Opinion ID: 1822097
Heading Depth: 1
Heading Rank: 5

Heading: Display kitchens

Text: The trial court determined that Mr. Elhard in allowing these [display kitchens] to be removed from his property when he had the full capability to stop the same allowed them to be treated as inventory and determined that MSB was entitled to the proceeds of their sale. Elhard's failure to prevent the removal of the display kitchens is not an adequate reason for treating the display kitchens as inventory. The Code does not require a creditor to monitor the use of collateral. J. White & R. Summers, Uniform Commercial Code § 23-13 (2d Ed.1980). Elhard asserts that those items were equipment or fixtures and that he was entitled to the proceeds from them because neither Tappan nor MSB claimed a security interest in equipment or fixtures. Northwestern's financing statement did not constitute a fixture filing under § 41-09-34, N.D.C.C., [§ 9-313, U.C.C.] or § 41-09-41(6), N.D.C.C., [§ 9-402(6), U.C.C.]. Section 41-09-09, N.D.C.C., [§ 9-109, U.C.C.] defines goods as equipment or inventory: 2. `Equipment' if they are used or bought for use primarily in business... or if the goods are not included in the definitions of inventory, farm products, or consumer goods.       4. `Inventory' if they are held by a person who holds them for sale or lease or to be furnished under contracts of service or if he has so furnished them, or if they are raw materials, work in process or materials used or consumed in a business. Inventory of a person is not to be classified as his equipment. We said in Benson County Cooperative Credit Union v. Central Livestock Association, Inc., 300 N.W.2d 236, 240 (N.D. 1980): The intrinsic nature of the goods does not classify them; rather, it is the use to which the owner puts the goods, or intends to put them, that determines their classification. The model kitchen display units involved were fastened to the store walls with screws and contained built-in appliances. The only testimony as to the use, either intended or actual, of the display kitchens indicates that they were equipment, not inventory. We conclude that the trial court erred in determining that MSB, rather than Elhard, was entitled to the proceeds of the sale of the display kitchens. For the reasons stated, the judgment is reversed and the matter is remanded for further proceedings consistent with this opinion. ERICKSTAD, C.J., and LEVINE, VANDE WALLE and GIERKE, JJ., concur.