In re Bluegrass Ford-Mercury, Inc.

942 F.2d 381 (1991)

From our private database of 46,100+ case briefs, written and edited by humans—never with AI.

In re Bluegrass Ford-Mercury, Inc.

United States Court of Appeals for the Sixth Circuit
942 F.2d 381 (1991)

  • Written by Brett Stavin, JD


In the mid-1970s, Farmers National Bank of Cynthiana (Farmers) (defendant) entered into a floor-plan financing arrangement with Bluegrass Ford, pursuant to which Farmers provided Bluegrass Ford with a line of credit intended to be secured by Bluegrass Ford’s fleet of automobiles. On June 7, 1977, Farmers filed a Uniform Commercial Code (UCC) financing statement covering all new cars and demonstrators in Bluegrass Ford’s inventory. In August 1979, Bluegrass Ford’s assets, including inventory, were sold to a new owner, which became known as Bluegrass Ford-Mercury, Inc. (Bluegrass) (plaintiff). The floor-plan financing arrangement continued, but Farmers did not file any new financing statement as a result of the change. By spring 1981, Bluegrass experienced financial difficulties and stopped paying Farmers the proceeds from the sold vehicles, so that the cars were sold out of trust. As of April 9, Bluegrass owed Farmers $232,084.24, inclusive of the amount related to vehicles sold out of trust. Also on April 9, Bluegrass obtained a loan from Farmers in the amount of $250,000, which was guaranteed by the Small Business Administration (SBA). The SBA loan was accompanied by a security agreement and UCC financing statement that identified collateral as including “all inventory,” which were filed with the county clerk on April 9. On October 8, Farmers filed another UCC financing statement covering “all new and used vehicles” in Bluegrass’s inventory. On January 5, 1982, Bluegrass filed for bankruptcy. In the 89-day period from the filing of the financing statement on October 8 to the filing of bankruptcy, Bluegrass paid Farmers $91,950.31 in principal and $10,545.54 in interest. All remaining vehicles in inventory were sold as part of the bankruptcy proceeding. The proceeds, totaling $23,938.87, were remitted to Farmers. Bluegrass also made various other payments to Farmers pursuant to the SBA loan. Subsequently, Bluegrass, as debtor-in-possession, filed an action to recover certain payments as preferential transfers. The bankruptcy court ruled in Bluegrass’s favor. The bankruptcy court allowed Bluegrass to recover payments made in the preference period. The district court affirmed the bankruptcy court’s decision, and Farmers appealed. Farmers argued that it was entitled to the payments made during the relevant period because it was a perfected and secured creditor.

Rule of Law


Holding and Reasoning (Guy, J.)

What to do next…

  1. Unlock this case brief with a free (no-commitment) trial membership of Quimbee.

    You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 747,000 law students since 2011. Some law schools—such as Yale, Berkeley, and Northwestern—even subscribe directly to Quimbee for all their law students.

    Unlock this case briefRead our student testimonials
  2. Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.

    Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students.

    Learn about our approachRead more about Quimbee

Here's why 747,000 law students have relied on our case briefs:

  • Written by law professors and practitioners, not other law students. 46,100 briefs, keyed to 987 casebooks. Top-notch customer support.
  • The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
  • Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
  • Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.

Access this case brief for FREE

With a 7-day free trial membership
Here's why 747,000 law students have relied on our case briefs:
  • Reliable - written by law professors and practitioners, not other law students
  • The right length and amount of information - includes the facts, issue, rule of law, holding and reasoning, and any concurrences and dissents
  • Access in your class - works on your mobile and tablet
  • 46,100 briefs - keyed to 987 casebooks
  • Uniform format for every case brief
  • Written in plain English - not in legalese and not just repeating the court's language
  • Massive library of related video lessons - and practice questions
  • Top-notch customer support

Access this case brief for FREE

With a 7-day free trial membership