In Re Fabers, Inc.

12 U.C.C. Rep. Serv. 126 (1972)

Facts

Fabers was a retail carpet merchant. On May 31, 1971, Mehdi Dilmaghani & Company, Inc. (P), a rug dealer, shipped oriental rugs to Faber on consignment. Follow on deliveries were also made on multiple occasions. All of the rugs had an identifying label attached. On each label was printed “MD. & CO., INC., Reg. No. R.N. 22956, 100% wool pile, No. _________, Quality _________, Size _________, Sq. Feet _________, Made in Iran.” The consignment agreement between P and Fabers provided that title to the rugs remained in the dealer until fully paid for. Fabers had the right to sell the rugs only at a price in excess of the invoice price and the proceeds were the property of P and held in trust for P. Fabers was to remit to P the proceeds of all sales. All rugs were held at the risk of Fabers, the consignee. P did not make an Article 9 filing to perfect its interest in the rugs. Fabers went bankrupt, and the trustee (D) included the rugs in Fabers’ estate. P petitioned the court claiming the rugs. D opposed the petition in that the consignment was for security purposes, which required Article 9 for protection. P does not assert a security interest in the rugs, claiming only that the rugs are and always were the property of the dealer under a “true consignment” and, therefore, not subject to the provisions of the Code relating to security interests.