Case: Adamatic  

Adamatic as discussed in Daniel --

Relying on Chrysler Corp. v. Adamatic, 59 Wis.2d 219, 208 N.W.2d 97 (1973), the Bank maintains that the purchasers can not become buyers in ordinary course of business who take free of the seller's secured creditor until the purchasers take title or delivery of the van. Because the purchasers in this case did not take title or delivery, the Bank contends that the purchasers do not take free of its interest as the dealership's secured creditor. 

The Chrysler court faced almost the same issue that this case presents, although the facts of the two cases are different. In the Chrysler case Chrysler brought an action of replevin, seeking possession of several machines it had contracted to purchase from defendant Adamatic, Inc. Lakeshore Commercial Finance Corporation intervened, asserting ownership of the machines because of its prior perfected security interest in the goods in question.

Adamatic had agreed to build several machines for Chrysler, and Chrysler agreed to make progress payments on the machines. Chrysler made payments until the machines were nearly paid in full. When Adamatic's financial condition worsened, Lakeshore Commercial informed its borrower Adamatic that it would be forced to liquidate the loan and directed Adamatic not to ship the machines to Chrysler. The trial court concluded that Chrysler was a buyer in ordinary course of business and held that Chrysler's interest in the machines was superior to that of Lakeshore Commercial.

This court concluded that Chrysler was not a buyer in ordinary course of business. The court reasoned that for there to be a "buyer " there must be a sale. The court then looked to the definition of "sale" in sec. 402.106(1), which defines sale as "the passing of title from the seller to the buyer for a price." In the Chrysler case, Chrysler was not a buyer in ordinary course because title did not pass to Chrysler before the creditor took possession of the goods.

The court said that if Chrysler had obtained title to the goods, its status as a buyer in ordinary course of business would not be defeated merely because it had not taken possession. Chrysler Corp., supra 59 Wis.2d at 239, 208 N.W.2d 97.FN2

[FN 2 While the court relied on the Code's definition of sale, the court did not consider the Code's definition of buyer. The Code defines buyer as one "who buys or contracts to buy goods. " Sec. 402.103(1)(a). The Code does not define buyer in terms of one who takes title to goods.]

The Chrysler court concluded that "sound policy considerations in the instant situation would seem to dictate that the rights of a secured creditor ought not be impaired in the absence of a physical transfer or assignment of the goods. " Chrysler Corp., supra 59 Wis.2d at 240, 208 N.W.2d 97.

The court acknowledged in Chrysler that "from the viewpoint of equity, this is an unsatisfactory result, for the record shows that, prior to the replevin, Chrysler had substantially paid the contract price for all the goods involved." 59 Wis.2d at 241-42, 208 N.W.2d 97. Nevertheless the court also concluded that the result could be justified because Chrysler was fully aware of the debtor's precarious financial condition and could have obviated the very situation which resulted by taking appropriate precautions.