Oklahoma’s highest court has ruled that purchase money security interests (PMSIs) in "intangible" assets such accounts receivable will not be granted super-priority status under the UCC.

The case arose out of a dispute in which a borrower granted a security interest in its existing and after-acquired accounts receivable to a bank as security for loans (First Bethany Bank & Trust N.A. v. Arvest United Bank, 77 P. 3d 595, 2003 OK 64 (2003)). The bank properly perfected its security interest. The borrower subsequently obtained a loan from a second bank for the specific purchase of two accounts receivable. In exchange, the borrower granted purchase money security interest (PMSI) in the two financed accounts, and used the money collected on those accounts to repay the loan from the second bank.

The borrower filed for bankruptcy, and the first bank sought to recover funds paid to the second bank on the two accounts. Even though the original lender was first to file its security interest in the accounts, the second lender bank maintained that it was entitled to a super-priority status on its lien, because the lien was a PMSI in collateral other than inventory under § 9-312(4) of the Uniform Commercial Code.

The Oklahoma Supreme Court held that because accounts receivable are "intangibles" incapable of being possessed, PMSIs in accounts receivable are not subject to the super-priority status granted under the UCC. The court held that PMSIs in accounts receivables are not entitled to a super-priority status even though the Oklahoma Uniform Commercial Code granted an exception to PMSIs in collateral that is not inventory.

Accordingly, be mindful that all other "intangibles" in addition to accounts receivable may not be granted a PMSI’s super-priority status.