In re Palmer

In January 2005, Joseph Palmer (debtor) purchased a compact utility tractor and a front loader from Suburban Tractor Company, which later assigned its contract and security agreement with Palmer to John Deere & Company (defendant). On the sales installment contract, Palmer indicated that the items were being purchased by an individual for personal or household use. There was a section on the contract to indicate that the items were being purchased for commercial use. Palmer left this section blank. Palmer was employed at a kennel that trained greyhounds for racing, and he operated his own kennel on five acres of land as self-employment. In August 2005, Palmer and his wife filed for bankruptcy. The bankruptcy trustee, Thomas Hazlett (plaintiff), wanted to avoid John Deere’s security interest by showing that the company’s interest in the tractor and the front loader were unperfected when the bankruptcy petition was filed. Whether John Deere’s interest was perfected depended on whether the tractor and front loader were classified as consumer goods, which are perfected without filing a financing statement, when Palmer executed the security agreement. If the goods were, in fact, part of a commercial transaction for business use, then a financing statement had to be filed for the security interest to be perfected. Hazlett filed suit in bankruptcy court seeking to avoid John Deere’s security interest by alleging that John Deere showed no evidence that Palmer’s purchase was a consumer transaction. Hazlett argued that perhaps Palmer simply did not understand the difference between the commercial transaction and a consumer transaction and left the commercial section on the contract blank by accident. Alternatively, Hazlett argued, without evidence, that perhaps John Deere and Palmer colluded to intentionally classify the goods improperly for their own benefits. John Deere moved for summary judgment.