## Facts

- Willard Burk agreed to sell cattle to Bob Emmick in a transaction treated as a cash sale, with payment expected at delivery by check.
- Burk delivered the cattle, and Emmick tendered two checks.
- The checks were dishonored.
- After learning of the dishonor, Burk reclaimed the cattle from Emmick and resold them to a third party at a lower price than the contract price.
- Burk sued Emmick for breach of contract and fraud, seeking damages measured by the contract price minus the resale price.
- Northwestern National Bank of Sioux City claimed a security interest in Emmick’s cattle and asserted priority under U.C.C. § 2-403 as a good-faith purchaser (as a secured party).
- A jury found for Burk and found the Bank did not act in good faith; the district court entered judgment allowing Burk both to reclaim the cattle and recover damages.

## Issues

1. Whether a cash seller whose buyer pays with dishonored checks may both reclaim the goods and recover resale damages, or whether U.C.C. § 2-702 makes reclamation exclusive.
2. Whether a seller’s reclamation is barred when made more than 10 days after delivery under U.C.C. § 2-702, or instead arises under U.C.C. § 2-507 in a cash sale.
3. Whether a secured creditor qualifies as a “good faith purchaser” under U.C.C. § 2-403 with priority over the seller’s interest, and what effect a lack of good faith has on priority.

## Decision

- The Eighth Circuit affirmed the judgment for Burk.
- The court held Burk could reclaim the cattle under U.C.C. § 2-507(2) because tender of delivery in a cash sale is conditional on concurrent payment and the checks were dishonored.
- The court held Burk could also recover damages for the resale deficiency under U.C.C. § 2-703; reclaiming the cattle enabled resale and did not create an improper double recovery.
- The court ruled U.C.C. § 2-702’s 10-day limitation did not govern because Burk’s reclamation right arose from the cash-sale payment condition in § 2-507, not the insolvency-based remedy in § 2-702.
- The court held the Bank did not qualify as a good-faith purchaser under U.C.C. § 2-403 based on the jury’s finding, so the Bank’s security interest was inferior to Burk’s interest in the cattle.

## Legal Principles

- In a cash sale, U.C.C. § 2-507(2) makes tender of delivery conditional upon concurrent payment; dishonor of the buyer’s check permits the seller to withhold or reclaim the goods.
- U.C.C. § 2-702 provides an insolvency-based reclamation remedy with a 10-day demand period, but it does not displace reclamation based on § 2-507’s cash-sale payment condition.
- After buyer breach, U.C.C. § 2-703 permits seller remedies including resale and recovery of damages measured by the contract-resale differential plus allowable incidental damages; these remedies may be used with reclamation when they compensate a single loss.
- Under U.C.C. § 2-403, a buyer with voidable title can transfer rights to a good-faith purchaser, and “purchaser” can include an Article 9 secured party; priority depends on the transferee’s good faith.
- “Good faith” under the U.C.C. requires honesty in fact and, for merchants, observance of reasonable commercial standards; lack of good faith prevents a secured creditor from taking priority under § 2-403 against an aggrieved seller.

## Conclusion

The court held that when a cash buyer’s checks are dishonored, the seller may reclaim the goods under U.C.C. § 2-507 and also recover resale damages under § 2-703, and that a secured creditor cannot defeat the seller’s interest under § 2-403 without establishing good faith.


Burk v. Emmick, 637 F.2d 1172 (8th Cir. 1980)