Zink v. Vanmiddlesworth

Frank and William Vanmiddlesworth (defendants) were dairy farmers in New York. In 1998 Frank granted Marine Midland Bank a security interest in cattle that he owned and would acquire in the future. Marine Midland Bank filed a financing statement to perfect its security interest. Marine Midland Bank was acquired by HBSC Bank USA (HBSC), and the security interest was transferred to HBSC. In 2001 the Vanmiddlesworths purchased 54 cows from Robert and Ruth Zink (plaintiffs) for approximately $3,000. As collateral on the purchase, the Vanmiddlesworths gave the Zinks a security interest in the 54 cows and any additional or replacement cattle. The Zinks did not send HBSC a notice that they intended to acquire a purchase-money security interest in the cattle. The Zinks filed a financing statement perfecting their security interest. In 2002 the Vanmiddlesworths filed for bankruptcy. The Zinks filed motions in the bankruptcy proceedings, seeking adequate protection of their purchase-money security interest. The Zinks believed that they had properly filed their purchase-money security interest and, therefore, that their interest in the cattle was superior to HBSC’s interest in the cattle. The bankruptcy court denied the Zinks’ motions, finding that the Zinks failed to achieve priority over HBSC because the Zinks did not fulfill the requirements imposed by New York law. Specifically, the Zinks failed to notify HBSC that they were obtaining a purchase-money security interest in the cattle. The Zinks appealed.