IN THE COURT OF APPEALS OF TENNESSEE

AT JACKSON

October 15, 2002 Session

KUBOTA CREDIT CORPORATION, USA v. DOUG TILLMAN, ET AL.

Direct Appeal from the Circuit Court for Tipton County

No. 5431 Joseph H. Walker, Judge

No. W2002-00885-COA-R3-CV - Filed December 16, 2002

The plaintiff creditor in this case filed suit to recover a tractor that was subject to a security

agreement and was pawned to the defendant pawnbroker. The court below awarded summary

judgment to the creditor. The pawnbroker appeals, claiming the creditor’s security agreement was

not properly perfected, and that the creditor therefore does not have a superior right to possession

of the tractor. We find issues of material fact exist regarding whether the security agreement was

perfected, whether the pledgor had authority to pawn the tractor, and whether the pawn transaction

was entered into in good faith. We reverse summary judgment and remand.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court; Reversed and

Remanded

DAVID R. FARMER,J., delivered the opinion of the court, in which ALAN E. HIGHERS and HOLLY K.

LILLARD, J.J., joined.

Roger A. Stone, Memphis, Tennessee, for the appellant, Doug Tillman a/k/a Bud Tillman, d/b/a

Millington Motors d/b/a AAA Collateral Loan & Jewelry Company..

William D. Wilson, Jr., Memphis, Tennessee, for the appellee, Kubota Credit Corporation.

OPINION

In April of 1999, Wooten Tractor Co. and Deborah Hubbard (Ms. Hubbard) entered into two

retail installment contracts and security agreements for Kubota tractors which were assigned to

Kubota Credit Corporation (“Kubota”). The first transaction was for the purchase of a Kubota

Model B7300HSD 16-hp tractor and a box blade. The second transaction occurred approximately

two weeks later, and consisted of an exchange of the first tractor for a larger tractor, a Kubota Model

L3010HST. The parties also completed a UCC-1 financing statement for $14,979.80 covering the

larger tractor, which Wooten Tractor filed in the register’s office of Tipton County. The documents

name only Ms. Hubbard as the buyer/debtor, and list her address as 5235 Simmons Road,

Drummonds, TN. The second tractor was picked up from Wooten Tractor by Ms. Hubbard’s
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brother, Donald Long (Mr. Long), who brought it to his home. The tractor remained garaged at Mr.

Long’s home until June of 1999, when he pawned it to Bud Tillman, d/b/a Collateral Loan & Jewelry

Co. (Bud Tillman and Collateral Loan & Jewelry Co. will be referred to collectively as Mr. Tillman).

The pawn documents include an affidavit by Donald Long stating that he was the owner of the

tractor and warranting the tractor against lawful claims and demands. 

In April of 2001, Kubota filed a warrant the Tipton County General Sessions court against

Ms. Hubbard and Mr. Tillman, asserting a purchase money security interest and seeking to recover

the tractor from Mr. Tillman. The court awarded Kubota possession upon the filing of a bond, and

Kubota recovered the tractor. Mr. Tillman appealed the general sessions’ order to the circuit court,

and counter-complained against Kubota, joining Ms. Hubbard, Donald Long, and Long’s

Construction as third-party defendants, for conversion in the amount of $13,500. Ms. Hubbard

subsequently filed for bankruptcy. Kubota moved for summary judgment, arguing it had a purchase

money security interest in the tractor and that the tractor was pawned by Donald Long individually

and without authority. The court awarded summary judgment to Kubota. Mr. Tillman non-suited

the third-party complaint against Ms. Hubbard, Donald Long andLong’sConstruction, and perfected

an appeal to this Court.

Issues

Mr. Tillman submits the following issues for review by this Court:

(1) Whether a genuine issue of material fact exists regarding whether Deborah

G. Hubbard gave Donald Long the authority to place the tractor which is the

subject matter of this litigation with a pawnbroker, the appellant Bud

Tillman, d/b/a Collateral Loan & Jewelry Company.

(2) Whether a genuine issue of material fact exists regarding whether Kubota

Credit Corp’s security interest was properly perfected, giving it priority over

the interest of the appellant Bud Tillman, d/b/a Collateral Loan & Jewelry

Company.

Kubota asserts that the dispositive issue is:

Whether Doug Tillman has shown that he has any right to possession of the

tractor that is superior to Kubota Credit’s claim for possession.

Standard of Review

Summary judgment should be awarded when the moving party can demonstrate that there

are no genuine issues regarding material facts of the cause of action and that it is entitled to a

judgment as a matter of law. Tenn. R. Civ. P. 56.04; Byrd v. Hall, 847 S.W.2d 208, 214 (Tenn.

1993); McCarley v. West Quality Food Serv., 960 S.W.2d 585, 588 (Tenn. 1998). Mere assertions
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that the nonmoving party has no evidence does not suffice to entitle the movant to summary

judgment. McCarley, 960 S.W.2d at 588. The moving party must either conclusively demonstrate

an affirmative defense or affirmatively negate an element which is essential to the nonmoving party’s

claim. Id. If the moving party can demonstrate that the nonmoving party will not be able to carry

its burden of proof at trial on an essential element of its case, summary judgment is appropriate. Id.

When a party makes a properly supported motion for summary judgment, the burden shifts

to the nonmoving party to establish the existence of disputed material facts or that the moving party

is not entitled to summary judgment as a matter of law. Id.; Staples v. CBL & Assocs., 15 S.W.3d

83, 89 (Tenn. 2000). The nonmoving party cannot merely rely on the pleadings, but must

demonstrate that essential elements of a claim exist by: 1) pointing to evidence that creates a factual

dispute; 2) re-enforcing evidence challenged by the moving party; 3) offering additional evidence

which establishes a material dispute; 4) submitting a Tenn. R. Civ. P. 56.06 affidavit explaining the

need for additional time for discovery. McCarley, 960 S.W.2d at 588.

We review an award of summary judgment de novo, with no presumption of correctness

afforded to the trial court. Guy v. Mut. of Omaha Ins. Co., 79 S.W.3d 528, 534 (Tenn. 2002). In

determining whether to award summary judgment, the court must view the evidence in the light most

favorable to the nonmoving party, drawing all reasonable inferences in favor of the nonmoving party.

Staples, 15 S.W.3d at 89. Summary judgment should be awarded only when a reasonable person

could reach only one conclusion based on the facts and inferences drawn from those facts. Id. If

there is any doubt about whether a genuine issue exists, summary judgment should not be awarded.

McCarley, 960 S.W.2d at 588.

Kubota’s Security Interest

Mr. Tillman submits that a genuine issue of fact exists regarding whether Kubota properly

perfected its security agreement covering the tractor at dispute in this case. He contends that the

tractor was neither farm equipment nor a consumer good, but equipment purchased for use by Long’s

Construction, a partnership of Ms. Hubbard, Donald Long, and their father, John Long. He asserts

that Kubota’s security agreement was accordingly not perfected by filing the UCC-1 with the register

for Tipton County, nor as a purchase money security interest in consumer goods which is perfected

without filing. 

The perfection of security agreements is governed by Tenn. Code Ann. § 47-9-101 et seq.,

Article Nine of the Uniform Commercial Code as adopted in Tennessee. This transaction and cause

of action is governed by the terms of Article Nine which were in effect prior to July 1, 2001, when

substantial changes to the article went into effect. The code provides:

A financing statement must be filed to perfect all security interests except the

following:

. . . .

(d) a purchase money security interest in consumer goods . . . .
1

Neither Kubota nor Ms. Hubbard assert that the tractor was farm equipment or used in farming operations.

2

A pawnbroker is by definition not a buyer in the ordinary course of business. Tenn. Code Ann. § 47-1-201(9).

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Tenn. Code Ann. § 47-9-302(1)(d)(1996). The code further provides:

The proper place to file in order to perfect a security interest is as follows:

(a) When the collateral is equipment used in farming operations . . . or

consumer goods, then in the office of the register in the county of the debtor’s

residence . . . .

. . . .

(c) In all other cases, in the office of the secretary of state. 

Tenn. Code Ann. § 47-9-401 (1)(1996).

Mr. Tillman argues that since the tractor was not a consumer good, Kubota does not have a

perfected security agreement and has no superior interest in the tractor.1 He further argues that since

Kubota’s security interest was unperfected, the sale of the tractor to him by Donald Long is

governed by Tenn. Code Ann § 47-9-301(1)(c), which provides:

Except as otherwise provided in subsection (2), an unperfected security interest is

subordinate to the rights of :

. . . .

(c) in the case of goods, instruments, documents and chattel paper, a person

who is not a secured party and who is a transferee in bulk or other buyer not in the

ordinary course of business, or is a buyer of farm products in the ordinary course of

business, to the extent that he gives value and receives delivery of the collateral

without knowledge of the security interest and before it is perfected.2

 

Tenn. Code Ann § 47-9-301(1)(c)(1996). Mr. Tillman contends that since he is not a buyer in the

ordinary course of business, and since he gave value for the tractor and received delivery without

knowledge of the security interest, his ownership interest is superior to Kubota’s. Mr. Tillman

further refers the Court to Title 45, Chapter 6 of the Tennessee Code, which governs pawnbrokers.

The code provides:

(b) If the pledgor fails to redeem the pledged goods with thirty (30) days after

the maturity date of the pawn transaction, the pledgor shall thereby forfeit all right,

title and interest of, in and to the pledged goods to the pawnbroker, who shall thereby

acquire an absolute title to the pledged goods and the debt becomes satisfied, and the

pawnbroker shall have the authority to sell of dispose of the unredeemed pledged

goods as the pawnbroker’s own and may sell the unredeemed pledged goods. 
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Tenn. Code Ann. § 45-6-211(b)(1999 Supp.)

Kubota contends that the tractor was purchased by Ms. Hubbard as a consumer good, and that

its purchase money security interest therefore was perfected without filing. In support of this

assertion, Kubota submits an affidavit by Ms. Hubbard in which she states that she purchased the

tractor for her own use and not for the benefit of Long Construction. Also included in the record is

an affidavit of Steve Wooten, an owner and manager of Wooten Tractor. Mr. Wooten asserts that

the tractor was sold for the personal use of Ms. Hubbard, and that Ms. Hubbard did not disclose any

contemplated business uses for the tractor. Mr. Tillman notes, however, that the credit application

completed by Ms. Hubbard does not state a contemplated use for the tractor, and that statements

made by Ms. Hubbard in her deposition support the contention that the tractor was purchased, at least

in part, for use by Long Construction. 

In her deposition, Ms. Hubbard stated that she purchased the original, smaller tractor at the

direction of her brother and partner, Donald Long, and that the down-payment was provided by her

father, also a partner in Long’s Construction. She stated that the exchange of this tractor for a larger

one also was completed at Donald Long’s direction, and that she did not know for what purpose the

tractor was needed. When asked whether the tractor was intended for use in the construction

business, Ms. Hubbard replied, “part of it.” Ms. Hubbard also stated that Donald Long picked up

the tractor from Wooten Tractor, and that it remained on his property from the time of purchase until

it was pawned. She additionally stated that Donald Long previously had pawned several other pieces

of large equipment to Mr. Tillman, apparently without incident.

Donald Long stated in his deposition that Long’s Construction provided the down-payment

for the tractor, and that the tractor was purchased for use by the construction partnership. He

explained that the original, smaller tractor was exchanged for the larger model because the smaller

tractor had nearly flipped over when used on a construction site. Donald Long further stated that

Deborah Hubbard purchased the tractor in her name because the partnership lacked sufficient credit

to finance it in its own name. He confirmed that he picked up the tractor from Wooten Tractor and

that it remained at his home, which was also the location of the construction business. Donald Long

further stated that the tractor was used for construction business purposes shortly after it was

purchased.

The determinative factor for establishing the classification of goods is the purpose for which

they are bought and used. In re James Fritz Butler v. Murfreesboro Prod. Credit Ass’n, 3 B.R.

182, 183 (Bankr. E.D. Tenn. March 5, 1980). When classifying goods in order to determine whether

a security interest has been perfected, the court looks to the actual use of the goods, not to what use

the goods could be put. Id. at 184. Upon review of this record, we find a genuine issue of material

fact exists regarding whether the tractor is properly classified as a consumer good or equipment, and

whether Kubota’s security interest was perfected.
3

Tenn. Code Ann. § 47-6-213 governs pawn transactions involving stolen property.

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Authority of Donald Long to Pawn the Tractor

Kubota submits that the issue of whether its security agreement was perfected is not a

material issue because “the record lacks any affidavit or other credible evidence that Appellant had

lawful possession of the tractor. That . . . is dispositive of the appeal.” Kubota’s argument, as we

understand it, is that Ms. Hubbard purchased the tractor individually, and not on behalf of the

partnership, that the tractor was pawned by Donald Long without her knowledge or permission, and

that Donald Long had no ownership interest in the tractor which could be transferred to Mr. Tillman.

Kubota further asserts that Mr. Tillman knew Donald Long had no ownership interest in the tractor,

despite the affidavit signed by Donald Long as part of the pawn transaction that he was the rightful

owner of the tractor. Kubota contends that where the Code provides that “[a] purchaser of goods

acquires all title which his transferor had or had power to transfer,” Tenn. Code Ann. § 47-2-403(1),

since Donald Long had no title to the tractor, Mr. Tillman could acquire no title. We disagree with

this assertion.

We first address Tenn. Code Ann. § 47-2-403, which provides, in pertinent part:

(1) A purchaser of goods acquires all title which his transferor had or had power to

transfer except that a purchaser of limited interest acquires rights only to the extent

of the interest purchased. A person with voidable title has power to transfer a good

title to a good faith purchaser for value. When goods have been delivered under a

transaction of purchase the purchaser has such power even though:

(a) the transferor was deceived as to the identity of the purchaser, or

. . . .

(d) the delivery was procured through fraud punishable as larcenous

under the criminal law. 

. . . .

(4) The rights of other purchasers of good and of lien creditors are governed

by the chapters on Secured Transactions (chapter 9 of this title) and Documents of

Title (chapter 7 of this title). 

Tenn. Code Ann. § 47-2-403(1)(1999 Supp.).

Although a thief has void title, one who is in possession of goods as a result of a voluntary

delivery is not a thief in the ordinary sense.3 Alsafi Oriental Rugs v. Am. Loan Co., 864 S.W.2d

41, 44 (Tenn. Ct. App. 1993). Even a swindler who induces a victim through fraud to voluntarily

deliver a good is a purchaser under the code, albeit one with voidable title. Id. A purchaser with

voidable title confers good title upon a good faith purchaser for value, even where delivery was

procured through actionable fraud. Id. Tenn. Code Ann. § 47-2-403(1). The parties do not dispute

that Mr. Long was in possession of the tractor by virtue of a voluntary delivery by both Ms. Hubbard

and Kubota. Thus he had the power to confer good title to a good faith purchaser for value. Kubota
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contends, however, that Mr. Tillman is not a good faith purchaser because he knew that Ms. Hubbard

was the rightful owner of the tractor and that Mr. Long had no authority to pawn it. This presents

an issue of material fact for determination by the trial court.

Second, Mr. Tillman asserts that Donald Long had authority to pawn the tractor since it was

equipment of the partnership, and not the personal property of Ms. Hubbard. In light of the

circumstances surrounding the purchase and delivery of the tractor as discussed above, we agree that

this is an issue of material fact which also must be determined by the trial court.

Conclusion

This case raises an issue of material fact regarding the classification of the tractor which is

the subject of this dispute. The determination of this issue is necessary to establish whether Kubota’s

security agreement was perfected. The evidence also raises issues of Donald Long’s authority to

pawn the tractor and whether Mr. Tillman was a good faith purchaser. 

In light of the foregoing, we reverse summary judgment and remand for a trial on the merits.

In so doing, we emphasize the obligations of good faith and honesty in fact which are required in

every transaction under chapters one through nine of the Uniform Commercial Code. Tenn. Code

Ann. § 47-1-102(3)(1996). Costs of this appeal are taxed to the appellee, Kubota Credit

Corporation, USA.

___________________________________ 

DAVID R. FARMER, JUDGE