GA Code § 11-9-103 (2021)
2021 Georgia Code|Title 11 - Commercial Code|Article 9 - Secured Transactions|Part 1 - General Provisions|§ 11-9-103. Purchase Money Security Interest; Application of Payments; Burden of Establishing

  Definitions. As used in this Code section, the term:   "Purchase money collateral" means goods or software that secures a purchase money obligation incurred with respect to that collateral.   "Purchase money obligation" means an obligation of an obligor incurred as all or part of the price of the collateral or for value given to enable the debtor to acquire rights in or the use of the collateral if the value is in fact so used.     Purchase money security interest in goods. A security interest in goods is a purchase money security interest:   To the extent that the goods are purchase money collateral with respect to that security interest;   If the security interest is in inventory that is or was purchase money collateral, also to the extent that the security interest secures a purchase money obligation incurred with respect to other inventory in which the secured party holds or held a purchase money security interest; and   Also to the extent that the security interest secures a purchase money obligation incurred with respect to software in which the secured party holds or held a purchase money security interest.     Purchase money security interest in software. A security interest in software is a purchase money security interest to the extent that the security interest also secures a purchase money obligation incurred with respect to goods in which the secured party holds or held a purchase money security interest if:   The debtor acquired its interest in the software in an integrated transaction in which it acquired an interest in the goods; and   The debtor acquired its interest in the software for the principal purpose of using the software in the goods.     Consignor's inventory purchase money security interest. The security interest of a consignor in goods that are the subject of a consignment is a purchase money security interest in inventory.   Application of payment in nonconsumer goods transaction. In a transaction other than a consumer goods transaction, if the extent to which a security interest is a purchase money security interest depends on the application of a payment to a particular obligation, the payment must be applied:   In accordance with any reasonable method of application to which the parties agree;   In the absence of the parties' agreement to a reasonable method, in accordance with any intention of the obligor manifested at or before the time of payment; or   In the absence of an agreement to a reasonable method and a timely manifestation of the obligor's intention, in the following order:   To obligations that are not secured; and   If more than one obligation is secured, to obligations secured by purchase money security interests in the order in which those obligations were incurred.       No loss of status of purchase money security interest in nonconsumer goods transaction. In a transaction other than a consumer goods transaction, a purchase money security interest does not lose its status as such, even if:   The purchase money collateral also secures an obligation that is not a purchase money obligation;   Collateral that is not purchase money collateral also secures the purchase money obligation; or   The purchase money obligation has been renewed, refinanced, consolidated, or restructured.     Burden of proof in nonconsumer goods transaction. In a transaction other than a consumer goods transaction, a secured party claiming a purchase money security interest has the burden of establishing the extent to which the security interest is a purchase money security interest.   Nonconsumer goods transactions; no inference. The limitation of the rules in subsections (e), (f), and (g) of this Code section to transactions other than consumer goods transactions is intended to leave to the court the determination of the applicable rules in consumer goods transactions. The court may not infer from that limitation the nature of the applicable rule in consumer goods transactions and may continue to apply established approaches.     (Code 1981, §11-9-103, enacted by Ga. L. 2001, p. 362, § 1.)   Law reviews.   - For article, "The Fourth Annual Emory Bankruptcy Developments Journal Symposium, March 1, 2007: Consumer Bankruptcy Panel: Selected Hot BAPCPA Topics," see 23 Bank. Dev. J. 517 (2007). For article, "Eleventh Circuit Survey: January 1, 2008 - December 31, 2008: Article: Bankruptcy," see 60 Mercer L. Rev. 1141 (2009).   JUDICIAL DECISIONS   Editor's notes.   - In the light of the similarity of the provisions, decisions under former Article 9 are included in the annotations for this Code section. For a table of comparable provisions, see the table at the beginning of the Article.    Enforceable title-retention agreement constitutes purchase money security interest within definition of that term. Food Serv. Equip. Co. v. First Nat'l Bank, 121 Ga. App. 421, 174 S.E.2d 216 (1970) (decided under former Code Section11-9-107).   Security interest to secure preexisting account balance.   - Security interest taken by the creditor, not to secure all or part of the purchase price of the collateral, but rather to secure the preexisting balance of the debtor's account with the creditor, did not fall within the definition of a purchase money security interest. In re Carter, 169 Bankr. 227 (Bankr. M.D. Ga. 1993) (decided under former Code Section 11-9-107).   Purchase money security interest in collateral purchased with loan proceeds.    - One who is a "lender," may acquire purchase money security interest in collateral to be purchased with proceeds of loan provided proceeds are in fact so used. Continental Oil Co. Agrico Chem. Co. Div. v. Sutton, 126 Ga. App. 78, 189 S.E.2d 925 (1972) (decided under former Code Section11-9-107).   Unexercised future advances clause.   - Where seller, rather than lender, claims purchase-money security interest, unexercised future advances clause is immaterial. Meadows v. Household Retail Servs., Inc. (In re Griffin), 9 Bankr. 880 (N.D. Ga. 1988) (decided under former Code Section 11-9-107).   Bank financing sales price of mobile home.    - Where seller sold mobile home for cash sales price and bank financed loan for cash sales price, proceeds of which were then paid to seller, the bank, not seller, had purchase money security interest in the mobile home, and actual sale was not a retail installment transaction under O.C.G.A. § 10-1-31(a)(9). Massey v. Stephens, 155 Ga. App. 243, 270 S.E.2d 796 (1980) (decided under former Code Section11-9-107).   Price limitation on security interest.   - Purchase money security interest must be in the item purchased, and if vendor of consumer goods is to be protected despite absence of filing, security interest cannot exceed price of item purchased in transaction out of which it arose. Roberts Furn. Co. v. Pierce, 507 F.2d 990 (5th Cir. 1975) (decided under former Code Section 11-9-107).    Transfer and assignment of a purchase money note and security agreement to a third party  did not destroy the purchase money character of the security interest, where the assignment did not refinance, renew, or modify the debtor's purchase money debt. Brooks v. First Franklin Fin. Corp., 74 Bankr. 418 (Bankr. N.D. Ga. 1987) (decided under former Code Section 11-9-107).   Refinancing or consolidation of loans.   - Refinancing or consolidating loans by paying off an old loan and extending a new one extinguishes the purchase money character of the original loan because the proceeds of the new loan are not used to acquire rights in the collateral. Franklin v. ITT Fin. Servs., 75 Bankr. 268 (Bankr. M.D. Ga. 1986) (decided under former Code Section 11-9-107).   Under Georgia law, the refinancing of a promissory note destroys the purchase money nature of the security interest. Hipps v. Landmark Fin. Servs., 89 Bankr. 264 (Bankr. N.D. Ga. 1988) (decided under former Code Section 11-9-107).   Where the debt secured contained both purchase money and nonpurchase money components, including the refinancing of prior obligations, the security interest of the creditor could not retain purchase money status, as it secured more than the "price" of the collateral. Lee v. Davis/McGraw, Inc., 169 Bankr. 790 (Bankr. S.D. Ga. 1994) (decided under former Code Section 11-9-107).   When debtor refinanced a prior purchase of furniture when the debtor financed a second purchase, the seller lost the seller's purchase money security interest status on the balance due from the first purchase because the installment contract failed to specify the order in which add-on costs, i.e., late fee, delivery fee, credit life insurance, and property insurance, abated upon payment. In re McClow, Bankr. (Bankr. S.D. Ga. Dec. 17, 2009).   Additional items purchased with collateral.   - Simultaneous purchase on credit of a vehicle and an extended service contract, and payment of a documentary fee and a certificate of title fee, did not transform the secured creditor's claim into a non-purchase money security interest, disqualifying its claim for treatment under the hanging paragraph at the end of 11 U.S.C. § 1325(a), because the cost of the additional items was part of the price of the vehicle. In re Murray, 352 Bankr. 340 (Bankr. M.D. Ga. 2006).   Purchase money interest in negative equity financed as part of trade-in.    - Because the definition of "cash sales price" under O.C.G.A. § 11-9-103(a)(2) included any amount paid to the buyer or to a third party to satisfy a lease on or a lien on or a security interest in a motor vehicle used as a trade-in, that entire amount was included in the purchase money security interest under 11 U.S.C. § 1325(a). In re Graupner, 356 Bankr. 907 (Bankr. M.D. Ga. 2006), aff'd, NO. 4:07-CV-37 (CDL), 2007 U.S. Dist. LEXIS 46144 (M.D. Ga. 2007).    Monies paid on debtor's behalf for an extended service contract and gap insurance were part of the purchase price of the debtor's vehicle for purposes of O.C.G.A. § 11-9-103 and the unnumbered, hanging paragraph following 11 U.S.C. § 1325(a)(9). The service contract was a charge for "servicing" the motor vehicle under O.C.G.A § 10-1-31(a)(1), and applying the close nexus standard in § 11-9-103 led the court to believe that gap insurance was also included in the purchase money security interest. In re Spratling, 377 Bankr. 941 (Bankr. M.D. Ga. 2007).    Because a debtor purchased a vehicle for personal use within 910 days of filing a bankruptcy petition under 11 U.S.C. § 1325(a), the cramdown provision of 11 U.S.C. § 506 did not apply; instead, O.C.G.A. § 11-9-103 determined that the purchase money security interest included the negative equity of a trade-in that was integral to the sales transaction. Graupner v. Nuvell Credit Corp., F. Supp. 2d (M.D. Ga. June 26, 2007), aff'd, 537 F.3d 1295 (11th Cir. 2008).    Under O.C.G.A. §§ 10-1-31(a) and11-9-103, negative equity in a debtor's trade-in vehicle was properly regarded as a purchase money security interest under the hanging paragraph referencing 11 U.S.C. § 1325(a)(5) in that there was a close nexus to the purchase of a vehicle for personal use within 910 days of filing for Chapter 13 relief. Thus, 11 U.S.C. § 506 did not apply to cram down the creditor's secured claim. Graupner v. Nuvell Credit Corp. (In re Graupner), 537 F.3d 1295 (11th Cir. 2008).   Distribution of loan proceeds subsequent to closing of loan.   - Lender obtained a purchase-money security interest in cows sold by a third party to the debtor although the debtor took care of the cows for the purpose of inspecting and milking several weeks before the loan was closed and legal ownership passed, and although the money was disbursed almost two weeks after the loan was closed, since the loan and its disbursement were closely allied to the sale. United States v. Hooks, 40 Bankr. 715 (Bankr. M.D. Ga. 1984) (decided under former Code Section 11-9-107).   RESEARCH REFERENCES   Am. Jur. 2d.   - 68A Am. Jur. 2d, Secured Transactions, §§ 75-84, 841.   C.J.S.   - 82 C.J.S., Statutes, § 309.   U.L.A.   - Uniform Commercial Code (U.L.A.) § 9-103.   ALR.    - Personal liability for mortgage debt of real owner who procures mortgage to be executed by another, 25 A.L.R. 1486.   Priority as between mechanic's lien and purchase-money mortgage, 73 A.L.R.2d 1407.   Consignment transactions under Uniform Commercial Code Article 9 on secured transactions, 58 A.L.R.6th 289.   Determination of appropriate Chapter 11 "cramdown" rate of interest, 17 A.L.R. Fed. 3d 8.