Aubry purchased a washing machine, a freezer, and a refrigerator from Gateway Appliances on credit, giving Gateway a security interest in the appliances. The appliances were for Aubry's household use. Gateway did not file a financing statement. Six

Question

months later, Aubry had a garage sale and sold the appliances to Tam. Tam bought the appliances for her student rental property. Aubry left town owing money on the appliances. If Gateway can trace the appliances to Tam, can Gateway repossess the appliances? Explain in detail.

Answer 1

Yes. Generally with consumer goods, a buyer takes the goods free of a security interest if he is not aware of the security interest, he pays value for the goods, he is buying for his own family use, and the secured party has not yet filed a financing statement. Here, however, Tam bought these items for her business venture, the rental property. She is not buying the items for her personal use. So, even though Gateway did not file a financing statement, it can retrieve the property if the items can be traced to Tam.