Case Problem:
Fordyce Bank & Trust Company (Bank) issued several loans to Bean Timberland (Bean) so that Bean could purchase timber from various landowners. Bean gave the bank security interests in the purchased timber, and the proceeds from the sale of the timber were intended to repay the loans the Bank had made to Bean. The Bank, intending to perfect its security interests, filed financing statements with the Arkansas Secretary of State’s Office. However, when Bean sold the timber to the various lumber mills with which it did business, Bean failed to remit the sales proceeds to the Bank. The Bank filed suit against these purchasers, alleging that the purchasers had “negligently entered into contracts” with Bean for the purchase of timber and had “failed to exercise good faith” in those transactions. The Bank further contended that the purchasers had been negligent in failing to request a lien search of the UCC records of the Arkansas Secretary of State’s Office. If the purchasers had conducted a lien search, they would have discovered the Bank’s financing statement and security agreement. The trial court granted the purchasers’ motion for a directed verdict because they were purchasers in the ordinary course of business and were not required to perform a lien search on the timber purchased from Bean. The Bank filed an appeal. How would you decide this case on appeal? Do businesses have a duty to conduct lien searches with respect to those firms from whom they purchase goods? Should they have this duty? Why or why not? [ Fordyce Bank & Trust Co. v. Bean Timberland, Inc., 251 S.W.3d 267 (Ark. 2007).]
Your answer must be, typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.