HCC Credit Corp. v. Springs Valley Bank & Trust Co.
Supreme Court of Indiana
712 N.E.2d 952 (1999)
Lindsey Tractor Sales bought inventory on credit from HCC Credit Corporation (HCC) (plaintiff), which held a perfected security interest in that inventory and its proceeds, and Lindsey was required to pay HCC immediately after any sale. Lindsey also regularly borrowed over $100,000 at a time from Springs Valley Bank & Trust Co. (Bank) (defendant). In 1991, Lindsey sold 14 tractors for about $199,000, deposited the money into its general account, and then — without telling the Bank in advance or discussing the (not-yet-due) debt — used those proceeds plus other funds to make its largest-ever payment, roughly $212,000, to the Bank. Lindsey filed for bankruptcy shortly after. HCC sued the Bank to recover the sale proceeds it says should have gone to HCC instead. Both parties moved for summary judgment; the trial court ruled for the Bank, and the appellate court affirmed. HCC appealed to the Indiana Supreme Court.
Whether a secured party with a perfected security interest in collateral proceeds can recover those proceeds from a third party who received them as payment from the debtor, when the payment was unusually large, not yet due, and made with the recipient's knowledge of the security interest.