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Allis-chalmers Corp. v. Staggs

OPINION FILED SEPTEMBER 2, 1983.

ALLIS-CHALMERS CORPORATION ET AL., PLAINTIFFS-APPELLEES,

v.

JERRY STAGGS ET AL., DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Clay County; the Hon. Jack M. Michaelree, Judge, presiding.

JUSTICE JONES DELIVERED THE OPINION OF THE COURT:

This replevin action was instituted by the plaintiffs, Allis-Chalmers Corporation and Allis-Chalmers Distribution Service Corporation, to recover from the defendant, Fred Bailey, personal property in which the plaintiffs claimed to have a perfected security interest. The trial court granted the plaintiffs' motion for summary judgment, finding as a matter of law that the parties had conflicting security interests in the disputed property and that the plaintiffs' security interest was prior in time and thus superior to the defendant's. The defendant contends on appeal that the trial court erred in construing the plaintiffs' security interest too broadly and that an issue of fact thus remains as to the extent of the parties' interest in the property. We agree and accordingly reverse the court's grant of summary judgment.

On July 19, 1979, debtor Staggs Farm Equipment, Inc. (Staggs), an Allis-Chalmers dealer, granted the plaintiffs a security interest pursuant to the terms of two separate security agreements. The property named as collateral in the agreement with Allis-Chalmers Corporation was described as follows:

"The Debtor's inventory of new machinery manufactured or sold by Secured Party, attachments, accessories and replacement parts therefor now owned or hereafter acquired by the Debtor from the Secured Party plus all proceeds derived therefrom. The collateral is more specifically described in Debtor's purchase orders, invoices, and periodic inventories signed by both parties. For the purpose of identification, such purchase orders, invoices and inventories, as and when executed, are by reference made a part hereof." (Emphasis added.)

The agreement with Allis-Chalmers Distribution Service corporation contained a virtually identical description as follows:

"The Debtor's inventory of new machinery manufactured or sold by Allis-Chalmers Corporation, attachments, accessories and replacement parts therefor now owned or hereafter acquired by the Debtor from Allis-Chalmers Corporation, plus all proceeds derived therefrom. The collateral is more specifically described in Debtor's purchase orders, invoices, and periodic inventories signed by Debtors and Allis-Chalmers Corporation. For the purpose of identification, such purchase orders, invoices and inventories, as and when executed, are by reference made a part hereof." (Emphasis added.)

On July 25, 1979, the plaintiffs filed their respective financing statements with the Illinois Secretary of State. Both statements described the collateral as follows:

"The debtor's inventory of new and used Farm Equipment, new and used Lawn and Garden Equipment, together with implements, attachments and accessories thereto and replacement parts therefor manufactured by or offered for sale by Allis-Chalmers Corporation now owned or hereafter acquired, on which the debtor has given or hereafter grants Allis-Chalmers Corporation a security interest. Proceeds of Collateral are also covered." (Emphasis added.)

On February 20, 1980, Staggs purchased a farm implement business from defendant Bailey, another Allis-Chalmers dealer, pursuant to the terms of a contract for sale executed on that date. Included in the transaction was the sale of parts in stock as inventoried on February 1, 1980, and valued at $100,000. Bailey filed a financing statement with the Illinois Secretary of State on February 29, 1980, in which the collateral was described as follows:

"All stock in trade, inventory, parts and replacement parts now owned or hereinafter [sic] acquired and all accounts receivable and chattel paper now owned or hereinafter [sic] acquired."

Staggs discontinued business operations in August 1981, and on September 28, 1981, the plaintiffs brought the instant replevin suit. In their complaint the plaintiffs sought to recover from defendant Bailey the inventory of Staggs that Staggs "[had given] or granted Plaintiffs a security interest in."

The plaintiffs subsequently moved for summary judgment based on the priority of their security interest over that of defendant Bailey. Bailey likewise filed a motion for summary judgment in which he maintained that the plaintiffs' security interest did not cover the property that he sold to Staggs by contract on February 20, 1980.

After hearing arguments of the parties, the trial court granted the plaintiffs' motion for summary judgment. The court's judgment was based on the following findings:

"7. On July 25, 1979, Plaintiffs perfected a security interest in `The debtor's inventory of new and used Farm Equipment, new and used Lawn and Garden Equipment together with implements, attachments and accessories thereto and replacement parts therefor manufactured by or offered for sale by Allis-Chalmers Corporation now owned or hereafter acquired, on which the debtor has given or hereafter ...


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