A perfected security interest is far from perfect. We examined several exceptions to normal perfection rules involving BIOCs, consumer goods and so on. Are the exceptions reasonable? Should UCC change to give the holder of a perfected interest absolute rights against absolutely everyone else?

A BIOC takes the goods free of a security interest created by his seller, even though the secu- rity interest is perfected." Suppose that, a month before Plato made his purchase, Socrates bor- rowed $200,000 from the Athenian Bank. Athenian took a security interest in all of Socrates' trees and perfected by filing. Then Plato purchased his 500 hemlocks. If Socrates defaults on the loan, Athenian will have no right to repossess the 500 trees that are now at the Garden Supply. Plato took them free and clear. (Of course, Athenian can still attempt to repossess other trees from Socrates.) The BIOC exception is designed to encourage ordinary commerce. A buyer making routine purchases should not be forced to perform a financing check before buying But the rule creates its own problems. A creditor may extend a large sum of money to a merchant based on collateral, such as inventory, only to discover that by the time the merchant defaults, the collateral has been sold. Because the BIOC exception undercuts the basic protec- tion given to a secured party, the courts interpret it narrowly. BIOG status is available only if the seller created the security interest . Often, a buyer will purchase goods that have a security inter- est created by someone other than the seller. If that happens, the buyer is not a BIOC. However, should that rule be strictly enforced even when the results are harsh? You make the call. You Be the Judge Conecco Finance Servicing Corp. v. Lee 2004 WL. 1243417:2004 Tex. App. LEXIS 5035 Teras Court of Appeals, 2004 Facts: Lila Williams purchased a new Roadtrek 200 motor home from New World R.V., Inc. She paid about $14,000 down and financed $63,000, giving a security interest to New World. The RV company assigned its security inter- est to Conseco Finance, which perfected. Two years later, Williams returned the vehicle to New World (the record does not indicate why), and New World sold the RV to Robert and Ann Lee for $42,800. A year later, Williams defaulted on her payments to Conseco. The Lees sued Conseco, claiming to be BIOCs and asking for a court declaration that they had sole title to the Roadtrek. Conseco counterclaimed, seeking title based on its perfected security interest. The trial court ruled that the Lees were BIOCs, with full rights to the vehicle. Conseco appealed. You Be the Judge: Were the Lees BIOCS? Argument for Conseco: Under the UCC, a BIOC takes free of a security interest created by the buyer's seller. The buyers were the Lees. The seller was New World. New World did not create the security interest-Lila Williams did. There is no security interest created by New World. The security interest held by Conseco was created by someone else (Williams) and is not affected by the Lees's status as BIOCs. The law is clear, and Conseco is entitled to the Roadtrek. Argument for the Lees: Conseco weaves a clever argument, but let's look at what they are really saying. Two honest buyers, acting in perfect good faith, car walk into an RV dealership, spend $42,000 for a used vehicle, and end up with-nothing. Conseco claims it is entitled to an RV that the Lees paid for because some- one that the Lees have never dealt with, never even heard of, gave to this RV seller a security interest that the seller, years earlier, passed on to a finance company. Conseco's argument defies common sense and the goals of Article 9. A BIOC takes the goods free of a security interest created by his seller, even though the secu- rity interest is perfected." Suppose that, a month before Plato made his purchase, Socrates bor- rowed $200,000 from the Athenian Bank. Athenian took a security interest in all of Socrates' trees and perfected by filing. Then Plato purchased his 500 hemlocks. If Socrates defaults on the loan, Athenian will have no right to repossess the 500 trees that are now at the Garden Supply. Plato took them free and clear. (Of course, Athenian can still attempt to repossess other trees from Socrates.) The BIOC exception is designed to encourage ordinary commerce. A buyer making routine purchases should not be forced to perform a financing check before buying But the rule creates its own problems. A creditor may extend a large sum of money to a merchant based on collateral, such as inventory, only to discover that by the time the merchant defaults, the collateral has been sold. Because the BIOC exception undercuts the basic protec- tion given to a secured party, the courts interpret it narrowly. BIOG status is available only if the seller created the security interest . Often, a buyer will purchase goods that have a security inter- est created by someone other than the seller. If that happens, the buyer is not a BIOC. However, should that rule be strictly enforced even when the results are harsh? You make the call. You Be the Judge Conecco Finance Servicing Corp. v. Lee 2004 WL. 1243417:2004 Tex. App. LEXIS 5035 Teras Court of Appeals, 2004 Facts: Lila Williams purchased a new Roadtrek 200 motor home from New World R.V., Inc. She paid about $14,000 down and financed $63,000, giving a security interest to New World. The RV company assigned its security inter- est to Conseco Finance, which perfected. Two years later, Williams returned the vehicle to New World (the record does not indicate why), and New World sold the RV to Robert and Ann Lee for $42,800. A year later, Williams defaulted on her payments to Conseco. The Lees sued Conseco, claiming to be BIOCs and asking for a court declaration that they had sole title to the Roadtrek. Conseco counterclaimed, seeking title based on its perfected security interest. The trial court ruled that the Lees were BIOCs, with full rights to the vehicle. Conseco appealed. You Be the Judge: Were the Lees BIOCS? Argument for Conseco: Under the UCC, a BIOC takes free of a security interest created by the buyer's seller. The buyers were the Lees. The seller was New World. New World did not create the security interest-Lila Williams did. There is no security interest created by New World. The security interest held by Conseco was created by someone else (Williams) and is not affected by the Lees's status as BIOCs. The law is clear, and Conseco is entitled to the Roadtrek. Argument for the Lees: Conseco weaves a clever argument, but let's look at what they are really saying. Two honest buyers, acting in perfect good faith, car walk into an RV dealership, spend $42,000 for a used vehicle, and end up with-nothing. Conseco claims it is entitled to an RV that the Lees paid for because some- one that the Lees have never dealt with, never even heard of, gave to this RV seller a security interest that the seller, years earlier, passed on to a finance company. Conseco's argument defies common sense and the goals of Article 9