Buyer in the Ordinary Course of Business Mike Thurmond operated Top Quality Auto Sales, a used car dealership. Top Quality financed its inventory of vehicles by obtaining credit under a financing arrangement with Indianapolis Car Exchange (ICE). ICE filed a financing statement that listed Top Quality’s inventory of vehicles as collateral for the financing. Top Quality sold a Ford truck to Bonnie Chrisman, a used car dealer, who paid Top Quality for the truck. Chrisman in turn sold the truck to Randall and Christina Alderson, who paid Chrisman for the truck. When Chrisman filed to retrieve the title to the truck for the Aldersons, it was discovered that Top Quality had not paid ICE for the truck. ICE requested that the Indiana Bureau of Motor Vehicles place a lien in its favor on the title of the truck. When ICE refused to release the lien on the truck, the Aldersons sued ICE to obtain title to the truck. The Aldersons asserted that Chrisman, and then they, were buyers in the ordinary course of business and therefore acquired the truck free of ICE’s financing statement. ICE filed a counterclaim to recover the truck from the Aldersons. Are Chrisman and the Aldersons buyers in the ordinary course of business who took the truck free from ICE’s security interest in the truck? Indianapolis Car Exchange v. Alderson, 910 N.E.2d 802, 2009 Ind. App. Lexis (Court of Appeals of Indiana, 2009)
The correct answer and explanation is:
Answer:
Yes, Chrisman and the Aldersons qualify as buyers in the ordinary course of business (BIOC) and took the truck free from ICE’s security interest.
Explanation:
Under Uniform Commercial Code (UCC) § 1-201(b)(9), a Buyer in the Ordinary Course of Business (BIOC) is someone who purchases goods:
- In good faith and without knowledge that the sale violates the rights of another party.
- From a seller in the business of selling those goods.
- In the ordinary course of business.
According to UCC § 9-320(a), a BIOC takes goods free of a security interest created by their seller, even if the security interest is properly filed.
Application to the Case:
- Chrisman (Used Car Dealer) as a BIOC:
- Chrisman bought the Ford truck from Top Quality Auto Sales, a dealership in the business of selling used vehicles.
- Chrisman acted in good faith, without knowledge of ICE’s financing arrangement.
- Because Chrisman purchased the truck in the ordinary course of business, she took it free of ICE’s security interest.
- The Aldersons as BIOC:
- The Aldersons purchased the truck from Chrisman, a used car dealer.
- They paid for the truck without knowledge of ICE’s claim.
- Since Chrisman was a BIOC, she transferred the truck free of ICE’s security interest to the Aldersons.
Outcome:
The Aldersons should prevail against ICE because they were buyers in the ordinary course of business. ICE’s security interest was only enforceable against Top Quality Auto Sales, not against downstream buyers who purchased the truck in good faith.
Now, I’ll generate an image related to this legal case.
Here is an image depicting the courtroom dispute over the vehicle title between the Aldersons and Indianapolis Car Exchange. Let me know if you need any modifications or additional details!
