Court Opinion

ID: 9533515
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:32:20.699487+00
Date Added: 2024-06-11T13:29:04.269796
License: Public Domain

DISSENTING OPINION

GARRARD, J.
—The majority opinion in this case holds that where a general creditor bargains with its debtor for a security interest and a term of the bargain imposed by the debtor is the protection of another creditor who holds an unperfected security interest, the creditor may accept the benefit of the bargain but reject its burden by recording the security interest thus obtained. I dissent from this view. Our decision is controlled by Article 9 of the Uniform Commercial Code, IC 26-1-9-101 et seq. Further references to the article are limited to the appropriate section number.
For A-W-D to have changed its status from general creditor to secured creditor it was necessary that Salkeld execute a security agreement since Midwest did not have possession of the collateral. § 203(1). That obstacle was met at a meeting between Salkeld and Mike Brown, the District Manager of A-W-D at Ft. Wayne. The evidence, especially when viewed from the perspective favoring the judgment, disclosed that Brown was the authorized agent of A-WD to procure the agreement or that at least he had apparent authority to act for the corporation. According to the testimony, when Brown explained what he wanted and why, Salkeld “told him at that time that my first obligation was to Midwest Warehouse in Marion, because they had, in fact, put me in business. The merchandise that I stocked was purchased from them. His [Brown’s] exact words were that this agreement would place A-W-D in a position second to Midwest Warehouse.” In subsequent testimony Salkeld *449stated that Brown was not only aware of the security agreement with Midwest, he had, in fact, read it.
§ 316 provides that nothing in Article 9 prevents subordination by agreement by any person entitled to priority, and as Judge Staton points out the general provisions of the UCC, IC 26-1-1-201(3) define agreement as “the bargain of the parties in fact.” Moreover, unlike § 203, § 316 does not express any requirement of a writing. In view of the Indiana Comment to § 316 and Hillman’s Equipment, Inc. v. Central Realty, Inc. (1968), 144 Ind. App. 18, 242 N.E.2d 522, rev ’d. other grounds 253 Ind. 48, 246 N.E.2d 383, 1 believe an oral agreement to subordinate is valid. I do not find the legal effect of the agreement altered by the fact that Midwest did not participate in the discussion and was not even aware it had occurred. Basic contract law recognizes the validity of third party beneficiary agreements, and the right of the beneficiary to enforce the contract. Voelkel v. Tohulka (1957), 236 Ind. 588, 141 N.E.2d 344, cert. den. 355 U.S. 891, 78 S.Ct. 263, 2 L.Ed.2d 189. Consideration supporting the contract was, of course, the execution of the security agreement by Salkeld. Thus, when the evidence is viewed from the perspective favoring the judgment, as it should be, it clearly supports the court’s finding of subordination. This court should not reweigh the evidence and reject reasonable inferences drawn by the trial court.
The judgment should be affirmed.
Note — Reported at 372 N.E.2d 486.