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Missouri Court of Appeals – Judge Joseph M. Ellis cites UNPUBLISHED DECISION

Judge Joseph M. Ellis and the Missouri Court of Appeals allow GAAC, a flooring lender, to knowingly convert 18 vehicles from Excel Bank (WD69701 2009).

Too bad for Excel Bank that the California Court of Appeals wasn't deciding their fate. The Fourth Appellate Court ruled that a UCC filing by a creditor does not extend to consigned goods when the creditor is aware of consigned goods. (Fariba v. Dealer Services Corporation (2009) Cal.App.4th D053162).

The California Appellate Court ruled that flooring lender Dealer Services Corporation's (DSC) argument was "absurd". DSC asserted that as a matter of law it held a perfected security interest in the vehicles that had priority over Fariba's because it filed a UCC-1 financing statement and Fariba did not.

"This contention is unavailing. It would be absurd to hold a creditor responsible for imputed knowledge but not hold the same creditor responsible for actual knowledge" the California court said.

Additionally, "It follows from this authority that since the purpose of the notice exception is to "protect creditors from the 'hidden' claim of the consignor, it should follow that a creditor of a consignee who has actual knowledge that the consignee is a consignee cannot claim the protection thereof." (3A Anderson on the UCC, § 2-326:97 (3d ed.) 2009 Westlaw [interpreting UCC § 2-326], italics added.)

Apparently Judge Ellis wasn't aware of the gross injustice in the Automotive Finance Corp. v. Cornejo unpublished decision he cites. Unlicensed flooring lender Automotive Finance Corporation was using the same twisted UCC argument to convert the vehicles owned by an auto wholesaler in San Diego. Hopefully unpublished decisions will be looked at in a different light, especially in a Court of Appeals.


Division Three Judges: James M. Smart, Jr., Joseph M. Ellis and James E. Welsh, JJ.


Division Three holds: (1) The trial court did not err in finding that the transaction between Miles and Excel was a consignment arrangement where Miles was attempting to sell the vehicles, Miles would receive a $400 commission on each vehicle sold at a price approved by Excel, and he was not obligated to pay for any of the vehicles for which no buyer was found. Accordingly, under the UCC, Excel was required to file a financing statement on the vehicles in order to perfect its security interest therein.

Opinion by Joseph M. Ellis, Judge Date: June 30, 2009

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