Belmont Internat., Inc. v. American Internat. Shoe Co

In Belmont Internat., Inc. v. American Internat. Shoe Co. (1992) 313 Or. 112, a consignor asserted it had priority over the claims of the consignee's creditor, even though it had not filed a UCC-1 financing statement and had not shown it was generally known to creditors that the consignee was substantially engaged in selling goods belonging to others, because the creditor had actual knowledge the relationship was one of consignor and consignee. (Id., 831 P.2d at pp. 18-19.) The Oregon Supreme Court agreed, holding that a narrow construction of the notice exception would "negate the policy" behind Oregon's version of Uniform Commercial Code section 2-326. (Belmont Internat., Inc., supra, at p. 19.) Because the policy of Uniform Commercial Code section 2-326 "is to protect the creditors of a consignee from the consignor's hidden liens on the consignment goods," "[t]he assumption is that, '[w]here a secured creditor has knowledge of consignments, he will certainly not advance funds to the consignee based on the consignee's possession of the consigned property.'" (Belmont Internat., Inc., supra, 831 P.2d at p. 19.) Thus, "in a dispute between a consignor and a creditor of the consignee as to priority in the consigned goods, proof that the creditor actually knew of the consignment before becoming a creditor is sufficient ... ." (Ibid.)