## Facts

- Lindsey Tractor Sales, Inc. (a farm equipment dealer) financed Hesston equipment through HCC Credit Corporation under agreements granting HCC a security interest in the equipment and its sale proceeds.
- HCC’s security interest in the equipment and proceeds was valid and perfected; HCC did not require Lindsey to segregate sale proceeds in a separate account.
- Lindsey maintained a checking account and several loan obligations with Springs Valley Bank & Trust Co.
- In 1991, Lindsey sold 14 Hesston tractors (financed by HCC) to the Indiana Department of Transportation.
- On August 15, 1991, Lindsey deposited $199,122 of tractor-sale proceeds into its bank account, which already contained $22,870 from other sources.
- On August 16, 1991, Lindsey issued a $212,104.75 check to the Bank; the Bank applied the funds to Lindsey’s loan indebtedness.
- The payment substantially prepaid Lindsey’s debt, was unusually large, and was made without prior discussion or arrangements with the Bank.
- Lindsey filed for bankruptcy in December 1991.
- HCC sued the Bank to recover $199,122 as identifiable proceeds of HCC’s collateral.

## Issues

1. Whether the Bank could retain the funds as proceeds received “in the ordinary course of the operation of the debtor’s business” under Indiana’s U.C.C. § 9-306(2)–(3), thereby taking free of HCC’s perfected security interest in proceeds.
2. Whether the tractor-sale funds were identifiable proceeds subject to HCC’s continuing perfected security interest.

## Decision

- The Indiana Supreme Court reversed summary judgment for the Bank and directed entry of judgment for HCC.
- The Court held the Bank did not receive the payment “in the ordinary course of the operation of [Lindsey’s] business.”
- Because the payment was not ordinary-course, HCC’s perfected security interest continued in the identifiable proceeds, and HCC was entitled to recover $199,122 from the Bank.
- The Court of Appeals’ decision was vacated upon transfer.

## Legal Principles

- A perfected security interest continues in identifiable proceeds of collateral.
- Under U.C.C. § 9-306(2)–(3) (as adopted in Indiana), a debtor’s creditor takes proceeds free of a prior perfected security interest only to the extent the creditor receives them “in the ordinary course of the operation of the debtor’s business.”
- “Ordinary course of the operation of the debtor’s business” is a narrow protection focused on routine operational transactions; extraordinary payments—such as atypically large, immediate lump-sum prepayments outside the debtor’s established pattern—do not qualify.
- A creditor receiving non-ordinary-course proceeds takes subject to the prior perfected security interest and may be required to return the proceeds.

## Conclusion

The court held that Lindsey’s atypical, large, next-day lump-sum prepayment to the Bank was not received in the ordinary course of Lindsey’s business operations, so HCC’s perfected security interest continued in the identifiable tractor-sale proceeds and the Bank was required to disgorge $199,122 to HCC.


HCC Credit Corp. v. Springs Valley Bank & Tr. Co., 712 N.E.2d 952 (Ind. 1999)