priority despite possession of the collateral. Under the revision, an ordinary course of business buyer is required to take or have a right to possession of the collateral in order to receive the protections of this section. For the buyer to be protected, the sale does not have to be at retail. Sales between dealers, where otherwise in the normal course of business, will be included. This continues prior law. P & E Finance Co. v. Stonecipher, 386 P.2d 765 (Okl. 1963).

Some security interests may be deemed to be "created by the seller" when the interest is actually created by an agent of the seller. Adams v. City Nat. Bank and Trust Co. of Norman, 565 P.2d 26 (Okl. 1977). The protections of this section are not dependant on the character or value of the collateral sold nor the method of perfection. Airplanes may be sold free of liens even though perfection is governed by the Federal Aviation Act. Idabel Nat. Bank v. Tucker, 546 P.2d 1287 (Okl. App. 1975). Fixtures installed by a contractor may be sold free of the Article 9 security interest by the builder. O'Dell v. Kunkel's, Inc., 581 P.2d 878 (Okl. 1978).

A buyer of consumer goods for consumer purposes from another consumer now is entitled to the protections of this section if the secured party relied on automatic perfection. Revised section 9-320(b) . This changes Oklahoma law as Oklahoma had not adopted the predecessor rule at old section 9-307(2) . This provides an incentive to perfect a purchase-money security interest in consumer goods by filing despite the automatic perfection under section 9-309(1) , as such a filing will defeat a consumer buyer's claim under section 9-320(b) . A secured party perfecting by filing will be able to follow its collateral despite such a sale. Thus, purchase-money lenders may want to consider whether filing to obtain the benefits of this section is worth the cost.

The protection of this section does not extend to buyers of farm products. They are protected under other laws. In that regard, the protection with respect to farm products at revised sections 9-320.1 --9-320.7 expands that given by nonuniform amendment in prior sections 9-307.1 --9-307.8. Under old section 9-307 , only buyers of livestock in the ordinary course of business from a person engaged in farming or ranching operations took subject to the security interest created by the seller. This state law rule was modified by the Food Security Act, 7 U.S.C. section 1631 . In response, Oklahoma adopted a central filing scheme which was contained in former sections 9-307.1 --9-307.8. These provisions were moved to new sections 9-320.1 --9-320.7. The protections to lenders embodied in these sections, however, can be lost through inaction on the part of the lender. First Nat'l Bank of Okarche v. Lepak, 961 P. 2d 194 (1998)

Moreover, the difficulty of determining in a particular circumstance whether the item purchased is inventory, so that the buyer would be protected, or farm products, so that the protection would be lost, continues. See First Nat. Bank and Trust Co. of Oklahoma City v. Iowa Beef Processors, Inc., 626 F.2d 764 (10th Cir. 1980). See generally Drew L. Kershen and Alvin C. Harrell, Agricultural Finance B Comparing the Current and Revised Article 9, 33 U.C.C. L.J. 169 (2000).