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In re Downey Creations, LLC

United States Bankruptcy Court for the Southern District of Indiana
414 B.R. 463 (2009)


Facts

Downey Creations, LLC (Downey) (defendant) bought and sold diamonds and jewelry. Generally, Downey contracted with retail jewelers to sell the retailers’ goods to consumers at special-event trunk shows. Downey obtained financing from Regions Bank, N.A. (Regions) (defendant) and secured the financing with all of its inventory. Regions perfected its security interest by filing a financing statement. A group of seven jewelers (plaintiffs) delivered goods to Downey to sell at trunk shows. The plaintiffs either did not file financing statements or filed them after Regions filed its financing statement. Downey did not return or pay for the plaintiffs’ jewelry. The plaintiffs eventually filed an involuntary petition for bankruptcy against Downey. The bankruptcy petition was granted, and the plaintiffs filed a complaint to recover the goods delivered to Downey against Downey and Regions. The plaintiffs asserted that the jewelry had been delivered as a common law bailment. Downey filed a motion for summary judgment, alleging that the transactions were consignments under the Uniform Commercial Code (UCC). The plaintiffs submitted proof that 50 of Downey’s 91 creditors knew that Downey was engaged in selling the goods of others.

Rule of Law

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Issue

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Holding and Reasoning (Coachys, J.)

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  • A “yes” or “no” answer to the question framed in the issue section;
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  • The procedural disposition (e.g. reversed and remanded, affirmed, etc.).

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