Element Financial Corp. v. Marcinkoski Gradall, Inc.

Inland Empire Distribution, LLC, a California company, bought three Bobcat utility vehicles in California in 2013. Promissory notes and security agreements were executed for each sale by Inland in favor of Element Financial Corp. (Element) (plaintiff), and the loans were also personally guaranteed by managing member Omri Elkadar. Elkadar moved the Bobcats to Florida, listed them for sale, and they were sold by CM Global, Inc., d/b/a Inland Empire Distribution, Inc., a Nevada corporation, to Damage Services, Inc. (Damage). Two of the Bobcats were then sold by Damage to Marcinkoski Gradall, Inc. (Marcinkoski) (defendant). Soon after the subsequent sales, Element sued Marcinkoski. Element also filed UCC financing statements in Florida and California less than a year after the three vehicles had been moved to Florida. The trial court ruled that four months after the debtor had moved to Florida, Element’s perfected liens expired, and that Marcinkoski was a buyer in the ordinary course of business and could take goods free of the security interest. Element appealed, arguing first that its security interest had been perfected for a year after the Bobcats were moved to Florida. The same statute that provided that Element’s security interest would expire four months after a change of the debtor’s location also provided in the alternative that it would expire a year after the collateral was transferred to a person who became a debtor and was located in another jurisdiction. Secondly, Element argued that the security interest had not been created by Marcinkoski’s seller and thus that Marcinkoski could not take free of Element’s security interest.