Lavonia Manufacturing Co. v. Emery Corp.
United States District Court for the Eastern District of Pennsylvania
52 B.R. 944 (1985)
Two days before filing for bankruptcy, Emery Corp. (Emery) (defendant) bought over $10,000 in yarn on credit from Lavonia Manufacturing Co. (Lavonia) (plaintiff), while three other creditors already held security agreements covering Emery's after-acquired property, which extended to the newly purchased yarn. In the bankruptcy proceeding, the bankruptcy court held Lavonia's UCC reclamation right superior to the other creditors' after-acquired-property security interests because Emery was insolvent when it bought the yarn, and Emery appealed, arguing the other secured creditors should have priority.
Whether, under the Uniform Commercial Code, a seller's right to reclaim goods sold on credit to an insolvent buyer is subordinate to the rights of a creditor with a perfected security interest.