Expeditors International of Washington, Inc. v. The Liquidating Trust

313 B.R. 473 (2004)

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Expeditors International of Washington, Inc. v. The Liquidating Trust

United States Bankruptcy Court for the District of Colorado
313 B.R. 473 (2004)

Facts

Expeditors International of Washington, Inc. (Expeditors) (defendant) was granted a security interest in all property owned by Schwinn Cycling and Fitness, Inc. (Schwinn) (plaintiff) that was under Expeditors’ possession or control. On July 16, 2001, Schwinn filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code (Bankruptcy Code). During the weeks before Schwinn’s filing, Expeditors had some of Schwinn’s goods in its possession, which Expeditors returned to Schwinn and which Schwinn then sold. Under Uniform Commercial Code (UCC) § 9-313(a), Expeditors held an automatically perfected security interest through its possession of the goods. However, Expeditors failed to file a financing statement in connection with the goods within 20 days after returning the goods to Schwinn. Thereafter, Schwinn deposited the proceeds from the sale of the goods into a segregated cash-collateral fund. Expeditors claimed an interest in the fund based on its initial interest perfected by possession, arguing that Schwinn’s bankruptcy filing had converted Expeditors’ temporary 20-day interest into a permanent interest, which did not require the second type of perfection by either filing or possession ordinarily required by UCC § 9-312(h) in order to maintain perfection after expiration of the 20-day period.

Rule of Law

Issue

Holding and Reasoning (Nottingham, J.)

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