Conister Trust v. Boating Corp. of America & Villas-Afloat

The buyer of three boats that were to be built pursuant to specific instructions defaulted on payment for the second and third boats by failing to pay the entire purchase price of the boats. The seller resold the two boats and recovered its damages caused by the buyer's breach. A creditor of the buyer, who furnished funds for the purchase of the first two boats, sought the excess proceeds from the sale of the second boat asserting that it had an unperfected security interest. Because the buyer did not attain rights in the collateral sufficient to meet the requirements for attachment of a security interest, the creditor is not entitled to distribution of the proceeds under Article 9 of the Uniform Commercial Code. Instead, the rights of the buyer and seller are governed by Article 2. The creditor was entitled to assert the buyer's right to restitution of partial payments, and the seller was entitled to recover its damages from the resale of the two boats. The seller also had a right of setoff which it exercised to recover losses on the third boat from moneys realized in the sale of the second boat. Accordingly, we affirm the trial court.