Crestmark Bank v. Electrolux Home Products

Crestmark Bank (Crestmark) (plaintiff) and Electrolux Home Products, Inc. (Electrolux) (defendant) became embroiled in a dispute over products, materials, and tools made by Tarheel Plastics, LLC (Tarheel). Tarheel made injection-molded plastic parts, which Electrolux used for appliances from 2008 to 2013. Work for Electrolux constituted 95 percent of Tarheel’s business. Tarheel and other manufacturers used an Internet portal to submit quotes to Electrolux. If Electrolux agreed, it submitted a purchase order and terms of sale for the manufacturer via the web portal. Tarheel then ordered the raw materials and resins for the Electrolux parts, and Electrolux periodically offset the costs of the resins against Tarheel’s previously completed invoices. Tarheel kept possession of the resins, the completed but not yet shipped parts, and certain tools and molds. In December 2011, Electrolux filed a Uniform Commercial Code (UCC) financing statement noting a security interest in some specific tools. A tooling agreement filed in 2013 described different tools but similarly indicated that Electrolux claimed ownership of tools and molds provided to Tarheel for manufacture of products that Electrolux would later purchase. Crestmark, meanwhile, was Tarheel’s primary lender, holding a $1.2 million line of credit. On November 27, 2012, a security agreement granted Crestmark a security interest in all of Tarheel’s assets, including accounts, goods, inventory, and equipment. In the fall of 2013, Crestmark stopped lending funds to Tarheel, and Tarheel’s operations were terminated. Crestmark filed suit and sought summary judgment, claiming a superior interest in the completed parts, the resins and raw materials, and the tools and molds. Electrolux filed its own motion for summary judgment and also counterclaimed that Crestmark had committed conversion by wrongfully retaining Electrolux’s property. Electrolux asserted that it was a buyer in the ordinary course of business but did not provide documentation as to the specific completed parts in question or any advanced payments or commitments in regard to same.