Seller Of Goods Can't Rely On "Reservation Of Title" If The Buyer Goes Bankrupt

LexisNexis (January 25, 2019, 1:51 PM EST) -- Can a seller of corn under a requirements contract retrieve the corn (or its proceeds) from a buyer that has gone bankrupt if the seller never perfected a security interest in the corn? In a notable decision from North Carolina, the bankruptcy court ruled that the seller’s “reservation of title” in the sales contract gave it nothing more than an unperfected security interest under Article 2 of the UCC. Failure to perfect that security interest enabled the buyer’s bankruptcy trustee to claim the $4.8 million in proceeds from a subsequent sale of the corn as property of the estate. The trustee had the power to avoid the seller’s unperfected security interest under the “strong arm” clause. Not a good day for the seller....