Madison Capital Company, LLC v. S & S Salvage, LLC
United States District Court for the Western District of Kentucky
765 F. Supp. 2d 923 (2011)
Timothy Smith's mining companies borrowed funds from Community Trust Bank (CTB) secured by mining equipment including 85 heavy metal roof supports (Shields); Smith later sold the Shields as scrap, either directly or through S & S Salvage, LLC (S & S) (defendant) acting as his agent, to River Metals Recycling, LLC (River Metals) (defendant), which bought them without any knowledge of Smith or his companies. Madison Capital Company, LLC (Madison) (plaintiff), which had acquired CTB's security interest by assignment, sued S & S and River Metals for conversion, and all parties moved for summary judgment.
Whether a buyer of goods from a person in the business of selling that type of goods qualifies as a buyer in the ordinary course of business under Uniform Commercial Code section 9-320(a) if the goods were obtained by the seller in violation of a security agreement.