In re Tucker

On April 21, 2001, Edward Tucker (debtor) purchased three vehicles for his car dealership in Arizona from Par Wholesale Auto, Inc. (Par) (creditor) in Texas with financing from DAVCO Enterprises (DAVCO) (creditor). DAVCO was to hold onto vehicle titles as security until Tucker sold them. Tucker gave Par a check for the first vehicle and purchased the other two on credit with a promise to pay with two bank drafts. All three vehicles were delivered to Tucker’s car dealership. Unfortunately, Tucker’s check for the first vehicle bounced, and he did not have the funds to replace it. Upon Par’s demand for payment or the vehicles, on April 28, Tucker returned the three vehicles to Par on May 24. At this time, DAVCO had not recorded its alleged interest in the vehicles with titling agencies in Texas or Arizona, and DAVCO did not file a financing statement to perfect its interest. Further, DAVCO had never possessed the vehicles. After the three vehicles were returned, Par acquired new titles in Texas in May, and DAVCO acquired new titles in Arizona in June. DAVCO ended its agreement with Tucker and demanded the vehicles be returned. Par and DAVCO filed cross-motions for summary judgment in bankruptcy court. DAVCO’s claim of ownership failed because DAVCO had never possessed or perfected an interest in the vehicles. The remaining question before the court was whether a seller exercising a right of reclaiming goods has priority over a secured creditor that has an unperfected interest.