A Purchase Money Security Interest - Essay Example

When Finance was unable to meet his obligations, various creditors attempted to seize the lawnmower. Sears argued that because it had a Purchase Money Security Interest (PMSI) in the lawnmower, its interest had perfected automatically.

Is Sears correct? In the above case, Sears was therefore correct to say that its PMSI had automatically perfected once it sold the lawnmower to Cosmo Fiscante on credit. This is because the lawnmower by Sears was a non-inventory collateral. After all, the debtor (Cosmo Fiscante) retained the good. This therefore automatically perfects the PMSI of Sears and hence Sears has the legal obligation to regain the lawnmower and take it back and not the other creditors who claim it.

Inventory collateral has to be followed by a notification to the debtor for the PMSI to be considered perfect. In the case of non-inventory collateral, no notification is required and once the good is given to the debtor, then the PMSI is considered to be perfected (Miller and Jentz, 454).