In 1983, Carpet Contracts owned a commercial lot and building, which it operated as a retail carpet outlet. In April of 1983, Carpet Contracts entered into a credit sales agreement with Young Electric Sign Corp. (Yesco) for the purchase of a large electronic sign for the store. The cost of the sign was $113,000, with a down payment of $25,000 and 60 monthly payments of $2,100 each. In August 1985, Carpet Contracts agreed to sell the property to Interstate. As part of the sale, Carpet Contracts gave Interstate an itemized list showing that $64,522 of the proceeds from the sale would be used to pay for the “Electronic Sign.” The property was transferred to Interstate, and the Carpet Contracts store continued to operate there, but now it paid rent to Interstate. In June 1986, Carpet Contracts asked Yesco to renegotiate the terms of the sign contract. Yesco reduced Carpet Contracts’ monthly payments and filed a financing statement on the sign at the Utah Division of Corporations and Commercial Code.
In December 1986, Interstate agreed to sell the property and the sign to the Webbs, who conducted a title search on the property, which revealed no interest with respect to the electronic sign. Interstate conveyed the property to the Webbs. Carpet Contracts continued its operation but was struggling financially and had not made its payments to Yesco for some time. By 1989, Yesco declared the sign contract in default and contacted the Webbs, demanding the balance due of $26,100. The Webbs then filed suit, claiming Yesco had no priority as a creditor because its financing statement was not filed in the real property records where the Webbs had done their title search before purchasing the land. Was the financing statement filed properly for perfection?
[Webb v Interstate Land Corp., 920 P2d 1187 (Utah)]