MDGa - Debtor Not a "Buyer In The Ordinary Course" Where Purchase Price Was Satisfaction of Prior Debt to Transferor
O.C.G.A. §§ 11-1-201(9), 11-2-403(2); Buyer in the Ordinary Course
First National Bank of South Georgia v. Ayers Aviation Holdings, Inc., 2006 Bankr. LEXIS 675, Adv. No. 01-1003 (Bankr. M.D. Ga. March 31, 2006)(Laney)
The basic relevant facts of a case that is otherwise factually and procedurally complicated are as follows. Seller, which was in the business of selling aircraft and avionics, sold an aircraft to the debtor, with the two engines on the aircraft encumbered by a prior security interest od the secured creditor. The aircraft was delivered to the debtor in the summer of 1999 but the bill of sale was submitted until May 2000. The debtor's principal testified that the consideration for the aircraft was, at least in part, in satisfaction of a prior obligation the debtor owed to the seller and through the transfer of avionics to the seller before and after the transfer of the aircraft.
O.C.G.A. §11-2-403(2) generally allows a merchant of the goods at issue to transfer the property to a buyer in the ordinary course of business. O.C.G.A. § 11-1-201(9) excludes from the definition of "buyer in the ordinary course" a person that "acquires goods …. for or in total or partial satisfaction of a money debt…" The court found that a monetary debt owed to the debtor existed before the aircraft was transferred and that the debtor paid for the aircraft with the satisfaction of that debt. Therefore, the debtor was not a "buyer in the ordinary course" of the encumbered engines. The court further declined to "fractionalize" the transfer, labeling a transferee a buyer in the ordinary course to the extent the purchase price was not in satisfaction of a money debt. Such an interpretation would constitute an improper judicial amendment to § 11-1-201(9). Therefore, the secured creditor maintained all rights of ownership in the engine.