Ormet Primary Aluminum Corporation, operated an aluminum smelter plant in Hannibal, Ohio. The facility ceased production in October 2013 in order to liquidate its assets after filing for bankruptcy in February 2013. Ormet used carbon anodes in the production of aluminum. The anodes were blocks the size of a washing machine, which were stacked and de-banded with no pallets. They had to be stored inside and kept dry. Ormet entered a contract to sell its estimated 17,086 metric tons of carbon anodes located at the Hannibal plant to Alcoa for \($252\) per metric ton for a total contract price of \($4,305,672.00.\) On January 2 and 3, 2014, Alcoa and Ormet executed the “Hannibal Anode Purchase and Sale Agreement.”
The “Delivery & Freight Terms” provided: “Buyer shall arrange pick-up from Seller’s facility, with delivery deemed complete upon loading of the Products onto Buyer’s trucks by Seller’s personnel.” Under the next heading, “Title; Risk of Loss,” the agreement read: “Title to and risk of loss or damage to the Product shall pass to Buyer when the Product is delivered to Buyer as per the applicable delivery term above.”
Alcoa had paid for the anodes in full and had removed just less than 50% of the anodes when it had trouble securing adequate trucks to remove the remaining anodes. In the meantime, an auction was held selling all of Ormet’s assets. Niagara was the successful bidder. It now claims the remaining anodes in its inventory claiming title had not passed to Alcoa since title was to pass at delivery and delivery had not been effected.
Appellants’ main focus is on the contract’s statement of when title passes and the U.C.C.’s statement that a sale “consists in the passing of title from the seller to the buyer for a price.” Yet, title does not govern rights under the U.C.C. unless the provision at issue refers to title. The contract’s explicit provisions govern when title passes if “matters concerning title become material.” Moreover, the anodes were still the subject of a “contract for sale” which “includes both the present sale of goods and a contract to sell goods at a future time.”
This contract of sale, once approved by the bankruptcy court order and once the goods were identified, gave Alcoa a “special property” or special interest in the anodes irrespective of whether title passed. Regardless of whether title passed, when a third party deals with goods identified to a contract for sale so as to cause actionable injury to a contracting party, any party to the contract who has title to “or a special property” in the goods has a right of action.
CRITICAL THINKING:
What actually is the significance of “title” in this case? Look at the last paragraph of the decision above. What does it mean when the court says “regardless of whether title passed”? What is the significance of title after reading this case?
ETHICAL DECISION MAKING:
Think about Niagara’s position in the above case. As an innocent party, they are now out a big chunk of what it thought it had purchased in the sale. Or is Niagara an innocent party? Did it fail to exercise due diligence? What about Ormet, or even the bankruptcy court? Did they fail to exercise due diligence?