The creditor entered into loan and security agreements with the debtor. The debtor purchased eighteen tractors and trailers (the “collateral”) and granted the creditor a “first priority security interest in the collateral.” The debtor defaulted on the loan agreement, and the creditor demanded possession of its collateral. However, the debtor notified the creditor that two storage companies were in possession of the collateral. The two storage companies refused to return the collateral and argued that a purchase agreement with the debtor entitled it to the repayment of its investments and payments for unpaid parking obligations. The creditor argued that it had a superior claim to the collateral and, therefore, the court should award it possession of the collateral and damages or a judgment against the storage companies for the value of the collateral. Further, the creditor requested a declaratory judgment that it has a “perfected first-priority security interest in the collateral,” the storage companies have no liens on the collateral, and that it did not have to pay parking rental fees to the storage companies.
In BMO Bank N.A. v. D H Trucking, Inc., No. 24-cv-10405, 2024 WL 4995558, 2024 U.S. Dist. LEXIS 220502 (E.D. Mich. Dec. 5, 2024) (opinion not yet released for publication), the court granted summary judgment and declaratory judgment in the creditor’s favor. First, the court stated that it was “uncontested” that the creditor was entitled to possession of the collateral against the debtor because it was a secured party with a security interest, the creditor had perfected its security interest, and the debtor had defaulted. Second, the court held that the creditor held a superior claim to the collateral against the storage companies. The court found that the creditor maintained both priority in time and priority in perfection of the security interest, which trumped the storage companies’ nonexistent claim to the collateral. Third, the court found that the creditor was not liable for any payments to storage companies, because it was not a party to the agreement between the debtor and storage companies. Finally, the court granted the creditor’s motion for declaratory judgment in full. In conclusion, the court ordered that the creditor was entitled to possession of the collateral and may use any lawful means to repossess it.
By Alfio Castorina: [email protected]
Edited By Maycee Redfearn: [email protected]
Edited By Ashley Boyce: [email protected]
Edited By Hayden Mariott: [email protected]