The bank counterclaimed that it had a perfected security interest in the cattle that was superior to any interest of McCoy’s. Who has title to the cattle? Explain.
McCoy, an Oklahoma cattle dealer, orally agreed with Chandler, a Texas cattle broker, to ship cattle to a New Mexico feedlot for delivery to Chandler. The agreement was for six lots of cattle valued at $119,000. After McCoy delivered the cattle, he presented invoices to Chandler that described the cattle and set forth the sales price. McCoy then demanded payment, which Chandler refused. Unknown to McCoy, Chandler had obtained a loan from First National Bank and pledged the subject cattle as collateral. The bank had no knowledge of any interest that McCoy may have had in the cattle. McCoy sued to recover the cattle. The bank counterclaimed that it had a perfected security interest in the cattle that was superior to any interest of McCoy’s. Who has title to the cattle? Explain.
Here, Person M delivers the stock to Person C,which gives the power to Person C to generate a security interest to a third party, such as a bank.
The Uniform Commercial Code secures good faith consumers for value from hidden interests in goods; in the given case, it is the bank. Any security interest that Person M may have, in the cattle,is going to be concealed by the bank. So, Person M can protect themself by perfecting their own covered interest in the stock.
Here, the settlement may be in favor of the bank due to the fact that the bank may have a higher regard in the stock. It is clear that Person C has committed fraud against Person M; Person C may have to rescind their title in the stock. The buyer may get the subject of the goods at the time and place where the retailer finishes the performance, with respect to the delivery of the goods, unless agreed otherwise.