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Factual and Procedural Background

This case arises from an action in detinue involving Galleon Industries, Incorporated, and Central Bank and Trust Company, Incorporated, as defendants below, and Lewyn Machinery Company as plaintiff. The dispute concerns certain equipment sold by Lewyn to Galleon. Initially, Galleon purchased equipment for cash at Lewyn's office in Atlanta, except for one machine which Lewyn was to obtain from the manufacturer, J. M. Lancaster. Due to a mistake or misunderstanding, the machine was shipped directly from Lancaster to Galleon in Pell City, Alabama, and Galleon received it without immediate payment, becoming a credit buyer.

Prior to this, on November 21, 1969, Galleon entered into a security agreement with Central Bank and Trust Company covering all equipment and inventory owned or thereafter acquired. Central perfected its security interest by filing a financing statement and later foreclosed on the loan, taking possession of Galleon's property, including the disputed machine.

Lewyn brought suit in detinue to recover possession of the machine from Galleon and Central. The trial court rendered a verdict and judgment in favor of Lewyn. Both defendants appealed following denial of their motions for new trial.

Legal Issues Presented

  1. Whether the plaintiff, Lewyn Machinery Company, had a general or special property interest and the right to immediate possession of the machine at the commencement of the detinue action.
  2. Whether the security interest held by Central Bank and Trust Company attached to the machine under the Uniform Commercial Code provisions concerning after-acquired property and rights vested in the debtor.
  3. Whether the trial court erred in refusing the jury's requested affirmative charge in favor of Central Bank and Trust Company.
  4. The validity and priority of competing security interests between Lewyn as a seller and Central Bank as a secured creditor, including the effect of filing or failure to file financing statements within statutory periods.

Arguments of the Parties

Appellant Galleon's Arguments

  • The verdict was contrary to law and the facts, and the judgment was not supported by the preponderance of the evidence.
  • At the commencement of the suit, possession of the property was not in Galleon, supported by Galleon's disclaimer placing burden on plaintiff to prove possession.

Appellant Central Bank and Trust Company's Arguments

  • Central’s security interest attached to the machine as after-acquired property under the security agreement and the Uniform Commercial Code.
  • The machine was sufficiently described as "equipment now owned or hereafter acquired," providing adequate notice of Central’s security interest.
  • The trial court erred in refusing to give Central’s requested affirmative charge because Central had superior right to possession.

Appellee Lewyn Machinery Company's Arguments

  • Title to the machine did not pass to Galleon until payment was made; since payment was not made, title and right to possession remained with Lewyn.
  • Delivery was conditioned upon payment as orally agreed, and the shipment to Galleon was a mistake.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Warrick v. Leddon, 230 Ala. 253, 160 So. 534 Title passes on seller's completion of delivery performance. Established baseline for title passage in sales of goods.
Brannon v. Cole, 40 Ala. App. 222, 110 So.2d 645 Requirements to recover in detinue: property interest, right to possession, and defendant's possession. Used to define plaintiff's burden in detinue action.
Hall Motor Co. v. Furman, 285 Ala. 499, 234 So.2d 37 Assignment of error as vicarious assignment of grounds in motion for new trial. Supported appellant Galleon's claim regarding motion for new trial.
State v. McDaniel, 285 Ala. 310, 231 So.2d 878 Review of verdict contrary to law and evidence. Court applied to determine insufficiency of evidence to support verdict against Galleon.
Harney v. Spellman, 113 Ill. App.2d 463, 251 N.E.2d 265 Effect of delivery and invoice on title and rights under UCC. Supported conclusion that delivery and invoice made Galleon a credit buyer with vested rights.
United States v. Antenna Systems, Inc., 251 F. Supp. 1013 Sufficiency of description in financing statements for notice. Supported holding that "equipment now owned or hereafter acquired" was adequate notice.
Aircraft Sales Service, Inc. v. Gantt, 255 Ala. 508, 52 So.2d 388 Assignments of error argued in bulk and appellate review. Discussed but court clarified proper application of principle.
Louisville Nashville R. Co. v. State, 276 Ala. 99, 159 So.2d 458 Same as above. Discussed but court clarified proper application of principle.
Andrews v. May, 277 Ala. 248, 168 So.2d 619 Grouping related assignments of error for appellate review. Supported court's approach to considering related assignments together.
Auto-Owners Ins. Co. v. Stokes, 284 Ala. 537, 226 So.2d 320 When to pretermit review of unrelated assignments argued in bulk. Applied to limit review to related assignments.

Court's Reasoning and Analysis

The court first addressed Galleon's appeal, focusing on the burden of proof in detinue actions. Galleon filed a disclaimer under Title 7, § 935, placing the burden on plaintiff to prove Galleon's possession at the commencement of the suit. The evidence showed possession was with Central under foreclosure, not Galleon, rendering the verdict against Galleon unsupported by law or evidence. Accordingly, the court reversed the judgment against Galleon.

Regarding Central Bank's appeal, the court analyzed the Uniform Commercial Code provisions governing security interests, particularly Article 9 and its after-acquired property clause. The court found that delivery of the machine and Lewyn's invoice with "net 30 days" terms converted Galleon into a credit buyer, thereby vesting "rights" in Galleon sufficient for Central's security interest to attach under § 9-204.

The court rejected Lewyn's argument that the term "equipment" in Central's security agreement was insufficient to cover the machine, holding that the description was adequate notice under UCC standards. Since Lewyn failed to perfect its purchase money security interest within the statutory 10-day period after delivery, Central's perfected security interest had priority.

Consequently, Central had a superior right to possession at the time of suit, and the trial court erred in denying Central's requested affirmative charge. The court reversed the judgment against Central and remanded the case.

Holding and Implications

The court REVERSED AND REMANDED the judgment against both appellants, Galleon Industries and Central Bank and Trust Company.

The direct effect is that Galleon's liability was negated due to lack of possession at suit commencement, and Central's security interest was recognized as superior and properly perfected, entitling it to possession of the disputed machine. No new precedent was established beyond the correct application and interpretation of existing Uniform Commercial Code provisions regarding security interests, after-acquired property clauses, and rights vesting in credit buyers.

GALLEON INDUSTRIES, INCORPORATED and Central Bank and Trust Company, Incorporated, v. LEWYN MACHINERY COMPANY, INC.

WRIGHT, Presiding Judge.

Galleon Industries, Incorporated, and Central Bank and Trust Company, Incorporated, were defendants below in an action in detinue. From a verdict and judgment in favor of plaintiff for the property sued for, after denial of motion for new trial, defendants each have appealed.

Appellant Galleon assigns as error the overruling of its motion for new trial. Such assignment is a vicarious assignment of every well stated ground of the motion which is adequately brought forth and argued in brief. Hall Motor Co. v. Furman, 285 Ala. 499, 234 So.2d 37. The grounds of the motion for new trial presented and argued in bulk in appellant's brief are that the verdict was contrary to the law and the facts, and the judgment was not sustained by the perponderance of the evidence.

Appellee has cited to us decisions of the Supreme Court of this State stating that when assignments of error are argued in bulk, if any one of them is without merit, the others are not to be considered. Cases cited are Aircraft Sales Service, Inc. v. Gantt, 255 Ala. 508, 52 So.2d 388; Louisville Nashville R. Co. v. State, 276 Ala. 99, 159 So.2d 458. We do not consider either of these cited cases authority for the proposition as stated by appellee.

The more proper proposition is that if unrelated assignments are argued in bulk and one assignment is not well taken, review of the remaining assignments will not be taken. Andrews v. May, 277 Ala. 248, 168 So.2d 619; State v. Selma Foundry Mach. Co., 276 Ala. 161, 160 So.2d 1. When assignments of error are so related as to present a single question, it is proper to group them for argument, and rule that if unrelated assignments are argued in bulk and one assignment is not well taken, review of the remaining assignments may be pretermitted, will not be invoked. Auto-Owners Ins. Co. v. Stokes, 284 Ala. 537, 226 So.2d 320; Commercial Union Ins. Co. of New York v. Security General Ins. Co., 282 Ala. 344, 211 So.2d 477; Southern Electric Generating Co. v. Lance, 269 Ala. 25, 110 So.2d 627.

We consider the grounds of the motion for new trial argued in brief to relate to a kindred question, that is, that the evidence affirmatively showed that at the time the suit in detinue was filed possession of the property was not in defendant Galleon.

Though the ground that the verdict is contrary to law has been held to be too general to require consideration on appeal, it has been held that a ground in the motion for new trial that the verdict and judgment is contrary to law and the great weight and preponderance of the evidence requires the reviewing court to consider the evidence to determine if, after allowing all reasonable presumptions in favor thereof, the evidence is so against the verdict as to convince the court that it is wrong and unjust. McDuffie Sons v. Weeks, 9 Ala. App. 282, 63 So. 739; Connecticut General Life Ins. Co. v. Carter, 46 Ala. App. 222, 239 So.2d 895; State v. McDaniel, 285 Ala. 310, 231 So.2d 878.

Defendant Galleon filed a disclaimer and issue was joined thereon as provided by Title 7, § 935, Code 1940. Thus the burden of showing possession by Galleon of the property sued for at the commencement of the suit was upon plaintiff. Plaintiff failed to carry this burden, as the evidence was that possession was in Central under foreclosure of a security interest at the beginning of suit. We can arrive at no other conclusion than that the state of the evidence is not merely insufficient to show possession of the property sought to be recovered in Galleon, but rather affirmatively shows possession in another at the commencement of suit. Therefore the verdict and judgment for the property sued for against Galleon is contrary to law and the evidence, and has no foundation in the evidence. Such judgment must be set aside on appeal. State v. McDaniel, supra.

The judgment against appellant Galleon is reversed and remanded.

We come now to consider the appeal of defendant, Central Bank and Trust Company.

The facts giving rise to plaintiff's suit are generally as follows: A representative of Lewyn Machinery Company, with offices in Atlanta, Georgia, came to the place of business of Galleon Industries in Pell City, Alabama, and discussed the sale by Lewyn and purchase by Galleon of certain items of equipment. A decision was made as to the items to be purchased subject to arrangement of financing. Upon investigation of Galleon's credit standing, Lewyn notified Galleon that no credit could be extended and that the items could be purchased for cash at Lewyn's office in Atlanta and delivered to Galleon there. Galleon subsequently went to Lewyn's office in Atlanta, paid cash, and accepted delivery of all items except one. This one item was a machine which Lewyn did not have on hand, but which was to be obtained by them from the manufacturer, J. M. Lancaster, located in North Carolina. Galleon was informed that when the machine was received by Lewyn he could return to Atlanta, pay cash, and accept delivery. The price was to be $2800.00. Through mistake or misunderstanding, the machine was subsequently shipped by the manufacturer, Lancaster, directly to Galleon in Pell City. Lancaster notified Lewyn of the shipment. Lewyn then sent to Galleon an invoice on the machine stating thereon the terms of "net 30 days." Shipment by Lancaster to Galleon was shown to be June 22, 1970. Lewyn's invoice was dated the same day. Actual receipt of the machine by Galleon was apparently about July 5, 1970.

On November 21, 1969, a security agreement had been entered into by Galleon with Central Bank Trust Company. This agreement included as collateral all equipment and inventory owned or to be thereafter acquired by Galleon. A financing statement was filed thereon on December 1, 1969. On July 13, 1970, the loan of Central being in default, Central foreclosed its security agreement and took possession of Galleon's property, including the machine which is the subject of this suit.

Appellee's testimony was that after notice of shipment by Lancaster to Galleon, Galleon was contacted by phone at least twice and a check for the machine was requested. Such check was promised but did not arrive. After several days the owner of Lewyn Machinery Company came to Pell City and learned of the taking of possession by Central. He retained counsel and brought suit in detinue against Galleon and Central.

For a plaintiff to recover in detinue he must show that at the commencement of the action he had a general or special property in the goods sued for, the right to immediate possession of the goods, and that the defendant had possession of the property. Brannon v. Cole, 40 Ala. App. 222, 110 So.2d 645.

Appellant has first assigned as error the failure of the trial court to give the jury its written requested affirmative charge. To determine if such failure constituted error to freverse we must apply to the evidence the provisions of the Uniform Commercial Code of this State.

Plaintiff, Lewyn, presented his case on the theory that title to the machine did not pass to Galleon until it had been paid for and since Galleon never paid, the title, and thus the right to possession, remained in Lewyn. We consider that the vesting of rights, as required under § 9-204 of the Uniform Commercial Code, and not the passing of title (§ 2-401) is the question to be determined on this appeal. The provisions of § 2-401 are explicitly subject to the provisions of Article 9 — therefore, the question being the effect of Central's after-acquired property clause, we will limit our discussion to whether or not sufficient rights did in fact vest in the buyer Galleon, for Central's perfected security interest to attach.

It is without dispute in the evidence that the machine was shipped by the manufacturer to the buyer, Galleon. Lewyn stated that such shipment was by mistake, and that it was orally agreed between Galleon and Lewyn that delivery was not to be made except upon payment. However, after receiving notice of the shipment Lewyn sent to Galleon an invoice requiring payment "net in 30 days." Thus any prior agreement as to delivery and payment was modified or waived by Lewyn and Galleon became a credit buyer. We do not decide here the application of § 2-201, the Statute of Frauds, to the sales agreement. The effect of delivery, together with the invoice, was to limit any retention of rights or title to an explicit security agreement subject to the provisions of Article 9 of the Uniform Commercial Code as to perfection and priority. Harney v. Spellman, 113 Ill. App.2d 463, 251 N.E.2d 265; Section 2-401, Title 7A, Code 1940, recompiled.

Section 9-202 states "Each provision of this Article with regards to rights, obligations or remedies applies whether title to collateral is in the secured party or in the debtor." It is stated in Anderson, Uniform Commercial Code, 2d Edition, Volume 2, page 26: "If it is the desire of the parties to effect a reservation of title until the purchase price be paid, a secured transaction should be entered into and a proper filing made if required to protect the creditor's interest as against third persons."

Section 9-204 provides for a security agreement covering after-acquired property such as that held by Central. This section also provides the manner in which such security interest shall attach. In the case of the security interest of Central, it attached when the debtor, Galleon, acquired "rights" in the collateral covered by the security agreement. As we have previously stated, the delivery of the machine and the forwarding of the invoice stating "net 30 days" made Galleon a credit buyer. A credit buyer acquires "rights" in the property when possession is received from the seller. Re Ten Brock, 4 UCCR 712.

Lewyn, if retaining title until payment, by delivery to a credit buyer reserved only a purchase money security interest, such security interest was never perfected by filing as required by § 9-302. Lewyn could have perfected its purchase money security interest and received priority over the perfected security interest of Central by filing a financing statement at the time of delivery, or within 10 days thereafter. Section 9-312(4). According to the evidence, Lewyn learned of the foreclosure and taking of possession by Central eight days after delivery to Galleon. There still remained two days for perfection of its security interest by filing a financing statement. Such filing would have given it priority over the perfected security interest of Central. Section 9-312(4).

Since sufficient "rights" had passed to Galleon by delivery and the sending of the invoice, the requirements of Section 9-204 were satisfied and the security interest of Central attached to the machine. The failure of Lewyn to perfect its security interest by filing within 10 days after delivery gave Central priority. Thus at the time of the filing of the suit in dentinue, Central had a superior right to possession.

We reject the argument of appellee that use of the term "equipment" in the after-acquired property clause of Central's security agreement is insufficient to include the machine involved. Under the evidence there is no question that the machine involved was to be used in the business of Galleon, and was placed within the premises as equipment. The sufficiency of a description in a financing statement is measured in terms of notice. Does the designation of "equipment now owned or hereafter acquired" give notice to a seller of a machine to be installed on the premises of an operating business and used in production that it is subject or likely to be subject to a perfected security interest? We hold it does. United States v. Antenna Systems, Inc., D.C., 251 F. Supp. 1013; Security Bank Trust Co. v. Blaze Oil Co., Wyo., 463 P.2d 495. Also see UCC 9-110 and comment thereto.

The law as applied to the evidence is clear that Central Bank and Trust Company had a superior right to possession to the property sued for and was due the affirmative charge as requested. The court erred in the refusal of the charge, for which error the judgment must be reversed and the case remanded.

Consideration of the remaining assignments of error is pretermitted as reversal is required for assigned Error One.

Reversed and remanded.

BRADLEY, and HOLMES, JJ., concur.

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GALLEON INDUST., INC. v. LEWYN MACHINERY CO., INC
(Apr 18, 1973)