Court Opinion

ID: 5158190
Source: CourtListenerOpinion
Date Created: 2022-01-02 02:28:01.706358+00
Date Added: 2024-06-11T08:25:29.688341
License: Public Domain

GURICH, J.,
with whom COLBERT, V.C.J. and REIF, J. join dissenting:
T 1 The majority holds that the good faith requirement of 12A 0.8.2011 § 2-403 does not extend to third parties. Such a holding is not supported by the Uniform Commercial Code,1 and case law interpreting the Code,2 *1096and goes too far-it bars all future third parties from defeating a secured lender's interest under § 2-408 regardless of how egregiously the lender has acted.
12 To be a good faith purchaser for value, a party must act honestly in fact and observe reasonable commercial standards of fair dealings.3 Barretts' Livestock submitted evidence that created an issue of material fact as to whether the bank acted in good faith.4 As such, summary judgment should not have been granted.

. - Section 2-403 states that ""[a) person with voidable title has power to transfer a good title to a good faith purchaser for value." 12A 0.8.2011 2-403(1). Third parties are not precluded under § 2-403 from asserting that the purchaser lost its priority because it did not act in good faith. "Good faith is an overriding purpose of the Code." Monsanto v. Walter E. Heller Company, Inc., 114 Ill.App.3d 1078, 70 Ill.Dec. 646, 449 N.E.2d 993, 1000 (1983).

. Manheim Auto. Fin. Servs., Inc. v. Guthrie, No. 06-2298-KHV, 2007 WL 3054184, at *9 (D.Kan. Oct. 19, 2007) (finding that Manheim presented no evidence regarding reasonable commercial standards of fair dealing or whether it followed those standards and had not established as a matter of law that it acted in good faith so as to qualify as a good faith purchaser for value under § 2-403); Chrysler Credit Corp. v. Ferguson Pontiac-GMC, Inc., 1993 OK CIV APP 43, ¶¶ 11-12, 853 P.2d 1282, 1284 (holding that for Chrysler's security interest to defeat Ferguson's reclamation right, Chrysler had to be a good faith purchaser for value but that evidence of Chrysler's good faith was either conflicting or absent and so summary judgment was inappropriate); Iola State Bank v. Bolan, 235 Kan. 175, 679 P.2d 720, 731-32 (1984) (holding that the bank failed to act in good faith and so it was not a good faith purchaser and its security interest did not attach against the sellers); Monsanto, 70 Ill.Dec. 646, 449 N.E.2d at 1000 (holding that the course of dealings between the parties and Heller's direct involvement with the operation of Ilikon's transactions with its suppliers precluded Heller from claiming priority as a good faith purchaser for value because Heller did not act in good faith); In re American Food Purveyors, Inc., 1974 WL 21665, 17 U.C.C. Rep. Ser. 436 (N.D.Ga.1974) (finding that the secured party had to act in good faith and have no notice of the debtor's insolvency condition to prevail over the reclaiming rights of the seller).
The cases relied on by the majority do not hold that the good faith requirement of § 2-403 does not extend to third parties. Rather, these cases find that either no evidence of bad faith was presented or the evidence presented did not rise *1096to the level of bad faith. See Maryott v. Oconto Cattle Co., 259 Neb. 41, 607 N.W.2d 820, 828 (2000) (finding that Maryott had not specifically alleged bad faith in either of its petitions and had not met its burden of proving bad faith on the part of Farm Credit); Cooperative Finance Ass'n, Inc. v. B & J Cattle Co., 937 P.2d 915, 921 (Colo.App.1997) (finding that the lender's terminating advances on a line of credit and dishonoring drafts issued in reliance on the line of credit was not bad faith so as to defeat the lender's priority); Shell Oil Co. v. Mills Oil Co., Inc., 717 F.2d 208, 213 (5th Cir.1983) (rejecting Shell's argument that the bank's knowledge that Shell was unpaid was enough to create a material issue as to the bank's good faith); Matter of Samuels & Co., Inc., 526 F.2d 1238, 1243 (5th Cir.1976) (finding no evidence that the lender acted in bad faith).

. 12A 0.$.2011 § 1-201(20).

. Defendant's Response to Plaintiff's Motion for Summary Judgment at 28-37.