National Acceptance Co. v. Doede

78 F.R.D. 333, 1978 U.S. Dist. LEXIS 19095
CourtDistrict Court, W.D. Wisconsin
DecidedMarch 13, 1978
DocketCiv. A. No. 75-C-90
StatusPublished
Cited by4 cases

This text of 78 F.R.D. 333 (National Acceptance Co. v. Doede) is published on Counsel Stack Legal Research, covering District Court, W.D. Wisconsin primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
National Acceptance Co. v. Doede, 78 F.R.D. 333, 1978 U.S. Dist. LEXIS 19095 (W.D. Wis. 1978).

Opinion

DECISION AND ORDER

REYNOLDS, Chief Judge, sitting by designation.

The plaintiff, National Acceptance Corporation of America (“NACA”) has moved for partial summary judgment on its claim that the defendants Arthur and Marlyn Doede are liable for conversion of certain property in which NACA claimed a security interest and has also moved for recovery of certain costs and expenses. For the reasons hereinafter stated, the motion for summary judgment is denied and the motion for costs and expenses is granted.

From the pleadings, affidavits, and depositions on file the court finds the following facts. Two machines used for nailing together wooden pallets were sold by the Doede Lumber Company, Inc. (“Doede”) (of which the defendants were the president and secretary), to the Bulk Packaging Corporation (“Bulk”). To secure payment of the purchase, Bulk granted to Doede a security interest in various pieces of equipment owned by Bulk including the two nailing machines. The-security agreement also granted to Doede an interest in “all accessions to, and spare and repair parts, special tools and equipment and replacements for, and proceeds of all or any part of the foregoing” pieces of equipment. Timely financing statements were filed covering “pallet mill operation and manufacturing equipment” and including the same list of equipment mentioned in the security agreement. This security agreement was subsequently assigned by Doede to the defendants individually.

In early 1974, Bulk, acting with the permission of the defendants, sent the two nailing machines to Atlantic Coast Industries (“Atlantic”) in Virginia for the purpose of having the machines repaired and refurbished. Some parts of the machines were replaced with other parts and certain alterations were made and new pieces of equipment were attached. The plaintiff and the defendants differ on the extent to which the nailing machines and the new equipment were formed into a single unit for performing functions other than those performed by the original two nailing machines. The plaintiff contends that the new equipment attached to the nailing machines was comprised mostly of separable components which were easily removable from the entire unit. However, the defendants maintain that the nailing machines and the new equipment were formed into an integrated whole and could not be separated without doing substantial damage to the nailing machines themselves. The parties also differ on the extent to which the equipment added to the nailing machines was in the nature of repairs and replacements of existing parts rather than completely new and separate equipment.

When Atlantic completed its work with respect to the two nailing machines and the other equipment, the nailing machines and other equipment were shipped to West Central Corporation (“West”) of Stevens Point, Wisconsin, in two separate shipments, one on March 28, ¶974, and one on April 20, 1974. NACA paid Atlantic for the machines and other equipment on behalf of West on April 26, 1974, and was given a security interest in certain pieces of equipment by West on March 14, 1974. On March 18, 1974, NACA filed a financing statement covering “[a]ll of Debtor’s [West’s] presently owned and existing and hereafter acquired . . . equipment [335]*335. and all proceeds and products of and from and accessions to the foregoing collateral.”

Subsequent to the transfer of the nailing machines from Atlantic to West, the defendants’ debtor, Bulk, defaulted on its debt to the defendants arising from the purchase by Bulk of the nailing machines. The defendants secured a judgment against Bulk which was executed against the nailing machines and other equipment then in possession of West. The machines and other equipment were then purchased by the defendants at a sheriff’s sale.

Plaintiff’s Motion for Partial Summary Judgment

Based on these facts the plaintiff seeks to have the defendants held liable for converting the nailing machines and other equipment in which the plaintiff maintains it held a valid and prior security interest. In this motion NACA is seeking judgment only as to the equipment added by Atlantic to the nailing machines, herein referred to as the “other equipment”. This other equipment consisted of the following:

1. At least two ACI feed tables;

2. An automatic half pallet ejector;

3. A stringer feeder;

4. An automatic pallet turner; and

5. An automatic board feeder.

NACA has urged two grounds in support of its motion for partial summary judgment, both of which attempt to establish that the defendants had no valid and perfected security interest in the other equipment. First, the plaintiff has alleged that the other equipment is not included within the security agreement and financing statement descriptions of items in which the defendants claimed a security interest. Second, the plaintiff has alleged that even if the other equipment was included in the descriptions, the defendants’ security interest in the other equipment never attached because the defendants’ debtor, Bulk, never acquired rights in the other equipment. Each of these issues will be addressed in turn.

To be enforceable a security agreement must contain a description of the collateral covered by the agreement. Wis.Stat. § 409.203. The test for determining the adequacy of a security agreement description of collateral is set forth in Wis.Stat. § 409.110: “For the purposes of this chapter any description of personal property or real estate is sufficient whether or not it is specific if it reasonably identifies what is described.” The official UCC Comment to Article 9-110 of the UCC further specifies the manner in which the description requirement is to be applied: “Under this rule courts should refuse to follow the holdings often found in the older chattel mortgage cases, that descriptions are insufficient unless they are of the most exact and detailed nature, the so-called ‘serial number’ test.”

The security agreement between Bulk and Doede contained both broad and specific terms of description of the collateral subject to the agreement. The agreement contained a list specifying certain pieces of equipment, including the two nailing machines, subject to the agreement. In addition, the agreement also covered “all accessions to, and spare and repair parts, special tools and equipment and replacements for, and proceeds of all or any part of the foregoing” pieces of equipment. (Marlyn Doede Deposition Exhibit 1.) NACA believes this description to be inadequate because “[tjhere is no description or reference whatsoever to any of the items which make up The Other Equipment” and because the security agreement “does not cover (by item, type, or otherwise) The Other Equipment sold by Atlantic to West.” Responding to this assertion of inadequacy of description, the defendants maintain that a factual issue exists as to whether the other equipment constitutes repairs, replacements of parts, or accessions to the original nailing machines, which categories of items are covered explicitly by the Doede-Bulk security agreement description of collateral.

The Court is persuaded that the defendants are correct in asserting that a factual dispute does remain with respect to

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640 F. Supp. 976 (E.D. Wisconsin, 1986)
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47 B.R. 774 (W.D. Wisconsin, 1985)
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47 B.R. 204 (W.D. Wisconsin, 1985)
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46 B.R. 17 (W.D. Wisconsin, 1984)

Cite This Page — Counsel Stack

Bluebook (online)
78 F.R.D. 333, 1978 U.S. Dist. LEXIS 19095, Counsel Stack Legal Research, https://law.counselstack.com/opinion/national-acceptance-co-v-doede-wiwd-1978.