## Facts

- Gloucester purchased scallops from Sigma under a sales agreement.
- Sigma delivered scallops to Gloucester on January 16, 1992, valued at $143,391.
- Sigma’s invoice stated the sale was “pending FDA release” and set payment as “net 30 days from FDA release date.”
- The invoice assigned Sigma’s account receivable from Gloucester to Trust Company Bank.
- Fleet National Bank and Coöperatieve Centrale Raiffeisen-Boerenleenbank held duly perfected security interests in all of Gloucester’s personal property, including after-acquired inventory.
- On January 24, 1992, the banks declared Gloucester in default and seized and liquidated Gloucester’s inventory, including the scallops.
- Trust Company Bank sued the banks for conversion, claiming the banks had no superior rights in the scallops because Gloucester allegedly lacked “rights in the collateral” until FDA release.

## Issues

1. Whether Gloucester obtained sufficient “rights in the collateral” upon delivery of the scallops, despite the invoice’s “pending FDA release” term, to permit the banks’ security interests to attach under U.C.C. § 9-203(1)(c).
2. Whether the banks’ attached, perfected security interests in after-acquired inventory had priority over Trust Company Bank’s interest as assignee of Sigma’s rights.
3. Whether summary judgment for the banks on the conversion claim was proper where the material facts were undisputed.

## Decision

- The court affirmed summary judgment for the banks.
- Gloucester acquired “rights in the collateral” when the scallops were delivered.
- Under U.C.C. § 2-501(1), delivery/identification gave Gloucester a “special property and an insurable interest,” sufficient to satisfy U.C.C. § 9-203(1)(c).
- The “pending FDA release” and payment-timing terms did not prevent attachment of the banks’ security interests upon delivery.
- Because the banks’ security interests attached and were perfected, they had priority in the scallops over Trust Company Bank’s claim, defeating conversion.

## Legal Principles

- A security interest attaches under U.C.C. § 9-203 when, among other requirements, the debtor has “rights in the collateral”; full title is not required.
- Under U.C.C. § 2-501(1), a buyer’s “special property and insurable interest” in identified/delivered goods can constitute sufficient “rights in the collateral” for Article 9 attachment.
- Contract terms tying payment or regulatory contingencies to release generally affect timing and risk allocation and do not, without clear title-reservation language, negate the buyer’s rights for Article 9 attachment and priority.
- A creditor with an attached and perfected security interest in after-acquired inventory has priority in the inventory over a seller’s assignee asserting a superior interest in the goods themselves.

## Conclusion

The court held that delivery of the scallops gave Gloucester a proprietary interest adequate for the banks’ perfected inventory security interests to attach and take priority, so the banks’ seizure and liquidation of the scallops did not amount to conversion.


Trust Co. Bank v. Gloucester Corp., 419 Mass. 48, 643 N.E.2d 16 (Mass. 1994)