Techsonic Industries, Inc. v. Barney's Bassin' Shop, Inc.

621 S.W.2d 332, 31 U.C.C. Rep. Serv. (West) 1437, 1981 Mo. App. LEXIS 3031

• Court: Missouri Court of Appeals
• Decided: July 31, 1981
• Docket: 11904
• Status: Published

Opinions

PREWITT, Presiding Judge.

Plaintiff received a monetary judgment against defendant. Thereafter plaintiff sought a judgment against garnishees or the right to levy execution upon certain goods garnishees had in their possession, claiming that defendant had transferred inventory to garnishees in violation of the Uniform Commercial Code — Bulk Transfers, § 400.6-101 to 111, RSMo 1978. Summary judgment was entered in favor of garnishees.

Garnishees admit that they bought defendant’s inventory and that no attempt was made to comply with the bulk transfers law. They contend that under § 400.6-103(c), RSMo 1978, the transfer was exempt because it was “in settlement ... of a lien”. Defendant owed Empire Bank approximately $83,400 on a promissory note, the payment of which was secured by a security agreement covering defendant’s inventory. Plaintiff sold goods on open account to defendant from December 29, 1978, through April 17, 1979, and received a judgment against defendant on September 18, 1979. On July 17, 1979, defendant and garnishees reached an agreement concerning the sale of the inventory to garnishees for $80,000 if the price was “favorable with the bank” and if garnishees were able to borrow $60,-000. Garnishees on that date received a bill of sale and the keys to the buildings in which the inventory was located. They removed part of the inventory that night. Empire Bank was not involved in the negotiations with garnishees, but defendant’s president contacted the bank to see if the sale was “agreeable with them.” At that time the bank was “fixing to” repossess the inventory but had not done so yet. The bank had called the note due because of defendant’s failure to make a payment. Defendant’s president testified by deposition that the sale to garnishees was made because of “pressure by the bank”.

On July 18, 1979, defendant’s president and garnishees met at the Empire Bank with an officer of that bank. Garnishees borrowed $60,000 from the bank on the inventory and the bank issued a cashier’s check payable to it “in favor of Barney’s Bassin” in the amount of $60,000. The bank applied the check as a payment on defendant’s note. Garnishees also gave their check to defendant and endorsed to defendant a check payable to them. These checks totaled $20,000 and were endorsed by defendant and given to the bank to apply on defendant’s note. At the meeting defendant issued its corporate check for $2,800 to the bank and defendant’s president wrote his personal check for slightly more than $600 to pay off the note. Defendant’s corporate officers had personally guaranteed the bank’s loan to defendant. The note and security agreement obligating defendant to the bank was cancelled and a new note for $60,000 and a security agreement was made by garnishees to the bank.

Plaintiff contends, quoting from Starman v. John Wolfe, Inc., 490 S.W.2d 377, 382 (Mo.App.1973), that to “be an exempt transfer under § 400.6-103(3) the transfer should be made to the holder of the security interest and not to the transferee for the benefit of the secured holder.” The quoted language does appear favorable to plaintiff but the facts in Starman are significantly different from those here. In the same paragraph as that quote the opinion states that there was no evidence that the debtor was in default under any security agreement nor that the secured party had a right to foreclose or demand delivery of the goods at the time of the transfer. Here there was a default in the agreement and the bank had a right to possession and was preparing to foreclose and seize the inventory. The sale was subject to the approval of the bank and all proceeds went to the bank. In Starman the bank did not receive the entire consideration “so that some creditors were preferred over Starman to his detriment.” 490 S.W.2d at 383.

The wording of § 400.6-103(3) does not require that the transfer be made to the holder of the security interest. We agree with American Metal Finishers, Inc. v. Palleschi, 55 A.D.2d 499, 391 N.Y.S.2d 170 (1977), that we should not add a requirement that the transferee must be the holder of the security interest. As that case stated, if there was a transfer to the security holder and the security holder then sold the goods, the creditors could not complain and there is no reason to require two transactions rather than one when the transaction was made with the approval of the secured party and to satisfy the lien. We hold that the transfer here is exempt and because of the difference in facts, do not believe that this result conflicts with the Starman holding.

The judgment is affirmed.

HOGAN and BILLINGS, JJ., concur. MAUS, C. J., dissents and files dissenting opinion.