Arthur Glick Truck Sales, Inc. v. Stuphen East Corp.
965 F. Supp. 2d 402 (2013)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A buyer who has paid a substantial portion of the price for goods that are specifically identified to a contract achieves "constructive possession," qualifying them as a "buyer in the ordinary course of business" under the UCC. This status grants them a superior interest in the goods over an unpaid consignor, even if the seller goes bankrupt before completing or delivering the goods.
Facts:
- Arthur Glick Truck Sales ('Glick') consigned fire truck chassis to Wolverine Fire Apparatus Company ('Wolverine'), a company that built and sold completed fire trucks.
- Wolverine entered into contracts with the Beaverkill Valley Fire District and the Forest Waverly Fire Department ('the Fire Districts') to build and sell them customized fire trucks.
- The Fire Districts secured surety bonds from Stuphen East Corp. ('Stuphen') to guarantee Wolverine's performance on the contracts.
- The Fire Districts paid Wolverine nearly the entire purchase price for the completed trucks upfront.
- Wolverine ordered the specific chassis from Glick to fulfill the Fire Districts' contracts and began construction according to each district's unique specifications.
- Before completing the fire trucks, Wolverine went into bankruptcy.
- Glick was never paid by Wolverine for the chassis used in the construction.
- Following the bankruptcy, the Fire Districts made claims on their surety bonds, and Stuphen arranged to acquire the chassis from the bankruptcy estate to have the trucks completed and delivered.
Procedural Posture:
- Arthur Glick Truck Sales sued Stuphen East Corp. in the U.S. District Court for the Southern District of New York, seeking damages for the value of two truck chassis.
- Defendant Stuphen filed a Motion for Summary Judgment, arguing its interest in the chassis was superior to Plaintiff Glick's interest.
- The District Court granted Defendant's Motion for Summary Judgment.
- Plaintiff Glick filed a Motion for Reconsideration of the court's order granting summary judgment.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the bankruptcy of a seller, and the subsequent actions by the buyer's surety to complete the contract, nullify the buyer's status as a 'buyer in the ordinary course of business' under the UCC, thereby defeating their superior claim to the goods against the original consignor?
Opinions:
Majority - Judge Karas
No, the bankruptcy and subsequent actions do not nullify the buyer's status. Under the UCC, the Fire Districts were buyers in the ordinary course of business with a superior interest in the chassis. Plaintiff's motion for reconsideration is denied because its arguments are procedurally improper and substantively without merit. The court holds that the Fire Districts qualified as buyers in the ordinary course under UCC § 1-201(9) because they had 'constructive possession' of the chassis. Constructive possession was established because the chassis were identified to the specific contracts, the Fire Districts had paid nearly the entire purchase price, and Wolverine was acting as their agent in customizing the trucks. Wolverine's bankruptcy constituted an 'anticipatory repudiation' under UCC § 2-610, which entitled the Fire Districts to suspend their own performance (final payment) but did not nullify the contracts or their status as buyers. Therefore, Stuphen, as the surety acting through equitable subrogation, could properly assert the Fire Districts' superior interest to acquire the chassis and complete the trucks.
Analysis:
This decision clarifies the scope of the 'possession' requirement for a buyer to achieve 'buyer in the ordinary course of business' (BIOC) status under the UCC. By endorsing the concept of 'constructive possession,' the court strengthens protections for buyers who prepay for goods that are later identified to their contract. This precedent makes it more difficult for unpaid consignors or secured creditors to reclaim goods from a bankrupt intermediary seller if a downstream buyer has already paid and the goods are specific to their order. The ruling reinforces the UCC's policy of promoting commercial finality and protecting good-faith purchasers in the marketplace.
Unlock the full brief for Arthur Glick Truck Sales, Inc. v. Stuphen East Corp.