## Facts

- Randall Hockensmith collected and sold classic cars and regularly advanced money to Performance Plus Motor Sports, Inc. (Performance Plus), a business that located, restored, and sold classic cars.
- Under the parties’ recurring arrangement, Hockensmith would front acquisition/restoration funds; Performance Plus would do the work and sell the cars; and the parties would split profits, sometimes rolling proceeds into later purchases.
- Performance Plus entered a financing relationship with Fifth Third Bank (Fifth Third) that granted Fifth Third a security interest in Performance Plus’s goods and other collateral, including its inventory (covering new and used motor vehicles owned or acquired by Performance Plus).
- Performance Plus acquired several classic Corvettes with Hockensmith’s funds and was restoring them while holding title in Performance Plus’s name.
- Fifth Third later asked Performance Plus to find a different lender; Performance Plus told Hockensmith about that request.
- Hockensmith directed Performance Plus to retitle the Corvettes in his name and to move them off the premises; Performance Plus promptly transferred title but did not promptly move the cars.
- Two certificates of title reflected a stated purchase price of $0.
- Performance Plus subsequently defaulted on its obligations to Fifth Third; Fifth Third obtained a judgment and executed on property located at Performance Plus’s premises.
- The sheriff seized property at the premises, including the Corvettes; Fifth Third sold the Corvettes and applied the proceeds to Performance Plus’s debt.
- Hockensmith sued Fifth Third for conversion and replevin and moved for summary judgment, arguing he took the cars free of Fifth Third’s security interest as a buyer in the ordinary course of business.

## Issues

1. Whether Hockensmith qualified as a “buyer in the ordinary course of business” under UCC § 1-201(b)(9) and therefore took the Corvettes free of Fifth Third’s perfected inventory security interest under UCC § 9-320(a).
2. Whether the certificates of title (including titles listing $0 consideration) and the parties’ course of dealing established Hockensmith’s superior rights in the Corvettes as a matter of law, despite Fifth Third’s perfected security interest in Performance Plus’s inventory.
3. Whether Fifth Third’s seizure and sale of the Corvettes could support liability for conversion and replevin based on the parties’ competing claims to priority and possession.

## Decision

- The magistrate judge (in the opinion published at 79 UCC Rep. Serv. 2d 176) recommended that Hockensmith’s summary-judgment motion be granted in part.
- In analyzing the request, the court treated the existence of certificates of title as relevant evidence but not automatically controlling of the Article 9 priority question.
- The recommendation relied on a transaction-by-transaction evaluation of whether Hockensmith’s acquisitions were ordinary-course purchases from a seller of goods of that kind and whether he bought in good faith without knowledge that the transactions violated Fifth Third’s rights.
- Procedurally, after the report and recommendation, the district judge later sustained Fifth Third’s objections and declined to adopt the recommendation, denying summary judgment.

## Legal Principles

- A secured lender that properly files financing statements generally has a perfected security interest effective against competing claimants to the debtor’s collateral, including inventory, unless an exception applies.
- Under UCC § 9-320(a), a buyer in the ordinary course of business can take goods free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows it exists.
- “Buyer in ordinary course of business” under UCC § 1-201(b)(9) requires, among other elements, a purchase in good faith, from a seller in the business of selling goods of that kind, and without knowledge that the sale violates another party’s rights in the goods.
- In resolving competing claims to vehicles tied to a dealer’s floor-plan financing, courts look to the substance of the transaction and the parties’ established practices; a certificate of title is important evidence but does not necessarily end the Article 9 inquiry.
- Conversion and replevin turn on a superior right to possession; where that right depends on UCC priority rules and disputed facts about the nature of the transfer, summary judgment may be limited or unavailable.

## Conclusion

In *Hockensmith v. Fifth Third Bank*, a classic-car collector claimed that Corvettes seized and sold to satisfy a dealer’s debt were his and that he took them free of the dealer’s lender’s perfected inventory lien as a buyer in the ordinary course. The opinion published in the UCC Reporting Service reflects a magistrate judge’s recommendation to grant summary judgment in part after focusing on the parties’ course of dealing, good faith, and whether the transactions fit the UCC’s ordinary-course buyer rule, while recognizing that certificates of title were evidence but not automatically conclusive on priority; the district judge later declined to adopt that recommendation and denied summary judgment.


Hockensmith v. Fifth Third Bank, 79 UCC Rep. Serv. 2d 176 (2012)