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Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 04-2521

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In re: Master Services, Inc. *

*

Debtor, *

*

_________________________ *

*

Master Services, Inc., *

*

Appellee, * Appeal from the United States

* District Court for the

v. * Western District of Missouri.

*

Empire Bank, * [UNPUBLISHED]

*

Defendant-Appellee, *

*

Heidelberg Print Finance Americas, *

Inc., *

*

Appellant. *

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Submitted: October 28, 2005

Filed: March 28, 2006

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Before MURPHY, COLLOTON, and BENTON, Circuit Judges.

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PER CURIAM.

Appellate Case: 04-2521 Page: 1 Date Filed: 03/28/2006 Entry ID: 2026054
1

The Honorable Gary A. Fenner, United States District Judge for the Western

District of Missouri.

2

The Honorable Arthur B. Federman, United States Bankruptcy Judge for the

Western District of Missouri.

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Heidelberg Print Finance Americas, Inc. (Heidelberg), appeals from an order

of the district court1

 affirming a decision of the bankruptcy court2 holding that its

purchase money security interest (PMSI) in certain property is inferior to a conflicting

security interest held by Empire Bank (Empire). For the reasons stated below, we

affirm. 

In April 2003, Master Services, Inc. (debtor), filed a voluntary Chapter 11

bankruptcy petition. Because Heidelberg and Empire each asserted a perfected

security interest in equipment debtor had purchased from Heidelberg (the equipment),

debtor brought an adversary proceeding to determine priority. Heidelberg asserted

priority of its lien under Mo. Ann. Stat. § 400.9-324(a) (West 2003) (stating general

rule that perfected PMSI in goods other than inventory or livestock has priority over

conflicting security interest in same goods if PMSI “is perfected when the debtor

receives possession of the collateral or within twenty days thereafter”). At a hearing

before the bankruptcy court, the parties introduced documents showing the following.

On August 9, 2001, debtor and Heidelberg entered into a sales contract and

security agreement for debtor to purchase the equipment from Heidelberg for $5,000

down, plus $184,848 over 60 months. On November 2, 2001, following Heidelberg’s

installation of the equipment, Michael Murphy, debtor’s president, faxed a letter to

Heidelberg expressing satisfaction with the equipment but noting that installation had

been slow, the equipment was not fully operational until October 15, and as a matter

of equity, monthly payments should not begin until November 19. On November 19,

debtor made its first monthly payment to Heidelberg. On November 27, 2001,

Appellate Case: 04-2521 Page: 2 Date Filed: 03/28/2006 Entry ID: 2026054
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Heidelberg filed with the Missouri Secretary of State a UCC financing statement

perfecting its PMSI in the equipment. 

Meanwhile, on September 5, 2001, Empire had executed a $725,000 loan to

debtor; on the same day, debtor and Empire executed a commercial security

agreement which granted Empire a security interest in “accounts and other rights to

payment,” “inventory,” “equipment,” and “general intangibles.” On September 7,

2001, Empire filed with the Missouri Secretary of State a UCC financing statement

describing as collateral for its loan to debtor “[a]ll equipment and machinery,

furniture and fixtures, all inventory, all present and future accounts receivable,

general intangibles, proceeds arising therefrom, however evidenced or acquired,

purchased with loan proceeds and hereafter acquired and all additions and accessions

thereto and insurance proceeds thereof.” 

The bankruptcy court determined that debtor had received possession of the

equipment on or about October 15, 2001, the date the equipment was fully operational

according to Murphy. The court concluded that, because Heidelberg filed its UCC

financing statement on November 27, 2001 (more than 20 days later), section 400.9-

324(a) did not apply. The court also determined that Empire’s description of the

collateral in its UCC financing statement covered not only property acquired with

loan proceeds, but also after-acquired property, including the equipment. The

bankruptcy court thus held that Empire had a properly perfected security interest in

the equipment, which was prior to Heidelberg’s PMSI. Judgment was entered

accordingly.

Heidelberg appealed to the district court. Urging application of the so-called

“obligation standard” to determine when debtor “received possession” of the

equipment for purposes of section 400.9-324(a), Heidelberg argued that debtor

received possession of the equipment on November 19, the date of debtor’s first

monthly payment. Heidelberg also challenged the bankruptcy court’s determination

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that Empire’s description of the collateral in its UCC financing statement covered the

equipment. The district court affirmed, and Heidelberg timely appealed to this court,

renewing the arguments it made in the district court.

We review the bankruptcy court’s factual findings for clear error, and its legal

conclusions de novo. See Wegner v. Grunewaldt, 821 F.2d 1317, 1320 (8th Cir.

1987). We agree with the bankruptcy court that, for purposes of applying

section 400.9-324(a), debtor received possession of the equipment on or about

October 15, 2001, when the equipment was undisputedly fully operational. See Mo.

Ann. Stat. § 400.9-324 cmt. 3 (West 2003) (when buyer takes possession of goods in

stages, followed by assembly and testing, buyer receives possession within meaning

of subsection (a) when, “after an inspection of the portion of the goods in the debtor’s

possession, it would be apparent to a potential lender to the debtor that the debtor has

acquired an interest in the goods taken as a whole”). In the present case, it would

have been apparent to a potential lender that debtor had acquired an interest in the

equipment taken as a whole on or before October 15, given debtor’s own statement

that the equipment was fully operational on that date. Moreover, even if we were to

apply the “obligation standard” as urged by Heidelberg, debtor was obligated to

perform under the contract at least by November 2, the date on which debtor

expressly confirmed its satisfaction with the operation of the equipment. Because

Heidelberg filed its UCC financing statement more than 20 days later, section 400.9-

324(a) does not apply. 

We also hold that the bankruptcy court did not err in determining that Empire’s

description of the collateral in its UCC financing statement covered the equipment

as after-acquired property, and thus that Empire has a properly perfected security

interest which has priority over Heidelberg’s PMSI. Accordingly, we affirm.

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Appellate Case: 04-2521 Page: 4 Date Filed: 03/28/2006 Entry ID: 2026054