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IN RE LUCKENBILL

November 13, 1957

In the Matter of Roy A. LUCKENBILL and Bessie M. Luckenbill, individually and jointly, Bankrupt Debtors


The opinion of the court was delivered by: EGAN

This matter is here on petition for review of a Referee's order dismissing a reclamation petition and assessing the costs on the petitioner.

It involves the construction of certain provisions of the Pennsylvania Uniform Commercial Code relating to filing.

 The question is appropriately stated by petitioner as follows: 'Does a Trustee in Bankruptcy, ipso facto, acquire a lien which is superior to an Installment Seller who did not strictly comply with the filing requirements, even though there are no creditors in existence under the State law who could contest the validity of the lien?'

 At the time of their voluntary bankruptcy and for some time prior thereto, the bankrupts were in the butcher business and conducted a retail grocery store in Berks County, Pennsylvania. They had two places of business in that County, one a butcher shop at Bernville, and the other a retail grocery store at Robesonia.

 Several months prior to their adjudication, in two separate transactions dated July 29, 1955 and November 9, 1955, respectively, the bankrupts purchased from United Butcher & Grocery Equipment Company, the reclamation petitioner, certain equipment for their stores under two separate installment sales contracts, each of which included a note for the full price, payable in installments. The notes and contracts were almost immediately assigned for value, with recourse, to a Reading bank by the reclamation petitioner, which became the holder thereof. The earlier contract was signed by both bankrupts and the other was signed by only one. No significance is attached to this by the parties.

 Shortly after the two installment sales contracts were executed and delivered by the bankrupts to the reclamation petitioner, copies thereof were separately filed in the office of the Prothonotary of Berks County, Pennsylvania, on August 19, 1955 and November 14, 1955, respectively, as secured transactions, under the Pennsylvania Uniform Commercial Code. *fn1"

 Copies were filed for the first time with the Secretary of the Commonwealth on March 18, 1957. In the meantime, the bankrupts had filed their voluntary petition and had been adjudicated bankrupts on February 14, 1957, and Referee Hiller had held a first meeting of creditors on March 15, 1957, at which a trustee was elected.

 To the reclamation petition the trustee filed an answer and supplemental answer resisting the petition on two grounds, namely, that the petitioner had failed to perfect his alleged security interest in the goods, and that the Bank to which the contracts were assigned, and not the reclamation petitioner, was the real party in interest and that the reclamation petitioner had no standing. *fn2"

 At the argument, the second question referred to was practically abandoned in order to have a determination of the more fundamental one relating to the validity of the alleged security interest of the petitioner in the goods sought to be reclaimed.

 The trustee contends that in order to perfect a security interest in the goods, it was necessary, under the facts of this case, that a financing statement, or a copy of the security agreement, be filed as a secured transaction, both in the office of the Secretary of the Commonwealth at Harrisburg, and in the office of the Prothonotary of Berks County where the debtors had their places of business; that petitioner's claim to the goods is subordinated to the trustee's lien by reason of the filing of the security agreements at Harrisburg after bankruptcy had intervened and the trustee's lien had attached.

 Under the express terms of the installment sales contracts, the interest reserved in the goods by petitioner was designated '* * * a security interest * * * pursuant to the Pennsylvania Uniform Commercial Code.'

 The parties agree that the goods covered by the two installment sales contracts are 'equipment' as defined in the Code. UCC, Section 9-109. *fn3"

 The Code (Section 9-302) requires the filing of a financing statement, or a copy of the contract, to perfect all security interests with certain exceptions not here applicable; that if filing is required to perfect a security interest and the collateral is 'equipment,' the place of filing is in the office of the Secretary of the Commonwealth 'and in addition if all the debtor's places of business are in a single county, in the office of the prothonotary of that county' (Section 9-401(1)); that if filing is required, a security interest is perfected at the time of filing (Section 9-303(1)); that an unperfected security interest is subordinate to the rights of a lien creditor who becomes such without knowledge of the secured interest and ...


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