Bank of Beaver City v. Barretts’ Livestock
Oklahoma Supreme Court
295 P.3d 1088 (2012)
- Written by Joe Cox, JD
Facts
Bank of Beaver City (bank) (plaintiff) perfected a security interest in the livestock of Lucky Moon Land and Livestock, Inc. (Lucky Moon), including all after-acquired livestock, on August 9, 2004. In late 2009, Barretts’ Livestock, Inc. (Barretts) (defendant) sold and delivered 903 head of cattle to Lucky Moon. Lucky Moon made two payments toward its balance and then wrote four checks to partially satisfy the remaining balance. The bank dishonored the checks due to insufficient funds. The bank and Barretts each claimed an interest in the cattle, which were sold at auction with the proceeds held in escrow pending a resolution of the priority situation. The bank filed suit, seeking judgment that it had priority based on its perfected security interest. Barretts did not have a perfected security interest but argued that it should take priority because the bank had not acted in good faith toward Barretts because the bank kept covering overdrafts by Lucky Moon despite knowledge of Lucky Moon’s financial struggles. Oklahoma’s Uniform Commercial Code (UCC) extended a duty of good faith from a lender to a debtor. Barretts submitted that it would not have delivered the cattle if it had known that the bank would not honor the checks in question. At trial, the bank’s motion for summary judgment was granted, with the court finding that the bank’s perfected security interest had priority over the unperfected security interest held by Barretts. Barretts appealed and argued that the bank’s interest had not attached because the bank was not a good-faith purchaser for value, and also that the bank had failed to act in good faith toward Barretts. The appellate court affirmed the trial court’s ruling, but the bank appealed to the Oklahoma Supreme Court, which granted certiorari to address whether a UCC requirement of good faith extended to third parties.
Rule of Law
Issue
Holding and Reasoning (Kauger, J.)
Dissent (Gurich, J.)
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