McFadden v. Mercantile-Safe Deposit & Trust Company (Maryland 1971)

Summary

The court reversed a judgment for Mercantile and held that McFadden acquired the two ice cream trucks free of Mercantile’s security interest. The trucks were inventory held for sale, the financing statement and surrounding circumstances implicitly authorized their sale, and McFadden was a buyer in the ordinary course of business even though the transaction included a franchise and he did not personally operate the trucks. The case was remanded for determination of conversion damages.

Holding

Whether the transaction was an actual sale and whether it was rescinded or abandoned.. The conditional sale contract constituted an actual sale of the trucks to McFadden, and the evidence did not establish a mutual agreement to rescind or abandon the transaction.

Whether the trucks were inventory and whether their sale was authorized under the security interest.. The trucks were inventory held by Softee for sale, not equipment, and Mercantile implicitly authorized their sale within the meaning of the applicable secured-transactions provision. McFadden therefore acquired them free of Mercantile’s security interest.

Whether McFadden was a buyer in the ordinary course of business.. McFadden was a buyer in the ordinary course of business and took the trucks free of Mercantile’s perfected security interest, regardless of whether the sale was authorized.

Summary

Holding

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