Heritage Ford Lincoln Mercury, Inc. (Heritage) was in the business of selling new cars. Heritage entered into an agreement with Ford Motor Credit Company (Ford), whereby Ford extended a continuing line of credit to Heritage to purchase vehicles.
Heritage granted Ford a purchase money security interest in all motor vehicles it owned and thereafter acquired and in all proceeds from the sale of such motor vehicles. Ford immediately filed its financing statement with the secretary of state. When the dealership experienced financial trouble, two Heritage officers decided to double finance certain new cars by issuing dealer papers to themselves and obtaining financing for two new cars from First National Bank & Trust Company of El Dorado (Bank).
The loan proceeds were deposited in the dealership's account to help with its financial difficulties.
The cars were available for sale. When the dealership closed its doors and turned over the car inventory to Ford, Bank alleged that it had priority over Ford because the Heritage officers were buyers in the ordinary course of business. Who wins?
First National Bank and Trust Company of El Dorado v. Ford Motor Credit Company, 231 Kan. 431, 646 P.2d 1057,Web1982 Kan. Lexis 280 (Supreme Court of Kansas)