## Facts

- Edward A. Tucker operated an Arizona used-car dealership and bought three vehicles from Par Wholesale Auto, Inc., a Texas wholesaler.
- Tucker’s purchases were financed through DAVCO Enterprises, which asserted it would hold vehicle titles as security until the vehicles were sold.
- Tucker paid with a check for one vehicle and promised to pay the remainder via bank drafts; the check was dishonored and Tucker lacked funds to pay.
- After Par demanded payment or return, Tucker returned all three vehicles to Par by late May 2001.
- Before Par reclaimed the vehicles, DAVCO neither filed a U.C.C. financing statement nor recorded its interest with Arizona or Texas titling authorities, and it never possessed the vehicles.
- After reclamation, Par obtained new Texas titles; later, DAVCO obtained Arizona titles listing it as lienholder.
- In the Chapter 7 case, the trustee and creditors litigated ownership/priority in the vehicles; Par and DAVCO filed cross-motions for summary judgment.

## Issues

1. Whether a reclaiming seller’s rights under U.C.C. § 2-702 have priority over a creditor claiming an unperfected security interest in the same goods.
2. Whether an unperfected secured creditor qualifies as an “other good faith purchaser” whose rights defeat reclamation under U.C.C. § 2-702(3).

## Decision

- The court granted summary judgment for Par and against DAVCO on ownership/priority in the three vehicles.
- The court held a reclaiming seller has priority over an unperfected secured creditor.
- The court concluded DAVCO, as an unperfected secured creditor, did not qualify as an “other good faith purchaser” for purposes of limiting reclamation.
- The court discounted DAVCO’s factual submissions (including inspection reports) as not credible where they conflicted with other record evidence.

## Legal Principles

- Under U.C.C. § 2-702(2), an unpaid seller may reclaim goods received on credit by an insolvent buyer upon timely demand, subject to statutory limitations.
- Under U.C.C. § 2-702(3), reclamation is subject to the rights of a buyer in ordinary course and other good faith purchasers (and lien creditors).
- A secured creditor that fails to perfect (by filing, proper titling/recording where applicable, or possession) does not obtain priority protections comparable to perfected interests.
- An unperfected secured creditor is not treated as an “other good faith purchaser” whose rights defeat a reclaiming seller’s timely reclamation.

## Conclusion

The bankruptcy court ruled that Par’s timely reclamation of the vehicles prevailed over DAVCO’s unperfected security interest because an unperfected secured creditor is not an “other good faith purchaser” under the U.C.C. limitation on reclamation.


In re Tucker, 329 B.R. 291 (Bankr. D. Ariz. 2005)