Swanson v. Applied Process Technology International, LLC (In re Delta-T Corp.)

475 B.R. 495 (2012)

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Swanson v. Applied Process Technology International, LLC (In re Delta-T Corp.)

United States Bankruptcy Court for the Eastern District of Virginia
475 B.R. 495 (2012)

Facts

Delta-T Corporation stored its inventory of scrap steel at a remote facility. In August 2009, Applied Process Technology International, LLC (APTI) (defendant) perfected a security interest in all Delta-T’s tangible and intangible personal property, exclusive of Delta-T’s inventory. On December 4, 2009, Delta-T accepted a purchase order for a portion of its steel. On January 5, 2010, Delta-T accepted a second purchase order for the remainder of its steel. The steel remained in place at the remote facility until the purchasers paid for and took delivery of the steel in January 2010. On January 15, 2010, DCR Construction, Inc. (DCR) (defendant) executed a court judgment against Delta-T by served writs to garnish the proceeds of the two sales. Delta-T declared bankruptcy in November 2010. Clara Swanson (plaintiff), the bankruptcy trustee, successfully asserted the bankruptcy estate’s claim against APTI’s security interest. Swanson also claimed DCR’s garnished funds. DCR disputed the claim. The bankruptcy estate’s claim could take priority over DCR’s claim only if, under Virginia’s Uniform Commercial Code (UCC), (1) Delta-T maintained accounts for the proceeds of its steel sales, (2) the garnished funds represented those sale proceeds, and (3) Swanson’s security interest in Delta-T’s accounts arose and was perfected before DCR’s garnishment lien arose.

Rule of Law

Issue

Holding and Reasoning (St. John, J.)

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