Peoples Bank v. Bryan Bros. Cattle Co. - 504 F.3d 549 (5th Cir. 2007)

Rule:

Summary judgment is appropriate if the record shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

Facts:

Bryan Brothers Cattle Company and B&S Cattle Company (“buyer”) paid Glenbrook Cattle Company for the cattle. However, two banks, Peoples Bank and Cornerstone Bank, claimed that Brooks L. "Louie" Dickerson was the owner of the cattle, and had previously granted them liens on the cattle. Each bank claimed priority to the other. The district court granted summary judgment for the buyer of the cattle on the ground that the apparent seller was the owner and passed title to the buyer free of a lien. On appeal, the banks argued that because liens were perfected on an individual and his property, the property sold by the apparent seller, which operated as the individual's sole proprietorship, was sold subject to their security interests.

Issue:

Did the apparent seller pass title to the buyer free of lien, thereby entitling summary judgment in favor of the buyer? 

Answer:

No.

Conclusion:

The court noted that under the circumstances, there was a question as to whether the apparent seller operated as a sole proprietorship, a partnership, or a limited liability company (LLC). Thus, summary judgment as to the issue was improper. The security interests attached only if the apparent seller was a sole proprietorship of the individual. If the apparent seller operated as a partnership or LLC, the individual did not have sufficient rights in the cattle to encumber them. As to the priority of the liens between the banks, even though defendant bank's financing statement used the individual's nickname, not his legal name, the financing statement was not seriously misleading. Plaintiff bank had actual knowledge that the individual was known by the nickname used in the financing statement, and defendant bank's security agreement included after-acquired property.