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Fordyce Bank & Trust Co. v. Bean Timberland, Inc.

Arkansas Supreme Court
251 S.W.3d 267 (2007)


Bean Timberland, Inc. (Bean) (defendant) borrowed money from Fordyce Bank & Trust Co. (Fordyce) (plaintiff) for the purpose of purchasing timber. As part of the lending agreement, Bean gave Timberland a security interest in the timber. Fordyce filed a financing statement to perfect the security interest. Bean resold the timber to two lumber mills (defendants) and failed to pay back Fordyce’s loan. Fordyce sued Bean and the lumber mills. Bean went bankrupt, but Fordyce continued to assert a claim against the lumber mills. Fordyce argued that the lumber mills were negligent because the mills did not search for liens before buying the timber. Bean had sold the timber using the customary practice of delivering the timber to the mills’ front gate for weighing and measuring. Mills commonly did not conduct lien searches on those kinds of timber deliveries. The trial court found that the lumber mills were buyers in the ordinary course of business and were not required to conduct a lien search on the timber. Thus, the lumber mills owned the timber free of any security interests, and Fordyce could not repossess the timber to cover the unpaid loan. Fordyce appealed.

Rule of Law


Holding and Reasoning (Glaze, J.)

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