Georgia Pacific Corp. v. Walter E. Heller & Co. Southeast, Inc.

• Decision Date: 18 November 1983
• Docket Number: No. AS-61,GEORGIA-PACIFIC,AS-61
• Citation: 37 U.C.C.Rep.Serv. 735,440 So.2d 666
• Parties: 37 UCC Rep.Serv. 735 CORPORATION, a Georgia Corporation, Appellant, v. WALTER E. HELLER & COMPANY SOUTHEAST, INC., a Louisiana Corporation, Appellee.
• Court: Florida District Court of Appeals

Page 666

440 So.2d 666

37 UCC Rep.Serv. 735

GEORGIA-PACIFIC CORPORATION, a Georgia Corporation, Appellant, v. WALTER E. HELLER & COMPANY SOUTHEAST, INC., a Louisiana Corporation, Appellee.

No. AS-61.

District Court of Appeal of Florida First District.

Nov. 18, 1983.

David W. Carstetter, of Kent, Watts, Durden, Kent, Nichols & Mickler, Jacksonville, for appellant.

Douglas H. Morford, of Ulmer, Murchison, Ashby, Taylor & Corrigan, Jacksonville, for appellee.

PER CURIAM.

Georgia Pacific Corporation appeals a final judgment in favor of Walter E. Heller & Company Southeast, Inc. permitting Heller recovery of the value of certain property converted by Georgia Pacific in the amount of $11,321.00 plus interest. The issue for our review is whether the total business relation involving these parties and a bankrupt entity was a transaction encompassed within the Florida Uniform Commercial Code, Section 672.326, Florida Statutes. No published Florida cases deal directly with the specific question before us and therefore we resort to authorities from other jurisdictions for assistance. The trial judge in this case, Judge Thomas D. Oakley, considered those authorities and favored the parties and this court with a well-reasoned and erudite judgment which we adopt as our own. That order provides as follows:

THIS CAUSE came on for trial before the Court without a jury.

The facts are not in dispute. In December of 1976, Georgia Pacific Corporation ("Defendant") entered into a contract with Bill Amos Brokerage Co., Inc. ("Bill Amos"), whereby Defendant agreed to consign stock to Bill Amos. The contract provided that the risk of loss for merchandise shipped to Bill Amos would pass to Bill Amos upon delivery of the merchandise by a carrier.

The contract contained numerous references to the term "consigned merchandise" and provided that Bill Amos would assist the Defendant in any reasonable manner to protect the interest of Defendant "in this consignment transaction including, but not limited to, execution (of) financing statement, posting of signs under a sign law, and otherwise." The Defendant took no action to perfect its interest in goods shipped to Bill Amos by the filing of a UCC-1 financing statement.

At the time Bill Amos entered into the agreement with the Defendant, Bill Amos operated a warehouse facility located in Jacksonville, Florida, at which Bill Amos was engaged in business as a wholesale food and grocery distributor, broker and merchant, dealing in food products and grocery items, including paper products.

Subsequent to the execution of the agreement, Defendant consigned merchandise to Bill Amos consisting of paper products such as paper towels, tissue and the like.

The Defendant shipped paper products to Bill Amos primarily to facilitate the sale of such products to military commissaries located in the State of Florida. When Bill Amos would ship consigned merchandise to a commissary, it would file a report with Defendant indicating that the delivery had been accomplished. The Defendant then invoiced the commissaries and received payments directly from the commissaries for the paper products delivered. Bill Amos received a commission from the Defendant representing 8% of the total sale price.

On August 2, 1977, Plaintiff's predecessor in interest, First National Heller-Factors, entered into an Inventory Loan Security Agreement and an Accounts Financing Security Agreement with Bill Amos. First National Heller-Factors obtained and filed UCC-1 financing statements covering all "accounts, contract rights, chattel paper and general intangibles, all inventory ..." The financing statements also covered the proceeds of collateral.

On September 15, 1978, First National Heller-Factors assigned to Plaintiff, Walter E. Heller & Company Southeast, Inc. ("Plaintiff"), all of its right, title and interest in the Inventory Loan Security Agreement, the Accounts Financing Security Agreement, and the financing statements in question.

On September 15, 1978, and at all material times thereafter, Bill Amos was indebted to Plaintiff in an amount in excess of $500,000.

On January 22, 1979, Bill Amos filed a voluntary petition in the United States Bankruptcy Court, For the Middle District of Florida, pursuant to Chapter XI of the Bankruptcy Act.

Shortly after the filing of the bankruptcy petition, the Defendant entered upon the premises of Bill Amos to reclaim the merchandise that had been consigned by Defendant to Bill Amos. The Defendant expected to find in excess of 1,400 cases of paper products. In fact, the Defendant located and removed from the Bill Amos facility consigned inventory consisting of 390 cases of goods, valued at $11,321.00.

Plaintiff contends that the removal of such goods by the Defendant was in derogation of the Plaintiff's superior rights to possession as a secured creditor and as such constituted conversion. Plaintiff argues that either the transaction constituted a consignment intended as security within the meaning of Section 671.201(37), Florida Statutes, or was a sale or return transaction governed by the provisions of Section 672.326, Florida Statutes, which in pertinent part provides that:

"(3) Where goods are delivered to a person for sale and such person maintains a place of business at which he deals in goods of the kind involved, under a name other than the name of the person making delivery, then with respect to claims of creditors of the person conducting the business the goods are deemed to be on sale or return. The provisions of this subsection are applicable even though an agreement purports to reserve title to the person making delivery until payment or resale or uses such words as 'on consignment' or 'on memorandum'. However this subsection is not applicable if the person making delivery:

"(a) complies with an applicable law providing for a consignor's interest or the like to be evidenced by a sign, or

"(b) establishes that the person conducting the business is generally known by his creditors to be substantially engaged in selling the goods of others, or

"(c) complies with the filing provisions of the chapter on secured transactions (Chapter 679)."

Defendant contends that the transaction was not a consignment intended as security. Defendant further contends that the paper products consigned to Bill Amos were not delivered "for sale" and that as such the provisions of Section 672.326(3), Florida Statutes, are inapplicable. Defendant relies primarily upon the case of Walter E. Heller & Company Southeast, Inc. v. Riviana Foods, Inc., 648 F.2d 1059 (5th Cir.1981).

The Riviana case, like the instant case, arose out of the Bill Amos bankruptcy proceeding. As in the instant case, the contractual agreement between Riviana and Bill Amos made no express provision for the sale of Riviana's goods by Bill Amos. Nonetheless, Riviana conceded, as the evidence indicates herein, that Bill Amos operated a place of business under its own name at which it dealt in food and grocery products. Riviana also admitted, as is admitted by the Defendant herein, that it took no steps whatsoever to evidence its retained ownership interest in the goods shipped by Riviana to Bill Amos and held at the Bill Amos facility.

In the Riviana Foods case, the United States District Court, For the Middle District of Florida, granted Riviana's motion for summary judgment in an unpublished opinion. The Court determined that the transaction between Riviana and Bill Amos was not a deemed sale or return under Section 672.326(3), Florida Statutes. The United States Court of Appeals for the Fifth Circuit subsequently affirmed this opinion per curiam at 648 F.2d 1059.

A principal issue in the Riviana case, as in the instant case, was whether the goods had been delivered by Riviana to Bill Amos "for sale", since no express authority had been conferred upon Bill Amos to sell.

The Riviana case has been criticized as an incorrect interpretation of Section 2-326(3) of the Uniform Commercial Code. See Brown, U.C.C. Section 2-326(3): Creditor Protection in the Deemed Sale or Return Transaction, 32 Case Western Reserve Law Review 904. This Court does not agree with the decision reached in the Riviana case.

The legislative history with respect to Section 672.326(3), Florida Statutes, indicates that a consignee's creditors are to be protected from secret reservations in ostensible ownership situations. Official Comment 2, Section 672.326, Florida Statutes.

Section 672.326(3), Florida Statutes, was enacted for the purpose of protecting the creditors of a merchant who is the apparent owner of goods located at the place of business of the merchant.

In the case of Manufacturer's Acceptance Corporation v. Penning's Sales, Inc. 487 P.2d 1053 (1971), a paint manufacturer shipped an inventory of paint to itself in care of a paint store under an agreement with the store owner by which the paint manufacturer reserved title to the paint which the store owner was to hold in a storage area at the rear of the paint store, subject to the manufacturer's order to ship the paint to one of the paint manufacturer's dealers in the area. For this service, the paint store was paid 6% of the amount of each order shipped or delivered to a dealer of the paint manufacturer. The paint store conducted a retail paint sales business in the front portion of the store.

The paint manufacturer contended that the agreement was simply a warehousing agreement, and that as such the goods could not be subjected to the claims of Manufacturer's Acceptance Corp., which held a perfected security interest in the inventory of the paint store. The court held that the transaction was a sale or return within the meaning of Section 2-236 [sic] of the Uniform Commercial Code, since the paint store was dealing in goods of the kind involved in the inventory stored on the premises. The Court went on to point out that the paint manufacturer had not rendered the sale or...