Here is a link about a recent case where the Indiana Court of Appeals held that a secured creditor could obtain pre-judgment possession of its collateral, despite the fact that the borrower had sold that collateral to a third party. The Court rejected the idea that the buyer could rely upon the statements of others concerning whether there were any liens attached to the property being sold. The buyer never contacted the lienholder.
The Court stated: We find that it is unreasonable to rely on the statements of third parties – or the debtor – about the current status of security interests, and noted that in these situations the debtor often has a strong incentive to be untruthful.
The business tip here is to conduct a UCC or other title search prior to purchasing property to determine if any liens attach to the property you want to buy. If there are perfected liens, and you buy the property without obtaining a release of those liens, you may find yourself paying twice for the same property.
