United Bank of Iowa v. Independent Inputs (In re Western Iowa Limestone, Inc.), 375 B.R. 518, 2007 Bankr. LEXIS 796 (8^th Cir. B.A.P. 2007) reiterates the rule that buyer in the ordinary course of business (BIOC) status now requires the buyer to take possession of the goods or have a right to recover them under U.C.C. Article 2. Law Professor Ingrid Michelsen Hillinger of Boston College Law School writes that if a buyer is not a BIOC, U.C.C. § 9-320(a) maintains the seller’s inventory lender’s security interest in, and superior claim to, the goods.

According to the bankruptcy panel in Iowa Limestone, constructive possession sufficient to establish BIOC status requires the buyer’s “possession” to be “visible, apparent and actual to strangers to the transaction.” The panel found that identification of a fungible good “solely by reference in a contract to an undivided share in an existing, specified fungible bulk did not satisfy the requirements of constructive possession under Iowa law for purposes of a priority contest between a buyer and the seller’s secured creditor.” The buyer must physically possess the goods or have the right to recover them.

Professor Hillinger analyzes Iowa Limestone and addresses the possession requirement where the buyer seeking BIOC status and protection is a consumer in the complete article, accessible from the link below: