Priority of Security Interests in Fixtures and Crops

  1. Law
  2. Georgia Code
  3. Commercial Code
  4. Secured Transactions
  5. Perfection and Priority
  6. Priority of Security Interests in Fixtures and Crops

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  1. Security interest in fixtures under this article. A security interest under this article may be created in goods that are fixtures or may continue in goods that become fixtures. A security interest does not exist under this article in ordinary building materials incorporated into an improvement on land.
  2. Security interest in fixtures under real property law. This article does not prevent creation of an encumbrance upon fixtures under real property law.
  3. General rule; subordination of security interest in fixtures. In cases not governed by subsections (d) through (h) of this Code section, a security interest in fixtures is subordinate to a conflicting interest of an encumbrancer or owner of the related real property other than the debtor.
  4. Fixtures purchase money priority. Except as otherwise provided in subsection (h) of this Code section, a perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property and:
    1. The security interest is a purchase money security interest;
    2. The interest of the encumbrancer or owner arises before the goods become fixtures; and
    3. The security interest is perfected by a fixture filing before the goods become fixtures or within 20 days thereafter.
  5. Priority of security interest in fixtures over interests in real property. A perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if:
    1. The debtor has an interest of record in the real property or is in possession of the real property and the security interest:
      1. Is perfected by a fixture filing before the interest of the encumbrancer or owner is of record; and
      2. Has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner;
    2. Before the goods become fixtures, the security interest is perfected by any method permitted by this article and the fixtures are readily removable:
      1. Factory or office machines;
      2. Equipment that is not primarily used or leased for use in the operation of the real property; or
      3. Replacements of domestic appliances that are consumer goods; or
    3. The conflicting interest is a lien on the real property obtained by legal or equitable proceedings after the security interest was perfected by any method permitted by this article.
  6. Priority based on consent, disclaimer, or right to remove. A security interest in fixtures, whether or not perfected, has priority over a conflicting interest of an encumbrancer or owner of the real property if:
    1. The encumbrancer or owner has, in an authenticated record, consented to the security interest or disclaimed an interest in the goods as fixtures; or
    2. The debtor has a right to remove the goods as against the encumbrancer or owner.
  7. Continuation of subsection (f) of this Code section priority. The priority of the security interest under paragraph (2) of subsection (f) of this Code section continues for a reasonable time if the debtor's right to remove the goods as against the encumbrancer or owner terminates.
  8. Priority of construction mortgage. A mortgage is a construction mortgage to the extent that it secures an obligation incurred for the construction of an improvement on land, including the acquisition cost of the land, if a recorded record of the mortgage so indicates. Except as otherwise provided in subsections (e) and (f) of this Code section, a security interest in fixtures is subordinate to a construction mortgage if a record of the mortgage is recorded before the goods become fixtures and the goods become fixtures before the completion of the construction. A mortgage has this priority to the same extent as a construction mortgage to the extent that it is given to refinance a construction mortgage.
  9. Priority of security interest in crops. A perfected security interest in or agricultural lien upon crops growing on real property has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property.

(Code 1981, §11-9-334, enacted by Ga. L. 2001, p. 362, § 1.)

Law reviews.

- For article discussing U.C.C. provisions establishing a security interest in fixtures as a means of protecting sellers, see 16 Mercer L. Rev. 404 (1965). For article, "The Revisions to Article IX of the Uniform Commercial Code," see 15 Ga. St. B.J. 120 (1977). For article surveying recent judicial developments in commercial law, see 31 Mercer L. Rev. 13 (1979). For article, "Fixture Financing Under Georgia's New Article 9" (Part 1), see 16 Ga. St. B.J. 110 (1980). For article, "Fixture Financing Under Georgia's New Article 9" (Part 2), see 16 Ga. St. B.J. 160 (1980). For note, "Limits on Residential Mortgage Lender Protection Section 1322(b) of the Bankruptcy Code," see 9 Ga. St. U.L. Rev 647 (1993).

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.

General rule.

- The general rule in Georgia is that personal property which is actually or constructively attached to real property is considered part of the realty so that an interest arises in it under real estate law. Wright v. C & S Family Credit, Inc., 128 Bankr. 838 (Bankr. N.D. Ga. 1991) (decided under former Code Section 11-9-313).

Nature of fixtures.

- Fixture is not a separate, exclusive classification of goods, but rather a unique category of property. Williams v. Western Pac. Fin. Corp., 643 F.2d 331 (5th Cir. 1981) (decided under former Code Section 11-9-313).

Section clearly recognized that fixtures may be subject to two different types of security interest: a chattel interest and a real estate interest; and this recognition is in accord with dual nature of a fixture, a chattel which has become real property; indeed, existence of both chattel interest and real estate interest in fixtures gives rise to need for this former section which attempted to equitably resolve conflicts between these two interests. Williams v. Western Pac. Fin. Corp., 643 F.2d 331 (5th Cir. 1981) (decided under former Code Section 11-9-313).

Priority of real estate interests.

- Section dealt with priority of real estate interest vis-a-vis chattel interest in fixtures. Williams v. Western Pac. Fin. Corp., 643 F.2d 331 (5th Cir. 1981) (decided under former Code Section 11-9-313).

Creation of real estate interests in fixtures.

- The former provisions of this section did not apply to creation of real estate interests in fixtures; that is a matter left to real estate law. Williams v. Western Pac. Fin. Corp., 643 F.2d 331 (5th Cir. 1981) (decided under former Code Section 11-9-313).

Consumer goods may be fixtures.

- Former provisions of Article 9 applied to transactions creating security interests in fixtures, but only to extent that provision was made for fixtures in this section, and, considering Uniform Commercial Code's definition and classification of goods, it appears that it contemplates that consumer goods may also be fixtures at least insofar as fixtures are subject to Uniform Commercial Code under this section. Williams v. Western Pac. Fin. Corp., 643 F.2d 331 (5th Cir. 1981) (decided under former Code Section 11-9-313).

Radio tower as personal property, not fixture.

- Where the intention of the parties was unclear as to whether a radio tower was to be a fixture and the radio tower was bolted to concrete slabs with bolts in each of the radio tower's three legs, no guy wires secured the radio tower, the radio tower apparently could be removed from the realty without damage to the land or to the radio tower by removing these bolts and disassembling the radio tower, and the radio tower had already been removed once, the radio tower was personal property rather than a fixture. Tidwell v. Slocumb (In re Ga. Steel, Inc.), 71 Bankr. 903 (Bankr. M.D. Ga. 1987) (decided under former Code Section 11-9-313).

Unperfected security interest in fixtures was superior.

- Where seller of personal property which is later affixed to realty retains security interest in goods, which is not perfected, seller's security interest attaches upon delivery and is superior to another creditor's prior deed to secure debt on same realty which has been perfected, to extent of advances made by prior creditor to common debtor before attachment of security interest of seller of personalty, but not to advances made after attachment of latter security interest. Babson Credit Plan, Inc. v. Cordele Prod. Credit Ass'n, 146 Ga. App. 266, 246 S.E.2d 354 (1978) (decided under former Code Section11-9-313).

Character of personalty after annexation to realty.

- Personalty purchased under retail installment contract, which is to be attached to realty, may by specific agreement of parties retain personalty classification where it is intent of seller and the purchaser that personalty is not to become a fixture, but an "accession." Babson Credit Plan, Inc. v. Cordele Prod. Credit Ass'n, 146 Ga. App. 266, 246 S.E.2d 354 (1978) (decided under former Code Section11-9-313).

Conflict on whether goods are to become fixtures.

- Where personalty is sold under contract which provides that goods are to remain personal property and not become fixture, but seller checks block on financing statement that described goods are affixed or are to be affixed to certain real estate, question of intent of parties and whether goods remain personalty or became fixtures upon affixation is for the trier of fact. Babson Credit Plan, Inc. v. Cordele Prod. Credit Ass'n, 146 Ga. App. 266, 246 S.E.2d 354 (1978) (decided under former Code Section11-9-313).

Interest of security holder in fixtures not subject to summary judgment.

- Trial court erred by granting the landlord summary judgment on the security interest holder's claims for conversion and reasonable hire because for some reasonable period of time the tenant's interest in the trade fixture took priority over whatever interest the landlord might have received under O.C.G.A. § 44-7-12 when the landlord took possession of the premises; what constituted a reasonable time was not subject to summary judgment. Heany v. Bennett Street Properties, L.P., 336 Ga. App. 290, 785 S.E.2d 1 (2016).

Cited in Stokes v. First Ga. Bank, 500 F.2d 393 (5th Cir. 1974); Goger v. United States, 4 Bankr. 4 (N.D. Ga. 1979); Brown v. United States, 512 F. Supp. 24 (N.D. Ga. 1980).

RESEARCH REFERENCES

Am. Jur. 2d.

- 68A Am. Jur. 2d, Secured Transactions, §§ 54, 155 et seq., 304, 607-614, 942-954.

C.J.S.

- 36A C.J.S., Fixtures, §§ 1, 42, 43, 44, 49, 51.

U.L.A.

- Uniform Commercial Code (U.L.A.) § 9-334.

ALR.

- Rights of seller of fixtures retaining title thereto, or a lien thereon, as against purchasers or encumbrancers of the realty, 13 A.L.R. 448; 73 A.L.R. 748; 88 A.L.R. 1318; 111 A.L.R. 362; 141 A.L.R. 1283.

Pavement, flooring, platform, walks, and the like as fixtures, 13 A.L.R. 1454.

Right as between landlord and conditional seller of property to tenant, 45 A.L.R. 967; 98 A.L.R. 628.

Storage tank or other apparatus of gasoline station as fixture, 52 A.L.R. 798; 99 A.L.R. 69.

Right of conditional seller of chattels attached to realty to claim lien on the realty, 58 A.L.R. 1121.

Chattel annexed to realty as subject to prior mortgage, 99 A.L.R. 144.

Doctrine of constructive annexation as applied to plumbing material and heating apparatus delivered to premises but not installed, 10 A.L.R.2d 207.


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