Can a bank claim security interest on unpaid goods of a third party?

Short version. I contracted with a developer to design/furnish 136 beachfront condos in a newly constructed building in South Carolina. The developer’s intent was to sell the units individually for the owners to contract their condo with a property management firm as a vacation rental.

Once the developer reached a sufficient number of pre-construction sales contracts, a bank loaned the developer sufficient funds to construct the building and furnish the condos.

Upon completion of the construction and subsequent condo furnishings, unit closings failed due to appraised condo values falling well short of the sales contract amounts.

Knowing the developer would be unable to pay back the construction loan, the bank exercised their security interest on the building and contents – including the furnishings I provided that were not fully paid for by the developer.

My attorney claims the bank has that authority which makes no sense to me since my contract was with the developer and expressly states ownership is not perfected until goods are fully paid for by requiring the developer to insure the goods in the building until fully paid.

A different attorney helped create the sales contract between my firm and the developer but did not suggest a UCC-1 be filed in advance of the delivery of unpaid goods.

Another attorney has suggested a simple replevin action should suffice to recover the unpaid merchandise.

The building has been operating as a hotel for three years now with rental revenues being collected by a receiver on the banks behalf.

I have a mere summary judgement on the building in foreclosure but incompleted. For whatever reason, I am not listed as a lien holder in the foreclosure documents. My attorney claims it’s a good thing because I can reappear after foreclosure completes as a nuisance to the bank which may make me an offer to “go away”.

Any ideas where I stand? Pursue a replevin action, sue my attorney(s) for malpractice or am I S.O.L.?

Expert advice is needed badly. I’m out $500K.

Asked by: Louis J. Talotta 286 days ago - 0 Answers - 1395 views

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