s.
In In re Faughn, 69 B.R. 18 (Bankr. E.D.Mo.1986), the debtor had made three separate purchases from Anderson's Home Furnishings ("Anderson's"). Each purchase was financed by Anderson's, and each transaction was evidenced by a properly filed financing statement. However, each successive financing arrangement simply added the balance of the amount owed under the prior transactions to the new amount of financing. The debtor argued that the only collateral in which Anderson's held a purchase money security interest were those items purchased in connection with the last transaction. The court agreed with the debtor and followed In re Matthews, 724 F.2d 798 (9th Cir. 1984).[3]
Boatmen's Bank of Cape Girardeau v. Evans, 715 F.Supp. 942 (E.D.Mo.1988), involved a security interest priority dispute between two secured creditors, Boatmen's Bank and FmHA. Boatmen's had loaned the borrower enough money to pay off the purchase money security holder of certain collateral. Boatmen's contended that it was equitably subrogated to the rights of the PMSI holder, and therefore, was itself a PMSI holder with priority in the collateral. FmHA was the secured party to a security agreement that contained an after-acquired property clause, which covered the collateral in which Boatmen's staked its claim. In concluding that FmHA held the superior security interest in the subject collateral, the court stated "[i]f the debt secured by a PMSI is refinanced, the purchase money nature of security interest is destroyed." Id. at 944. According to the court, Boatmen's extension of credit, in effect, refinanced the obligation and thereby extinguished its purchase money nature.
The same is true here. While the original loan proceeds were used to purchase the Van, the proceeds of the second loan were used to both purchase another vehicle and to pay off the first loan. And the proceeds of the third loan were used to start a business and to pay off the second loan. Since the original obligation was refinanced, its purchase money nature was destroyed.