Opinion ID: 2631886
Heading Depth: 2
Heading Rank: 1

Heading: Priority in the Manufactured Home

Text: ¶ 18 A fixture straddles the line between personal and real property. 35 Am. Jur.2d Fixtures § 1 (1967). Originally a good or chattel, a fixture has become so related to real property that it has become part of the realty. See Utah Code Ann. § 70A-9-313(1)(a) (1997) (repealed 2001) (defining fixtures); Fixtures, supra, § 1. Since a fixture is part of the real property, encumbrances on the real property encompass its fixtures. See Fixtures, supra, § 2. Moreover, absent an agreement to the contrary, a sale of real property generally includes its fixtures. See id. Yet a fixture also retains enough of a separate identity that the law may continue to recognize some of its chattel character. For example, the U.C.C. prescribes conditions under which perfected security interests in goods that have become fixtures have priority over conflicting real estate interests. See Utah Code Ann. § 70A-9-313 (1997) (repealed 2001) (implementing U.C.C. section 9-313's conflict resolution provisions concerning fixtures); U.C.C. § 9-313 cmt. 1 (West 1999). ¶ 19 Under the law governing fixtures, then, when the manufactured home became affixed to the Tremonton property, the home became part of the Tremonton property. As a result, a conflict arose between Deere's security interest in the home and Schriever's judgment lien on the Tremonton property. Despite the home's status as a fixture, the district court found that Deere satisfied the U.C.C.'s conditions for obtaining priority against a judgment lienor by filing its UCC-1 financing statement with the Division of Corporations. Since the court relied on its ruling that Deere had priority in the home to conclude that Deere had priority in the excess trust proceeds, Schriever first attacks this initial ruling. ¶ 20 To refute Deere's claim to priority in the home, Schriever does not challenge the district court's conclusion that, by filing a UCC-1 financing statement with the Division of Corporations, Deere had a perfected security interest in the manufactured home before it became a fixture. Schriever contends, however, that the court erred in concluding that the mere filing of a UCC-1 sufficed to perfect Deere's security interest against her judgment lien after Pinnacle affixed the home to the Tremonton property. ¶ 21 To this end, Schriever cites Webb v. Interstate Land Corp., 920 P.2d 1187 (Utah 1996), in which we held that under section 70A-9-313, the filing of a UCC-1 financing statement with the Division of Corporations was ineffective to perfect a security interest in an electric sign against a purchaser of real estate on which the sign had become a fixture. Id. at 1191. To maintain priority against a purchaser of the real estate, we noted that section 70A-9-313 instead required a fixture filing, a procedure that calls for other information (e.g., legal description of the real estate) and a different filing location (in the real estate records) than a typical UCC-1 filing. Id. at 1190-92. In discussing the rationale behind this rule, we explained that a filing in the real estate records was necessary to provide a real estate purchaser constructive notice of an encumbrance. Id. at 1192. ¶ 22 However, under the U.C.C., a real estate interest arising from a purchase materially differs from an interest arising from a judgment lien. In particular, the U.C.C. does not require that a judgment lienor receive constructive notice via a fixture filing for a fixture financer to retain priority. Instead, [a] perfected security interest in fixtures has priority over the conflicting interest of an encumbrancer . . . of the real estate where . . . the conflicting interest is a lien on the real estate obtained . . . after the security interest was perfected by any method permitted by [U.C.C.] Article [9]. Utah Code Ann. § 70A-9-313(4)(d) (1997) (repealed 2001) (emphasis added). In elaborating on the permissible methods of perfection against judgment lienors, the Official Code Comments state that a fixture security interest if perfected first should prevail [against a judgment lienor] even though not filed or recorded in real estate records, because generally a judgment creditor is not a reliance creditor who would have searched records. Thus, even a prior filing in the chattel records protects the priority of a fixture security interest against a subsequent judgment lien. U.C.C. § 9-313 cmt. 4(c) (West 1999). Deere filed in the chattel records when it filed a UCC-1 with the Division of Corporations. This filing came before Schriever's judgment lien attached. Accordingly, we agree with the district court that Deere's security interest in the home had priority over Schriever's interest in the home arising from her judgment lien on the Tremonton property.