Agricredit Acceptance, LLC v. Hendrix

AAC (plaintiff) held a security interest in Hendrix's cotton crop, which Hendrix kept possession of and sold through Sea Island Cotton Trading. Warehouses issued electronic warehouse receipts (EWRs) for the cotton, and several merchants (defendants) bought the cotton and had the EWRs transferred to their names, paying Sea Island — which never forwarded the money to AAC or Hendrix. AAC sued the merchants for possession of the cotton, and the merchants moved for summary judgment, arguing their document-of-title interest had priority and that AAC had waived priority by entrusting the cotton to Hendrix.

Whether an owner who delivers or entrusts goods to a person with apparent authority to deal with them may still assert ownership against a party to whom a negotiable document of title for the goods has been duly negotiated.