Farmers-Merchants Bank & Trust Co. v. Southern Structures, LLC

134 So. 3d 142, 83 U.C.C. Rep. Serv. 2d (West) 14, 13 La.App. 3 Cir. 926, 2014 WL 852584, 2014 La. App. LEXIS 596
Louisiana Court of Appeal·Decided March 5, 2014·No. No. 13-926·Published

Opinion

KEATY, Judge.

|!Defendant, Nucor Building Systems Sales Corporation, appeals the trial court’s judgment in favor of Plaintiff, Farmers-Merchants Bank & Trust Company of Breaux Bridge (FM Bank). For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

Southern Structures, LLC was in the business of manufacturing components for metal buildings. Southern Structures secured multiple loans1 from FM Bank between 2005 and 2007 to purchase various large items of equipment, including a Franklin flange unit, a type of metal fabricating equipment used in the construction of various metal items. At all relevant times, FM Bank held a first perfected security interest in the flange unit.

In November 2009, negotiations commenced between Nucor, Southern Structures, and MH Precision Systems, Inc. MH Precision was allegedly acting as the agent of Southern Structures and the broker for the sale of the flange unit. In December 2009, Southern Structures sold the used flange unit to Nucor. Nucor subsequently had the equipment shipped to its plant in South Carolina. Southern Structures defaulted on its loan with FM Bank, and when FM Bank attempted to inventory its collateral, it discovered that the flange unit was gone. FM Bank later learned that the flange unit had been sold and was in possession of Nucor.

FM Bank sued Southern Structures, MH Precision, and Nucor for the return of the equipment and damages. Nucor filed a cross-claim against MH Precision, asserting that it had purchased the flange unit from MH Precision who Nucor 12believed was either the seller of the flange unit or the agent of Southern Structures as the seller. Nucor also filed a motion for summary judgment, claiming that it purchased the equipment from MH Precision in good faith pursuant to La.R.S. 10:1-201(9) and as such was not liable to FM Bank. The trial court denied Nucor’s [145]*145motion for summary judgment. The case then proceeded to trial on the merits wherein the trial court rendered judgment in favor of FM Bank and against Nucor, MH Precision, and Southern Structures, jointly, severally, and in solido, in the amount of $276,000.00 together with legal interest from the date of judgment and all court costs.

Nucor is before this court alleging three assignments of error and one alternative assignment of error. Nucor contends that: (1) the trial court erred as a matter of law when it held Nucor personally liable for damages and/or in finding Nucor in bad faith regarding the purchase of the flange unit; (2) the trial court erred as a matter of law when it found it had subject matter jurisdiction of the in rent action because Nucor is not subject to personal liability and neither in rent nor quasi in rent jurisdiction existed over the flange unit because it is not located in Louisiana; and (3) the trial court erred in finding that Nucor was not a buyer in the ordinary course of business entitled to keep the flange unit free of FM Bank’s security interest because MH Precision was the seller of the flange unit, the sale occurred in MH Precision’s ordinary course of business, and Nu-cor was a good faith purchaser. Alternatively, and only in the event that this court finds bad faith premised on some type of negligence standard suggested by the trial court, Nucor contends that the trial court erred in finding Nucor liable in solido with the other Defendants, Southern Structures and MH Precision, and instead, should have allocated fault under La.Civ.Code art. 2324(B).

JijLAW

In Rosell v. ESCO, 549 So.2d 840, 844 (La.1989) (citations omitted), the supreme court held:

It is well settled that a court of appeal may not set aside a trial court’s or a jury’s finding of fact in absence of “manifest error” or unless it is “clearly wrong,” and where there is conflict in testimony, reasonable evaluations of credibility and reasonable inferences of fact should not be disturbed upon review, even though the appellate court may feel that its own evaluations and inferences are as reasonable.... Where there are two permissible views of the evidence, the factfinder’s choice between them cannot be manifestly erroneous or clearly wrong....
When findings are based on determinations regarding the credibility of witnesses, the manifest error-clearly wrong standard demands great deference to the trier of fact’s finding; for only the fact finder can be aware of the variations in demeanor and tone of voice that bear so heavily on the listener’s understanding and belief in what is said.

Additionally, appellate courts review the interpretation of statutes de novo and render judgment on the record without deference to the legal conclusions of the trial court. Cleco Evangeline, LLC v. La. Tax Comm’n, 01-2162 (La.4/3/02), 813 So.2d 351.

DISCUSSION

Assignment of Error Number One

Did the trial court err in finding that La.R.S. 10:9-315(a) (3) created a statutory avenue for a secured party to hold a third-party purchaser personally liable for damages?

Nucor contends that the trial court erred in finding it personally liable to FM Bank. Nucor argues that the trial court erred in finding that La.R.S. 10:9-315(a)(3) created a statutory avenue for a secured party to hold a third-party purchaser per[146]*146sonally liable for damages. Louisiana Revised Statutes 10:9-315(a)(3) provides:

(a) Disposition of collateral: continuation of security interest; proceeds. Except as otherwise provided in this Chapter:
_k...
(3) a purchaser of collateral incurs no personal liability on account of an unauthorized transfer unless he has failed to act in good faith.

Nucor takes issue with the trial court’s statement that because La.R.S. 10:9-315(a)(3) “clearly state[s] that a ‘good faith’ purchaser [of collateral] incurs no personal liability, thus by inference, a bad faith purchaser under the statute incurs personal liability.” Nucor argues that La.R.S. 10:9-315(a)(3) does not support the conclusion that only upon a showing of bad faith, which Nucor believes is a relaxed standard of proof, does a purchaser in an unauthorized transaction incur personal liability.

In support, Nucor contends that under La.R.S. 10:9-315(a)(3)’s predecessor statute, La.R.S. 10:9-306(2), a high burden of proof was required to impose personal liability on a purchaser in an unauthorized transaction. The predecessor statute, La. R.S. 10:9-306(2), provided that the buyer had no personal liability “unless he has conspired with the debtor to defeat the interest of the secured party.” In 2001, the Louisiana legislature amended the statute to provide for no personal liability of a buyer “unless he has failed to act in good faith.” La.R.S. 10:9-315(a)(3). Despite the revision, Nucor contends that the legislature did not intend to change the law to lessen the burden of proof required to hold a third-party purchaser personally liable for damages under the amended statute. Rather, Nucor alleges that the correct standard is a finding of both conspiracy and willful/purposeful conduct on the part of the purchaser to defraud or to defeat the bank’s security interest, which cannot be supported based on the evidence.

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Farmers-Merchants Bank & Trust Co. v. Southern Structures, LLC, 134 So. 3d 142, 83 U.C.C. Rep. Serv. 2d (West) 14, 13 La.App. 3 Cir. 926, 2014 WL 852584, 2014 La. App. LEXIS 596 (La. Ct. App. 2014).

134 So. 3d 142 (Farmers-Merchants Bank & Trust Co. v. Southern Structures, LLC) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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