LMS Holding Company v. Core-Mark Mid-Continent, Inc.

MAKO, Inc., operated convenience stores. In 1988 MAKO granted Core-Mark Mid-Continent, Inc. (Coremark) (defendant) a security interest in its inventory and after-acquired inventory. Coremark filed a financing statement naming MAKO as the debtor to perfect its security interest. MAKO subsequently filed for Chapter 11 bankruptcy. Under MAKO’s reorganization plan, Retail Marketing Company (RMC) (plaintiff) acquired certain MAKO assets—including inventory in which MAKO had given Coremark a security interest—and took over MAKO’s stores. RMC assumed MAKO’s debts and granted Coremark a new security interest in RMC’s inventory and after-acquired inventory. Coremark did not file a new financing statement listing RMC as the debtor. In 1991 RMC filed for bankruptcy. Coremark filed a proof of claim in RMC’s bankruptcy for its after-acquired inventory. RMC filed an adversary proceeding in bankruptcy court, seeking to avoid Coremark’s claim. RMC reasoned that Coremark did not have a perfected security interest in RMC’s after-acquired inventory, because Coremark had not filed a new financing statement naming RMC as the debtor. The bankruptcy court, relying on an Oklahoma statute providing that a financing statement remained effective with regard to collateral transferred by a debtor, held that Coremark’s financing statement related to MAKO’s inventory remained effective with respect to RMC’s after-acquired inventory. Therefore, Coremark had a perfected security interest in RMC’s after-acquired inventory. The district court reversed the bankruptcy court, holding that Coremark’s perfected financing statement only applied to the inventory that MAKO transferred to RMC. Because Coremark did not have a perfected security interest in RMC’s after-acquired inventory, the district court granted summary judgment for RMC. Coremark appealed.