Nicolosi bought a diamond ring on credit from Rike-Kumber as an engagement present for his fiancée. He signed a purchase money security agreement giving Rike-Kumber a security interest in the ring until is was paid for. Rike-Kumber did not file a financial statement covering its security interest. Nicolosi filed for bankruptcy. The bankruptcy trustee claimed that the diamond ring was part of the bankruptcy estate because Rike-Kumber did not perfect its security interest. Rike-Kumber claimed that it had a perfected security interest in the ring.
1. Did Rike-Kumber have to file a financing statement to perfect its security interest?
2. Is the bankruptcy trustee correct? Should the engagement ring be part of the bankruptcy estate?
3. What could Rike-Kumber have done to better protect itself in its credit transaction with Nicolosi?
