General Electric Credit Corp. v. RA Heintz Const. Co.

• Citation: 302 F. Supp. 958
• Decision Date: 10 June 1969
• Docket Number: Civ. No. 67-379.
• Parties: GENERAL ELECTRIC CREDIT CORPORATION, a corporation, Plaintiff, v. R. A. HEINTZ CONSTRUCTION CO., a corporation, Defendant, R. A. HEINTZ CONSTRUCTION CO., a corporation, Third-Party Plaintiff, v. GENERAL ELECTRIC CREDIT CORPORATION, a corporation; James E. Wagner, Trustee in Bankruptcy for Fincham Equipment Co., Inc., a corporation, Bankrupt; Ingersoll-Rand Financial Corporation, a corporation and Winslow Construction Co., a corporation, Third-Party Defendants.
• Court: United States District Courts. 9th Circuit. United States District Court (Oregon)

302 F. Supp. 958

GENERAL ELECTRIC CREDIT CORPORATION, a corporation, Plaintiff, v. R. A. HEINTZ CONSTRUCTION CO., a corporation, Defendant, R. A. HEINTZ CONSTRUCTION CO., a corporation, Third-Party Plaintiff, v. GENERAL ELECTRIC CREDIT CORPORATION, a corporation; James E. Wagner, Trustee in Bankruptcy for Fincham Equipment Co., Inc., a corporation, Bankrupt; Ingersoll-Rand Financial Corporation, a corporation and Winslow Construction Co., a corporation, Third-Party Defendants.

Civ. No. 67-379.

United States District Court D. Oregon.

June 10, 1969.

Boyd J. Long, Boyrie, Miller & Long, Portland, Or., for plaintiff and third-party defendant.

Jack L. Joyce, Kobin & Meyer, Portland, Or., for defendant and third-party plaintiff.

William M. McAllister, Davies, Biggs, Strayer, Stoel & Boley, Portland, Or., for Ingersoll-Rand Financial Corp., third-party defendant.

OPINION AND FINDINGS

KILKENNY, District Judge:

This is an action to determine the rights of the respective parties in two Euclid 71 TD dump trucks (71's) and two Euclid dump 65 TD hauling trucks (65's).

General Electric Credit Corporation (GECC) is a New York corporation. R. A. Heintz Construction Co. (Heintz) is an Oregon corporation. Ingersoll-Rand Financial Corporation (Ingersoll) is a Delaware corporation. Fincham Equipment Co., Inc. (Fincham) is an Oregon corporation and is now in bankruptcy. Its trustee has disclaimed all interest. Jurisdiction exists by virtue of 28 U.S. C. §§ 1441, 1332, 1335 and 2361.

Fincham was engaged in selling and renting new and used equipment. In April, 1966, it purchased the two 71's previously mentioned. At the time it was doing business in Adams County, Colorado, and purchased the equipment in that county. Subsequently, on May 18, 1966, Fincham, for value, executed a note to Ingersoll for $61,600.00. To secure payment of the note, it executed a chattel mortgage on the 71's. This chattel mortgage was filed for record in Adams County, Colorado, on May 27, 1966. The filing was in accordance with Colorado law. This security interest was acquired in good faith and without knowledge of claimed ownership by others.

Fincham, on June 24, 1966, for value executed and delivered to GECC its promissory note. To secure said note, it executed and delivered to that corporation a chattel mortgage creating a lien on certain equipment not involved in this litigation. The said chattel mortgage was filed for record with the County Clerk and Recorder of Adams County, Colorado, on June 29, 1966.

Heintz, on January 25, 1967, in good faith and without actual knowledge of the alleged security interest of Ingersoll, purchased the 71's from Fincham for the sum of $64,000.00. At the same time, and as part of the same transaction, Heintz traded the two 65's to Fincham and received a credit of $27,000.00 against the purchase price of the two 71's. Heintz is a buyer in the ordinary course of business as to this amount. Fincham, on January 25, 1967, was indebted to Heintz in the sum of $10,000.00, for the balance of the purchase price on a Cat Loader and was indebted to Heintz-Kaiser, a joint venture, in the amount of $4,459.68 on tires and those amounts were credited on the purchase price of the two 71's. Heintz, on February 2, 1967, delivered to Fincham a check for the balance of $22,540.32. Heintz is a buyer in the ordinary course of business as to this amount.

Fincham did not have Ingersoll's written consent to sell the 71's. The 71's were shipped from Denver on February 4, 1967, and shortly thereafter received by Heintz in Redding, California.

Later, on March 10, 1967, Fincham and GECC signed an agreement designated a Partial Release and Substitution of Equipment in Chattel Mortgage, in which the two 65's were substituted for certain of the collateral covered by the above chattel mortgage. This instrument was filed on March 13, 1967, with the proper officer for the County of Adams, Brighton, Colorado.

At the time GECC obtained its alleged security interest in the 65's, it did so for value in good faith and without actual knowledge of any claim of ownership or interest of the other parties in or to the 71's or the 65's.

The Uniform Commercial Code's (UCC) effective date in Colorado was July 1, 1966.

The Code's financing statements reflecting Fincham as debtor and GECC as secured party were filed March 27, 1967, with the Secretary of State of the State of Oregon and the proper officer of Multnomah County, Oregon. Attached to the financing statements, and made a part thereof, were copies of the chattel mortgage and the partial release and substitution of equipment, previously mentioned.

Jack Fincham, President of Fincham, died on March 16, 1967. At that time, Heintz was in physical possession in Oregon of the two 65's and did not voluntarily surrender possession. GECC instituted a claim and delivery action in the Oregon courts against Heintz for possession of the 65's and caused an Oregon sheriff to seize possession. Heintz, learning that defendant Winslow Construction Co. (Winslow) and Ingersoll claimed interest in the 71's, removed the state case to this Court and filed a third-party complaint seeking a determination of the interests of the respective parties. GECC received possession of the 65's by posting a surety bond in the amount of $50,000.00 in the state proceeding. GECC later sold the 65's for a price of $14,000.00.

As of July 10, 1967, Fincham was indebted to GECC in the sum of $50,697.61. On March 31, 1967, Fincham was indebted to Ingersoll in the sum of $43,458.83. On July 10, 1967, the value of the two 65's did not exceed $14,000.00. Fincham was in default on the dates above mentioned.

ISSUES

The issues of fact as stated in the pre-trial order are:

(1) When did R. A. Heintz Construction Co. obtain actual knowledge of the interests of the various parties in the 71's and 65's?

(2) Was R. A. Heintz Construction Co. a buyer in the ordinary course of business?

(3) Was R. A. Heintz Construction Co., subsequent to February 4, 1967, retaining physical possession of the two 65 TD's at the sufferance of Fincham Equipment Co., and awaiting instructions from Fincham specifying to which point shipment should be made?

The issues of law as therein stated are:

(1) Did General Electric Credit Corporation acquire any interest in the 65's by virtue of its agreement dated March 10, 1967?

(2) If Ingersoll-Rand acquired any interest in the 65's by reason of these 65's being a part of the proceeds of the sales of the 71's, was that interest cut off by the acquired interest of General Electric Credit Corporation?

(3) Are Ingersoll-Rand's rights in the 71's and the 65's governed by the Colorado Pre-Code Law?

(4) Is the interest of General Electric Credit Corporation in the 65's governed by the Oregon Uniform Commercial Code?

(5) Are the rights of R. A. Heintz Construction Co. to the 65's governed by the Uniform Commercial Code?

(6) Was Heintz a buyer buying in the ordinary course as to the entire purchase price or just to that portion represented by the cash and trade-in?

(7) In the event that R. A. Heintz Construction Co. is not the owner of the 71's free and clear of any claim of Ingersoll-Rand, does it have a right in the 65's superior to that of General Electric Credit Corporation?

HEINTZ'S RIGHTS TO THE 71'S

Although GECC contends that Oregon law is applicable and is the measure of Heintz's rights, I can find nothing persuasive in its argument. The Oregon law on conflicts, ORS¹ 71.1050, and the controlling Federal cases, Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) and Getlin v. Maryland Cas. Co., 196 F.2d 249, 50 A.L.R.2d 73 (9th Cir. 1952), point in the opposite direction. The Oregon statute requires that the state's Uniform Commercial Code be applied where the parties to the transaction have not indicated what law is to govern and if the transaction bears an appropriate relation to the state. Obviously, the mere fact that an action is prosecuted in the state does not require the courts to apply the state's substantive law. I interpret the language "appropriate relation" as meaning essentially the same thing as the more common phrase "significant contacts". In general, the Oregon Supreme Court holds that the law of the state which has the most significant contacts with the occurrences and the parties is determinative of all rights and liabilities. DeFoor v. Lematta, 86 Or.Adv.Shts. 169, 437 P.2d 107 (1968); Casey v. Manson Construction & Engr. Co., 247 Or. 274, 428 P.2d 898 (1967); Lilienthal v. Kaufman, 239 Or. 1, 395 P.2d 543 (1964). I have no difficulty in finding that all, or practically all, of the "significant contacts" in this transaction took place in the state of Colorado. The 71's were located in that state at the time of the transaction. The seller's place of business was in Colorado and the agreement was reached in Colorado. Only payment by mail and later delivery of the 71's took place outside of that state. Under the Oregon decisions, the Colorado law must be applied. It can well be argued that this issue is academic and of no importance in that both Oregon and Colorado have enacted the UCC and that the provisions to be here considered are identical.

Ingersoll seems to contend that pre-UCC Colorado law determines Heintz's rights in the 71's. It also relies on the UCC. Inasmuch as Heintz's rights to the 71's were established when it made the purchase from Fincham in January, 1967, some six months after the Colorado Code went into effect, the pre-code rights are here of no significance.

CRS² XXX-X-XXX(2) provides:

"Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business."

Ingersoll concedes that under this section, as well as under pre-UCC Colorado law, Moore v. Ellison, 82 Colo. 478, 261 P. 461 (1927), and the Colorado Inventory Chattel...