Filing Requirement Extends To Proceeds In Consignments

A ruling in the Ninth Circuit Court of Appeals reminds us that regardless of whether the consignor and the consignee intend to transfer title, when a consignor fails to file a UCC-1 registration statement, its property rights in the goods will be extinguished, and its claim to proceeds of the goods will be limited to that of an unsecured creditor.

What you need to know

• In In re Pettit Oil Company (the Debtor), the bankruptcy trustee disputed the claims of fuel supplier IPC (USA), Inc. (IPC), in consigned fuel and cash proceeds held by the Debtor at the time of filing of the bankruptcy petition.
• The court affirmed the ruling that the transaction was a consignment, and because IPC had not filed a UCC-1, the trustee's rights in the fuel and proceeds were superior to those of IPC.