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Intermet Corp. v. Financial Federal Credit, Inc.
Citations: 263 Ga. App. 622; 588 S.E.2d 810; 2003 Fulton County D. Rep. 3136; 2003 Ga. App. LEXIS 1279Docket: A03A0911
Court: Court of Appeals of Georgia; October 15, 2003; Georgia; State Appellate Court
Intermet Corporation appeals a trial court decision granting summary judgment and a writ of possession to Financial Federal Credit, Inc. (FFCI) in a case involving a security interest in a machine. FFCI had provided a loan to Pittard Leasing Company, which created a security interest in the machine purchased from Pittard Machine Company. Intermet later bought the machine from Pittard Machine for $265,000, but Pittard Leasing had not sold the machine back to Pittard Machine prior to this sale. FFCI claims both parties are victims of fraud and filed for possession of the machine, leading to cross-motions for summary judgment. The trial court favored FFCI, denying Intermet's motion and affirming FFCI's security interest. Intermet argues it purchased the machine free of FFCI's security interest, citing three Code sections, and contends material facts exist that could influence this interpretation. Generally, a security interest remains after collateral is sold unless the holder authorizes a sale free of that interest. In this case, FFCI did not authorize such a sale. Intermet invokes OCGA § 11-9-307 (1), which allows a buyer in the ordinary course of business to take free of a security interest from their seller, arguing for a "close identity" analysis based on the ownership structure of the companies involved. However, the court rejects this reasoning, referencing a precedent where a similar argument was dismissed, noting that mere common ownership does not meet the statutory requirement. Additionally, Intermet posits that it acquired title free of FFCI's interest under OCGA § 11-2-403 (1), which states that a purchaser receives all title that their transferor had unless limited. However, the ruling underscores that the existence of a valid security interest persists despite the close relationship between the entities involved. The court determined that Intermet's claim lacks merit regarding the transfer of title under the relevant Code section. Even if a good title was transferred to Intermet, it was not free from FFCI's security interest, meaning Intermet acquired only the title that its transferor held, which included FFCI's interest. Intermet argued that OCGA § 11-2-403 (2) should apply to its purchase from Pittard Machine but did not demonstrate how this provision would impact FFCI's security interest. The Code states that entrusting goods to a merchant allows that merchant to transfer the rights to a buyer in the ordinary course of business; however, precedent (Commercial Credit Equip. Corp. v. Bates) clarifies that this does not grant a buyer a title free of any existing security interest. Consequently, the trial court's ruling is upheld, affirming both the grant of summary judgment and the writ of possession to FFCI while denying Intermet's request for summary judgment due to the absence of genuine material facts. The judgment is affirmed with references to earlier Code sections relevant to the transactions under review.