Opinion ID: 790467
Heading Depth: 2
Heading Rank: 1

Heading: GECC's Security Interest in Machinery's Deposits

Text: 17 The district court determined that GECC had a security interest in certain funds that were deposited by Machinery in its parent account. It made this determination at the bench trial, and its conclusion is a finding of fact. 18 GECC sought to establish its security interest in deposited funds by establishing that (1) ninety-two of Machinery's customers made lease payments to Machinery during January, February, and March 2001, (2) those customers leased GECC-financed inventory, and (3) the funds paid by those customers were deposited in the parent account. The funds paid by a lessee of inventory are proceeds of that inventory under Missouri law, and GECC's security interest in the inventory therefore continued in those proceeds. Mo. Ann. Stat. § 400.9-306(1)-(2), cmt. 6. 2 But GECC's evidence was weak. Audit records indeed revealed that the ninety-two customers had leased GECC-financed inventory. And cancelled checks that had been deposited in Machinery's parent account established the amounts paid by the ninety-two customers to Machinery. But no leases, invoices, or other evidence tying the payments to the collateral was presented. GECC nonetheless argued that the audit records and cancelled checks showed that the funds paid by the ninety-two lessees and deposited in the parent account were proceeds of GECC-financed inventory because those customers were likely making payments on their leases of GECC-financed inventory. 19 UPB countered with testimony establishing that twenty-three of the ninety-two customers also leased equipment in which GECC had no security interest. The district court concluded that GECC had not proven that those twenty-three customers' payments were proceeds of GECC-financed inventory because the inference upon which GECC relied—that such customers were likely making payments on their leases of GECC-financed inventory— was no longer valid given UPB's evidence. The court therefore excluded those twenty-three customers' payments from its deposit calculations and held that GECC had proven that the remaining sixty-nine customers' payments were proceeds of GECC-financed inventory that was deposited in the parent account. We agree with the district court. 3 Including the twenty-three customers' payments requires speculation, and although GECC's evidence was scant, we see no clear error in the district court's finding with regard to the remaining sixty-nine customers' payments. 20