Opinion ID: 160061
Heading Depth: 4
Heading Rank: 5

Heading: MCNB's Affirmative Defense

Text: 34 MCNB asserts that, regardless of any party's priority interests in the cattle, it is entitled to retain all proceeds received from the sale of the cattle to Conley because it was a transferee in the ordinary course of business. Comment 2(c) to Okla. Stat. Ann. tit. 12A, § 9-306 provides that [w]here cash proceeds are covered into the debtor's checking account and paid out in the operation of the debtor's business, recipients of the funds of course take free of any claim which the secured party may have in them as proceeds. The Oklahoma Supreme Court has interpreted this comment to require that the transferee have acted in good faith and without knowledge of the other party's security interest in order to obtain the benefit of the affirmative defense. See Anderson, Clayton & Co. v. First Am. Bank, 614 P.2d 1091, 1094-95 (Okla. 1980). 35 The district court did not address this claim in its order granting summary judgment for the defendants, and we decline to consider it on appeal. As a general rule, we do not consider issues not passed on below, and it is appropriate to remand the case to the district court to address an issue first. See R. Eric Peterson Constr. Co. v. Quintek, Inc., 951 F.2d 1175, 1182 (10th Cir. 1991). This rule is particularly applicable in the present case given that the determination of whether MCNB acted in good faith and without notice of NTPCA's security interest are factual inquiries that are best resolved in the first instance by the district court. Moreover, the question of whether MCNB is entitled to assert this defense is necessarily intertwined with the resolution of the conspiracy and fraud claims in this case. Comment 2(c) to § 9-306 emphasizes: 36 What has been said [concerning the affirmative defense available to a recipient of proceeds] relates to payments and transfers in ordinary course. The law of fraudulent conveyances would no doubt in appropriate cases support recovery of proceeds by a secured party from a transferee out of ordinary course or otherwise in collusion with the debtor to defraud the secured party. 37 Given our conclusions at Parts I.B. and I.C., infra, that it is necessary to remand the fraud and conspiracy claims to the district court, it would be inappropriate for this court to determine if MCNB is entitled to retain the proceeds of the cattle sale as a transferee in the ordinary course.