Note that a UCC-1 statement (more commonly referred to as a financing statement) is not sufficient to create a security interest in personal property. See, e.g., Komas v. Future Systems. And in Lovelady we are not told whether Loop's Hospitality signed a security agreement granting the Loveladys a security interest in the fixtures and equipment. It would not be surprising if the only collateral worth arguing about was the leasehold interest. The fixtures and equipment may have been relatively worthless.

    Why would a financing statement alone be insufficient to grant a security interest the fixtures and equipment but sufficient to create a leasehold mortgage?  In personal property financing, the secured party does not commonly file a copy of the security agreement itself to give public notice of the security agreement; rather, it files a financing statement. It is common for the secured party to "pre-file" a financing statement, i.e. to file the financing statement before consummation of the transaction, for reasons relating to priority which we discuss elsewhere. Thus, execution of a financing statement by a debtor does not necessarily indicate that the debtor has granted a security interest because the deal may fall through before consummation.

    In the real estate context, the lender records the document (mortgage or deed of trust, or, in this unusual case, a UCC-1) by which the debtor does grant a lien on real property. Pre-filing does not occur.  Thus, if the lender is recording the UCC-1 in the real estate records to perfect a leasehold mortgage, does that not indicate that a mortgage had been created when the debtor signed the UCC-1?