In 2005, Piknik purchased equipment from Crouch for $369,865 that was delivered and installed in Piknik’s factory. Piknik offered 35 percent as a down payment and financed the rest from Crouch. Crouch failed to file a UCC-1 financing statement within 20 days of when Piknik took possession of the goods.

Although the equipment was fully installed in the factory, it was not operational when Piknik filed for bankruptcy a few months later. Wachovia Bank had filed a UCC-1 financing statement on all equipment owned by Piknik and claimed ownership of the equipment to secure its loan to Piknik.

CASE QUESTIONS

1. Was Piknik in possession of the goods even though the equipment was not operational? Why or why not?

2. Had Crouch filed a UCC-1 financing statement within 20 days, would it have priority over Wachovia’s security interest? Why or why not?