Opinion ID: 445318
Heading Depth: 2
Heading Rank: 1

Heading: Proceeds Versus After-Acquired Property

Text: 5 Appellant contends that the award of damages in this conversion action constitutes an impermissible double recovery. According to appellant, the sale of the Case equipment resulted in the only recovery available to Taylor. Though appellant's argument is somewhat unclear, it appears to be premised on an election of remedies theory. That is, because Taylor elected to sell the Case equipment and because the equipment constituted proceeds, and not after-acquired property, Taylor was foreclosed from pursuing any additional remedy. 6 As an initial matter, we note, as did the district court, that an action for conversion is a proper remedy for a secured party to bring against a third party when its collateral has been disposed of by the debtor. United States v. McCleskey Mills, Inc., 409 F.2d 1216 (5th Cir.1969). When an unauthorized disposition of collateral has occurred, a secured party has numerous cumulative remedies at its disposal; it is not forced to elect a single remedy. See Fla.Stat. Sec. 679.501 (1983). A creditor may pursue several remedies until the debt is satisfied. Motorola Communications and Electronics, Inc. v. National Patient Aids, 427 So.2d 1042, 1045 n. 9 (Fla.Dist.Ct.App.1983). The pertinent UCC provision provides that: 7 (2)[A] security interest continues in collateral notwithstanding sale, exchange or other disposition thereof unless the disposition was authorized by the secured party in the security agreement or otherwise, and also continues in any identifiable proceeds including collections received by the debtor. 8 Id. Sec. 679.306(2) (emphasis added). Official Comment 3 to this section of the UCC provides: 9 3. In most cases when a debtor makes an unauthorized disposition of collateral, the security interest, under prior law and under this Article, continues in the original collateral in the hands of the purchaser or other transferee. That is to say, since the transferee takes subject to the security interest, the secured party may repossess the collateral from him or in an appropriate case maintain an action for conversion. Subsection (2) codifies this rule. The secured party may claim both proceeds and collateral, but may of course have only one satisfaction. 10 Appellant contends that the sale of the Case equipment by Taylor constituted the single satisfaction to which Taylor is entitled. We disagree. 11 The only limitation on the secured party's ability to seek full satisfaction of its debt is that the secured party may not harass the debtor by simultaneously pursuing several remedies. That was the situation presented to the court in Ayares-Eisenberg Perrine Datsun, Inc. v. Sun Bank, 455 So.2d 525 (Fla.Dist.Ct.App.1984); it is not the situation presented here. 12 Appellant urges us to rely on Ayares Eisenberg in finding that appellee was precluded from seeking damages in this conversion action. This case is inapposite. Unlike the instant case, the secured party in Ayares Eisenberg initiated a direct action on the note before the collateral had been sold. Thus, the secured party was pursuing contemporaneously two or more remedies. In contrast, the secured party here has disposed of the collateral and is now pursuing an additional remedy in furtherance of satisfaction of the debt. See id. at 527. 13 In any event, we agree with the district court that Taylor's security interest in the new Case equipment attached as after-acquired property. Moreover, even if it could be considered proceeds, the equipment could also be considered after-acquired property; appellant has not pointed to anything which convinces us that the terms are mutually exclusive. Case could have protected itself by obtaining a purchase money security interest in its equipment. Moreover, the district court found that Case did not act in a commercially reasonable fashion in relying exclusively on Wyman's assurances that he owned the equipment free of any security interests. Under these circumstances, we agree with the district court that appellee will not obtain a double recovery in this conversion action. Appellee is merely exercising its right to pursue the cumulative remedies available to it to seek satisfaction of the debt.