Snap-On Tools Corporation v. Rice

Larry Neal owned a tire business. Neal purchased tools from Snap-On Tools Corporation (Snap-On) (plaintiff). Neal financed the purchase with Snap-On and gave Snap-On a security interest in the tools. Snap-On did not perfect the security interest by filing a financing statement. Randy Rice (defendant) was Neal’s employee. Rice purchased the tire business from Neal. The sale contract included the tools from Snap-On that were still subject to Snap-On’s security interest. Neal attempted to transfer the Snap-On account balance to Rice’s name. However, Neal was unable to transfer the account to Rice because Snap-On rejected Rice’s credit application. Neal kept most of the Snap-On tools that were subject to the security interest, but Neal left Rice a tire balancer and a compressor that were necessary to the business. Rice knew Neal owed money to Snap-On, but he did not know Snap-On had a security interest in the tools. The Snap-On account stayed in Neal’s name, and Rice believed that Neal was going to pay the Snap-On balance. Neal never paid the balance and soon filed for bankruptcy. Snap-On unsuccessfully attempted to repossess the tire balancer and compressor from Rice. Snap-On sued Rice and had the sheriff preliminarily repossess the tools. Rice then testified that he had no knowledge of Snap-On’s security interest. The trial court ordered Snap-On to return of the tools to Rice. Snap-On appealed, arguing that its security interest was superior to Rice’s rights in the tools.