Opinion ID: 2977034
Heading Depth: 2
Heading Rank: 2

Heading: Sale of Inventory

Text: Although FDP was no longer a viable business as of November 2002, it still had assets in the form of patents, outstanding orders, and inventory specifically designed for use with certain patents. When Fisher approached Globe about purchasing FDP, the discussions No. 07-3319 4 turned to the purchase of certain patents and the future employment of Fisher. In a memorandum from December 2002, W. Patrick Winton of Globe stated that he and Fisher talked about getting National City Bank, which held a security interest in FDP’s inventory, to assign the inventory to Globe so that Globe could purchase the parts as they were needed to complete FDP’s back orders. In another memorandum from December 2002, Winton stated: “JAF is arranging to take the raw stock and is working this out with the bank. We do not have to agree to buy any of the stock, but it will be available to us. I assume he will get this deal done.” Fisher and Brennan recognized that the inventory, appraised for National City at a liquidation value of $3,000, represented a business opportunity because it had substantially greater value to Globe. If Fisher took the inventory personally, however, it could be lost to the trustee when he filed for bankruptcy. Instead, the inventory would be sold to Brennan. In January 2003, Brennan wrote to National City offering to purchase certain FDP inventory and shelving for $3,800. National City responded that although it held a security interest in the inventory, the property was owned by FDP and any offer to purchase should be directed to Fisher. On January 23, 2003, Brennan sent a letter to Fisher offering to purchase the inventory for $3,850. The evidence showed that National City approved the sale to Brennan, that Fisher accepted her offer, and that Brennan paid by check dated February 3, 2003. The proceeds of the sale went to National City, which released its security interest in the inventory purchased by Brennan. Brennan moved the inventory to Globe’s facility. On February 7, 2003, less than a No. 07-3319 5 week later, Globe made its first purchase from Brennan’s inventory for the sum of $10,326.11. At Fisher’s direction, Globe continued to make purchases from Brennan through October 2004. The bankruptcy court found that Globe paid a total of $99,128.65 to Brennan for inventory, which she used not only as supplemental income but also to make “gifts” to former employees of FDP who were owed back pay. At the time of trial in October 2005, some portion of the inventory had still not been sold.