Tom Boudreau and Mary Belle Boudreau, Husband and Wife v. Borg-Warner Acceptance Corporation, a Delaware Corporation, Defendant

This is a diversity case. The appellant, a secured creditor of the appellees, appeals from a directed verdict for conversion and a jury award of $14,271.34 compensatory damages and $65,000 punitive damages. The issues on appeal are: (1) Did the district court err in its interpretation of the Security Agreement under which it conditioned the creditor’s possessory rights upon the debtor’s failure to accede to a demand for delivery? and (2) Does appellant’s security interest in the appellees’ “inventory” extend to inventory other than that acquired under the floorplan financing arrangement? We hold that the Security Agreement created a security interest in the debtor’s entire inventory and that the right to self-help repossession accrued upon the debtor’s failure to pay for floorplanned merchandise which had been sold. We reverse and remand.

Jurisdiction is conferred by 28 U.S.C. § 1291 (1976).

I.

FACTUAL BACKGROUND

Pursuant to a plan to expand his television repair business to include retail sales, appellee Tom Boudreau entered into a wholesale floorplan financing arrangement with appellant Borg-Warner Acceptance Corporation (BWAC). BWAC extended Boudreau credit to acquire new…