Giant Wholesale agreed to supply Hendersonville Food Center with groceries if th

Question

Giant Wholesale agreed to supply Hendersonville Food Center with groceries if the owner, William Page, would guarantee all debts incurred by Hendersonville. Page agreed, and a security agreement was drawn up. The security agreement gave Giant a security interest in Hendersonville's groceries and equipment. Giant failed to file a financing statement properly. When Hendersonville ran into financial difficulty, Page turned over the checking account to Giant. When this maneuver did not work, Giant repossessed all of Hendersonville's inventory. Page later went bankrupt. Gray, the bankruptcy trustee, brought a suit against Giant, claiming that the inventory was part of Page's property and thus subject to the bankruptcy proceeding. Gray argued that because the financing statement had not been filed, Giant's security interest had not been perfected. Was Gray correct? Explain. Use and apply the relevant legal concepts, rules of law, and issues in your answers

Explanation / Answer

As per the above case, Gray alleges that since financial statement were not filed properly by Giant, his security interest cannot be perfected, but as per the law it is not necessary to file a financial statement to perfect the security interest in any property pledged as security that a secured person or party owns.

Since Giant repossessed the inventory legitimately due to the negligence of Page, it perfected the security interest in Hendersonville food center and it is not subordinated to the powers and interest of the trustee under Bancruptcy Reform Act Sec. 544(a)(1) as alleged by Gray against Giant in the above case.

Hence, considering the above rule of law and facts it may be concluded that Gray was not correct.

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